Why Medicaid is Failing Already

A new Eljay, LLC, analysis of the Medicaid financing system projects that the states will underfund the actual cost of long term care by nearly $4.7 billion in 2009. This is one of the key problems with Medicaid--it never pays 100% of the actual cost to provide care.

As a reminder, Medicaid is a federal/state partnership program in which the federal government picks up, on average, 50% of the amount paid out by the states. The balance is paid out of state resources. While the federal government can run budget deficits, states must balance their budget each year. In order to accomplish this feat, they traditionally reimburse care providers for less than the actual cost of care.

The recession has significantly reduced state revenues. Robert Van Dyke, Chair of the American Health Care Association, but it bluntly: "With our national and state economies in an historic downturn, this state data serves as a stark reminder of the vital importance to evaluate both Medicare and Medicaid funding as a final federal health care reform bill takes shape. At stake is seniors' ongoing access to quality care, sustaining a strong long term care workforce and local jobs base, and the very ability of our sector to remain strong in the face of challenging demographic realities."

This emphasizes the point we are trying to make in To Tax or To Ration. The system is already showing major cracks. It will crumble soon. Even faster if the new national health insurance program adds more individuals to its rolls while reducing available funding. It's time to start talking about where we go from here. We cannot wait for Washington to solve the problem.