Medicaid’s Disadvantage: Why Private Plans Work Better in Medicare Than in Medicaid

The Medicare and Medicaid programs both increasingly rely on private insurers to procure health care benefits for their enrollees. These arrangements are referred to as Medicare Advantage and Medicaid managed care, respectively. Policymakers hope that this will reduce costs while improving care for beneficiaries.

This arrangement has worked less well in Medicaid than in Medicare due to three fundamental structural differences between the programs:

The broad prohibition on beneficiary premiums in Medicaid. This commits the government to covering whatever additional costs are incurred by relatively costly Medicaid plans. In turn, this creates a risk of plans vying to expand benefits at public expense, which prevents the government from permitting substantial competition in Medicaid managed care—eliminating much of the point of private management.

The greater ambiguity and discretion in Medicaid eligibility. Publicly financed private insurance allows insurers to profit by enrolling individuals who are ineligible for benefits. Medicaid eligibility is particularly hard to assess due to the ambiguity and fluctuations of beneficiaries’ income and simultaneous enrollment in other sources of health insurance.

Continue reading the entire piece here at the Paragon Institute

______________________

Chris Pope is a senior fellow at the Manhattan Institute, where his research focuses on entitlement reform, insurance markets, and healthcare payment policy.