Deepening Medicaid Crisis Threatens Physicians

January 8, 2015

Even if you don't accept Medicaid, new state laws may require you to as its cost and failed policy overwhelms budgets.

The U.S. Government Accountability Office (GAO) published its 2014 state and local government outlook, and it shows fiscal troubles continuing to deepen. The latest projection estimates a spending cut (or corresponding tax increase) of 18 percent, and, that's just to break even.

The root of the problem is Medicaid, the cost of which is on the verge of, or already has in many states, superseded the traditional state and local budget spending leader: education.

How the states respond may well impact you and your practice in a very direct way through the last resort of policymakers and legislators: mandates. How so?

The causation of this deepening problem is a combination of three primary factors. First, Obamacare is really a massive expansion of Medicaid and that federal subsidies to states will begin to be reduced dramatically in a few years.

Second, and at the heart of the matter, is the persistent - and lobbyist-groomed - tenet that federal, state, and local governments take as gospel: The only way to reduce costs is to ration care, a political third rail that no one will touch.

Third, Obamacare's central tenet that all Americans must have health insurance to solve the healthcare crisis is the equivalent of mandating all Americans to have a savings account to solve poverty; both of which are deeply linked. Neither addresses the root problem of funding the consequences of inadequate chronic disease education, prevention, and management, and starving education, prevention, and management.

The failure of health system leaders, experts, and pundits to even acknowledge that the system is bloated and broken in their New Year prognostications speaks loudly that they are either clueless or disingenuous, protecting their turf until they run out of other people's money. Running out of other people's money is likely nigh since the average U.S. annual per capita cost of healthcare hit $10,000 for the first time; that's more than double that of any other country in the world including the most generous and high quality systems like the Netherlands and Sweden, whose results are far better than ours, which is at or near the bottom in general quality and outcomes in the developed world.

An actual Obamacare solution, investing in primary care by increasing Medicare rates from 40 percent of Medicare to Medicare levels, which could have materially decreased costs by providing resources to address the root of 93 percent of Medicaid spending - chronic disease - is a complete failure because it is such a transparent sucker bet that virtually no primary-care physicians fell for it. Why? It was temporary and when it expires in a few months, physicians buying into the program will own those patients and the crushing losses that also extinguish any progress made.

State Medicaid programs have gotten what they paid for by funding emergencies instead of investing in preventing them, putting the final key element in place for a state and local failure so spectacular, it makes the already ominous GAO projections look like good news.

Absent an epiphany to set policy right to cut waste and improve health status, the next governmental step is the same as that employed for virtually every failed public policy:  penalties and mandates.

It's not like real solutions aren't there and ready to be put to work. It is, however, that successful chronic disease management makes expensive diagnostics, hospitalizations, and procedures unnecessary by preventing them – and that is a reality that will take leadership, political will, and courage to enable.

It also requires leaders to understand history, the consequence of their policies, and have a vision for the future.

A tall order, and one that may fill your waiting room with Medicaid and health insurance exchange patients in the near future.