During the campaign season, little attention was focused on the largest item of the state budget — Medicaid. This program has grown dramatically the past six years and promises to grow even more the next decade.
Unfortunately, our elected officials are offering few ideas as to how to control the program’s growth.
Instead of avoiding the issue, they need to be considering how to fundamentally restructure Medicaid in Maryland. One step in the right direction would be to introduce cost-sharing requirements for some Medicaid users.
Currently, there is little or no cost for Medicaid users in Maryland. Since health care is essentially free to them, some Medicaid beneficiaries tend to overuse the system, which drives up costs for the taxpayers who are funding the program and unnecessarily burdens Maryland’s health care system.
Cost-sharing would reduce overuse and help to bring costs under control.
Because Medicaid is a program for people with low incomes, the federal government has limited co-payments to Medicaid recipients whose incomes exceed the federal poverty level. However, Maryland’s Medicaid program is one of the most generous in the nation — a number of its users have incomes more than 1.5 times the federal poverty level. Asking these beneficiaries to pay $2 or $3 per doctor visit is not a burden.
While co-payments will help the state recover a few dollars every time one of these beneficiaries uses services, the more important benefit is that it will help reduce the amount of times these recipients use medical care.
That may sound like a negative consequence, but studies have shown that reductions in health care use due to cost-sharing do not result in worse health for recipients. Cost-sharing simply makes recipients better health care consumers.
If something is free, it tends to be overused. Imposing some cost on free medical care reduces unnecessary use, but does not seem to reduce use of truly needed health care.
Reducing unnecessary health care use is vital if the state ever wants to control Medicaid spending.
Make no mistake — controlling spending is essential for the fiscal future of the state. As long as Medicaid continues to be free for the recipient, it will continue to be a financial burden on Maryland taxpayers — taxpayers who spent $2.1 billion on the program in 2004. That number has been growing in recent years and, as the baby boom generation retires, it will only continue to increase because Medicaid pays for a significant portion of long-term care for the elderly.
This increasing spending is dangerous for a state like Maryland, which is facing a large structural deficit over the next five years. While the state currently has a budget surplus, by 2011 it will have a $5 billion deficit if current spending and revenue trends continue. Medicaid spending is a large part of this deficit.
Instead of debating the Wal-Mart bill yet again in the next session of the General Assembly, perhaps our legislators could do some substantive work on Medicaid issues.
What the state really needs is fundamental Medicaid reform to help control costs in the long-run.
However, in the short-run, imposing co-payments on some recipients is a good beginning. It would show that the state is serious about bringing costs under control.
Then the real work on Medicaid reform can begin.
Marc Kilmer is a senior fellow at the Maryland Public Policy Institute.
