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March 03, 2006
Can Health Savings Accounts help Medicaid?
Medicaid is the federal-state program that provides health insurance, long-term care, and other health care services to about 52 million poor, disabled, and senior Americans. For the first time since Congress passed it in 1965, Medicaid has become more costly than Medicare and is the largest budget item in nearly half the states.
Can Health Savings Accounts help the Medicaid program?
For at least some of the Medicaid population, the answer is yes, but the savings will likely be relatively small given the size and scope of the Medicaid program. The problem with the Medicaid program is that people have little incentive to be prudent shoppers of medical services. A Medicaid Health Savings Account plan could change those incentives and save the program money over the long term.
Iowa and Florida have already incorporated Health Savings Accounts into their Medicaid programs, and South Carolina is trying [as of January 2006].
What's the solutions?
States should consider adding an HSA to their Medicaid program. The state could continue to be the insurer, but increase the deductible, depositing part or all of the savings in the Medicaid beneficiary's HSA. Or, the state could simply provide a defined contribution to a private-sector insurer or third-party administrator selling HSA plans.
Would this approach be a radical departure from traditional Medicaid programs? Yes, but Medicaid needs radical change in order to sustain the program. Some considerations when designing an HSA Medicaid plan:
1.What should happen to the HSA balances once a Medicaid beneficiary leaves the program?
2. Can states use methods such as electronic benefit transfer (EBT) cards to protect against misuse of the account as they do with their food stamp programs?
3. Should a Medicaid HSA program be implemented as a limited demonstration project to test and evaluate it (as Florida has done)?
4. Since HSA plans already include a financial incentive to use the funds wisely, would frequently used state cost-control restrictions, such as prescription drug lists and formularies that limit patient choice, also be imposed on the Medicaid HSA population?
The Medicaid program is in desperate need of a fix. Health Savings Accounts may not solve all the problems of Medicaid, but they can certainly help change the mindset of individuals in the program.
This is a solution lawmakers should seriously consider.
Posted by Wiley Long at March 3, 2006 10:46 AM