The Medicaid Glitch

by Benjamin Domenech on 3:16 pm July 1, 2011

The AP’s report this week of a “glitch” in PPACA that would allow millions of members of the middle class to jump onto Medicaid is enough to rouse the frustrated objections of Medicare chief actuary Richard Foster:

After initially downplaying any concern, the Obama administration said late Tuesday it would look for a fix.

Up to 3 million more people could qualify for Medicaid in 2014 as a result of the anomaly. That’s because, in a major change from today, most of their Social Security benefits would no longer be counted as income for determining eligibility. It might be compared to allowing middle-class people to qualify for food stamps.

Medicare chief actuary Richard Foster says the situation keeps him up at night.

“I don’t generally comment on the pros or cons of policy, but that just doesn’t make sense,” Foster said during a question-and-answer session at a recent professional society meeting.

“This is a situation that got no attention at all,” added Foster. “And even now, as I raise the issue with various policymakers, people are not rushing to say … we need to do something about this.”

The one hard and fast rule in entitlement policy is this: People go where the money is. If there’s money to be had, someone will put together an industry to train Americans how to get it. According to the actuary’s office, under the scenario in question, a married couple retiring at age 62 in 2014 who “receives the maximum Social Security benefit of $23,500 apiece could get $17,000 from other sources and still qualify for Medicaid with a total income of $64,000.” The upshot: Another 5 million or so people who can jump onboard Medicaid and take advantage of its long-term care benefits.

Now, you might think that this isn’t all that appealing–Medicaid has such awful outcomes, after all. But in reality there is a whole cottage industry of books advising older Americans how to qualify for both Medicaid and Medicare in order to reap the benefits of long-term care coverage, an ongoing problem for states which is getting worse. They’re use Medicare for the doctor’s office, and Medicaid for long-term.

The real question is what this new population will do to the cost picture. Dan Mitchell of Cato has a solid video here detailing the fiscal case for Medicaid reform, but math may be too hard for the folks at HHS to comprehend–given stories like this, it seems Washington is continuing to shift Medicaid policy in the direction of covering more people for less money, an idea that’s about as feasible as a car that runs on unicorn dung.

Yet 41 Democrat senators stood up to be counted earlier this month, demanding President Barack Obama block any attempts to reform this unsustainable program. They proposed no alternate solution for the program, nor did they outline any feasible alternative plan toward sustainability. Under their approach, Medicaid’s outcomes will continue to worsen, the program will bankrupt budgets, and more and more people will be trapped in the Medicaid ghetto.

Politics is about the application of power and pain. Unless these recalcitrant politicians are compelled by outrage from the people or the hard truth about costs, they are unlikely to change their minds.

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