As Cuts Loom, Study Finds Medicaid Works

BY Jason Kane  July 8, 2011 at 6:00 PM EDT

Medicaid makes a big difference to the health and financial stability of the poor, a new study concludes.

The simple finding from Harvard and MIT researchers hit Washington this week just as politicians appear ready to start chipping away at the program as part of their efforts to reduce the federal deficit.

Released Thursday by the National Bureau of Economic Research, the report found that Medicaid recipients in Oregon not only had more access to health care one year after receiving coverage, they also felt healthier, less depressed, and more financially stable.

The findings contradict long-standing critics of Medicaid who have hit the program on two fronts: One, some critics say the program doesn’t achieve its goal of providing the good access to primary care. Secondly, other conservatives have argued Medicaid may be unnecessary since the uninsured receive care through charity, clinics, and emergency room visits.

“Both of those camps thought Medicaid didn’t make a difference,” said Katherine Baicker, professor of health economics at the Harvard School of Public Health. “Our study shows definitively that it makes a big difference.”

The impact of the study will likely run deep as both parties try to seize control of Medicaid — the third biggest recipient of taxpayer dollars — and re-shape it in their own image.

As part of the health care reform law, Democrats hope to rapidly expand Medicaid to cover 16 million more low-income Americans by 2014 — or about half of all Americans who would be newly insured under the law. Republicans want to cut it by issuing block grants to states, saving $771 billion in 10 years and, they argue, giving governors more flexibility to cover people more efficiently.

The Oregon study is considered significant in the debate for its ability to use the “gold standard” of scientific research — randomly assigning patients to either have Medicaid or not, then following up with them to ask about their experience.

Previous studies have compared the insured and uninsured, but researchers were never able to definitively isolate the impact of insurance because so many “confounding factors” separate the two groups, including income, employment, and initial health. It was considered unethical to assign a group of people to go without health insurance for the sake of research.

That hurdle was lifted in 2008, when the state of Oregon opened a waiting list for its Medicaid program. About 10,000 of 90,000 applicants were assigned coverage through a lottery, creating natural pools of insured and uninsured study groups.

One year after the enrollment, those receiving Medicaid benefits reported they had received 30 percent more hospital care than their uninsured counterparts, in addition to 35 percent more outpatient care and 15 percent more prescription drug care.

On the preventive side, mammograms rose by 60 percent and cholesterol monitoring increased 20 percent. Medicaid patients were also 70 percent more likely to find a regular doctor.

Insurance coverage decreased the probability of having a bill sent to a collection agency by 25 percent, out-of-pocket medical expenses by 35 percent and the need to borrow money or skip other bills by 40 percent.

“Medicaid comes with substantial costs in terms of the expenditures necessary to pay for this coverage and run the program, but there are also substantial benefits in terms of the health and finances of the beneficiaries,” Baicker said.

Ron Pollack, executive director of the liberal health care advocacy group Families USA, said he “blanketed” the White House and Capitol Hill with the report the moment it was released.

“This study shows that if there is an erosion of the Medicaid program — now or in terms of the expansion in 2014 — it will have very significant, real-life consequences,” he said. “Policymakers need to care about that.”

He worries that if states no longer receive dollar-for-dollar matching funds for Medicaid from the federal government, both benefits and physician payments will be slashed, reducing the positive benefit of the program for the poor.

Further, cuts to Medicaid now could lead to “a potential of unraveling one of the key elements of coverage in the Affordable Care Act,” he said. “If states get something less than the 100 percent match, I think we’ll have a less-than-robust effort to get everyone enrolled in 2014 lot of the people eligible for coverage would never get it.”

On Capitol Hill, defenders of the law were just as swift to embrace the study. Sen. Jay Rockefeller, D-W.Va., told the NewsHour in an email that it “reinforces what we already know – Medicaid is an essential life line for millions of Americans. The needs of the 68 million people who depend on Medicaid don’t go away with spending cuts, and cuts would just push the financial burden on to the states.”

But states are already overwhelmed by Medicaid costs. As of March 2011, Medicaid or other health care programs had run over budget in 23 states. Seven million Americans have enrolled in Medicaid since the recession began, driving up costs 8.1 percent to almost $340 billion in 2009.

Such figures prompted 29 Republican governors to outline their ideas for Medicaid reform in a letter to Sen. Orrin Hatch, Ranking Member of the Senate Committee on Finance, and Rep. Fred Upton, Chairman of the House Committee on Energy and Commerce. Topping their list of suggestions: A full repeal of the health reform law and block grants to states for Medicaid.

Mike Schrimpf, spokesman for the Republican Governors Association, said the report is right, Medicaid is essential. “But the best way to preserve and protect Medicaid is to give states ability to run the program in the way they see fit for their unique population, rather than a top-down approach from Washington,” he said.

In the same camp, Paul Winfree, a senior policy analyst at the conservative Heritage Foundation, said that comparing Medicaid recipients to the uninsured also misses the point.

“I would hope enrollment in Medicaid is better than being uninsured, especially for those who need access to health care the most,” he said shortly after posting a Heritage blog post headlined “Oregon Medicaid Experiment Not As Convincing as You May Think.” “But I think we should probably start looking at whether a better alternative to putting people on Medicaid might be helping them to afford private insurance – which may end up being more cost-effective.”

While encouraging all of the debate instigated by the report, Baicker, the researcher, also urged a bit of caution. Oregon’s demographics are slightly different than the rest of the nation and extending coverage on such a wide scale may completely alter the outcome, she said.

“So I would want people to be cautious when extrapolating these findings to the Affordable Care Act,” she said. “But I would certainly want them to consider them.”

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