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Pennsylvania’s Medicaid Debacle

by Andrew Barr on January 6, 2012

As the gradual implementation of Obamacare continues and debate over the intelligence of socialized medicine mounts, the budgetary malaise of the current Medicaid system should be a red flag to supporters of the President’s health care plan. The current degree of governmental control over healthcare is proving calamitous for states with financial troubles, and the expanded bureaucracy that is Obamacare will only make matters worse.

The contradictions and logistical maladies manifest in government-controlled healthcare have never been more evident than in the recent series of cuts in the Pennsylvania Medicaid apparatus. Over the next nine years, $1.2 trillion in reductions will mean the elimination of care for 150,000 people (43,000 of which are children) and more than 80,000 in job losses.

The uncertain economy has meant a surge in those receiving Medicaid across the nation, but since the summer of 2011, Pennsylvania has seen a steady decline because of the Department of Public Welfare’s (DPW) efforts to cut those no longer living in state and those who are dead or otherwise ineligible for aid. Patient advocates are saying otherwise, calling the cuts “disastrous.”

The bureaucratic nightmare that the cuts have unleashed on eligible patient care could be called Orwellian, as Pennsylvania’s push to close the backlog of cases has resulted in an overload for an already understaffed DPW. Hundreds of thousands of pending cases were “reviewed” in a matter of weeks, and technical omissions that would regularly necessitate simple clarification from the patient, such as lack of information, resulted in the cancellation of thousands of cases.

But the bureaucratic incompetence doesn’t end there.

Computer programs cancel patient benefits based on little-known deadlines, and hard copies (often the only copies) of patient files are regularly lost. Additionally, Gov. Tom Corbett has reduced the number of welfare caseworkers from the previous Rendell administration by 20 percent, while between administrations the number of those receiving Medicaid has skyrocketed more than 50 percent, according to the Philadelphia Inquirer.

Eighteen percent of Pennsylvanians receive some degree of Medicaid assistance. And in 2010, approximately 27 percent of Scranton’s Community Medical Center’s $157.6 million in patient revenue came from Medicare, according to a report by the Pennsylvania Health Care Cost Containment Council, cited in the Scranton Times-Tribune. As increasing cutbacks loom, such dependence will no doubt be put to the test.

In short, these cuts aren’t merely superficial “budgetary readjustments.” Such reductions severely curtail the quality of care that many receive, as well as Pennsylvania’s fledging economy. According to a study done by Families USA in June 2011, a 5 percent cut in Pennsylvania’s Medicaid system means 12,230 jobs at risk and $1.5 billion of business activity at risk. These numbers only increase as cuts become more and more severe. A 33 percent reduction results in 80,750 jobs at risk and $9.9 billion of endangered business activity.

The man in charge of implementing many of the cuts, DPW Secretary Gary Alexander, has been praised by Gov. Corbett as having “just the kind of experience we need right now in Pennsylvania.” If the “experience” that Corbett refers to is the global waiver program that Alexander pushed through in Rhode Island, proponents of Alexander’s budgetary management should think again. Alexander’s track record reveals an unsustainable and highly political program that is anything but applicable to Pennsylvania, or indeed any other state.

According to the Center on Budget and Policy Priorities:

The Rhode Island waiver was a “sweetheart deal” [with] the Bush Administration…in which the federal government effectively unloaded additional federal money on the state and gave Rhode Island federal funds beyond what it would receive under the regular Medicaid program, in return for the state accepting a cap on its Medicaid expenditures at an inflated level that it never expected to reach anyway. Such a deal would be impossible to replicate under proposals to convert the Medicaid program to a block grant; such proposals are designed to cut federal Medicaid funding by tens or hundreds of billions of dollars, the opposite of what happened in Rhode Island.

But Alexander’ commitment to reducing waste, fraud and abuse is indeed a sorely needed sentiment in the world of healthcare policy. He’s currently seeking to limit the number of firms providing Financial Management Services (FMS) to Medicaid patients receiving home-based and community-based care from 37 firms to 3 or less like most states, according to the Beaver County Times. Such a move will help lower the overall price of services, contribute to cost savings for the state programs and make it easier to guarantee compliance with state and federal laws, according to Alexander.

And, as he and other reformers have constantly pointed out, those abusing the system are constantly being exposed and brought to justice. But a large part of the problem is the ease in which the system is taken advantage of, as well as the devastating results such cuts can have on the eligible patients trying to get the care they deserve.

Indeed, these cuts are not unique to Pennsylvania. Obamacare means more nationwide cuts, less accountability, and fewer affordable options.

Despite the cuts and the exaltation of universal healthcare, the roots of the problem, corruption, inefficiency and vulnerability, persist. The distended bureaucracy that has come to characterize too much of our government will not be sated by arbitrarily slashing budgets.

As James Capretta, a fellow in the Ethics and Economics Program at the Ethics and Public Policy Center in Washington, DC explains,

The fundamental problem in Medicaid is that the program provides strong incentives for states to push costs onto the federal budget. The [federal government] pays 57 percent [of Medicaid costs], on average, [which] seriously weakens incentives for states to police this well.

The weakness of the system is glaringly evident today, and as Obamacare takes effect, the system’s inadequacies will become more pronounced, and more of a liability. Markets, not bureaucrats and government initiatives should drive healthcare policy.

Options that create private sector competition with Medicare while maintaining a baseline of guaranteed aid, like the Wyden-Ryan Plan, promise more results than just cutting budgets.

Cutting waste, fraud and abuse should be a top priority for both state and federal budgetary review committees, but such cuts must be made with great care, keeping the patient first and foremost. While one must recognize the extraordinary difficulty in trying to work with the budget of an inherently flawed structure, Secretary Alexander’s work in Pennsylvania is decidedly shortsighted.

The cuts are a symptom of the larger syndrome of economic distress coupled with the unsustainability of the current Medicaid system. Reductions and streamlining measures like the FMS consolidation may serve to quell budgetary issues in the short term, but the only cogent long term solution lies in a complete overhaul of Medicaid itself.

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