THE PRESIDENT is determined to curb the outpouring of money to pay for health services, but concedes that he hasn't yet figured out how to do it. So, as much out of desperation as out of sound policy, his administration is considering placing a lid on federal support for Medicaid, the second largest of the federal medical programs. The largest, Medicare coverage for Social Security recipients, is the one exempted from cuts earlier this week. Medicaid is the health insurance program for the poor, and putting a cap on it simply makes everyone else involved in the system figure out how to absorb the proposed cuts.
First in the line of those destined to get this added burden are state governments. Medicaid is now a shared responsibility -- the federal government pays $16 billion of the roughly $30 billion costs, and states and localities pay the rest. The rules are the usual mixture of minimum federal requirements for eligibility and covered services, with some latitude for states to extend coverage to other groups and services. Since most states are already desperate to control their substantial share of Medicaid costs -- they had been hoping for increased, not decreased, federal support -- they have, in recent years, been cutting back sharply an optional features and trying out various ways to control costs. But these efforts come up sharply against two sorts of resistance.
One is the structure of the Medicaid system itself, which generally pays the full costs billed to eligible patients by the doctors or hospitals of their choice. This way of operating certainly encourages free and easy, if not excessive, use by both patients and health care providers. It has also given some Medicaid patients a level of service that many middle-income people cannot afford.
Other stumbling blocks to reform are the well-organized and aggressive lobbies that protect the interests of doctors, hospitals and medical suppliers as well as the advocacy groups that represent the poor. The medical lobbies have successfully beaten back attempts by previous presidents to control medical costs, and their current position has been strengthened by President Reagan's decision to shield the much larger Medicare program and to abandon attempts to put in place across-the board controls on the growth of hospital and other medical costs.
The Reagan proposals would apparently give states some additional flexibility to control costs -- things like being able to refuse to deal with high-cost providers, negotiate hospital rates in advance and finance cheaper alternatives to nursing homes. If these proposals survive -- similar ones were defeated in Congress last year -- they would help to curb Medicaid costs in the long run. c
But these sorts of administrative savings and minor service cutbacks are neither large in total, nor central to the matter. In some other programs, savings may be had by chasing out people who don't really need help. But no one seriously questions that Medicaid beneficiaries -- low-income aged, disabled and mostly fatherless families with children (and many others not covered) -- are in need of medical assistance. Within these eligible groups, the great bulk of Medicaid dollars goes to people who will probably never be really well again, the very old and the severely handicapped of all ages. With a rising population of the elderly, and with new and expensive advances in medical technology every day, taking care of these people can be almost limitlessly expensive. This brings you right up to the hard question -- more of ethics than of economics: when do you cut back on aid of this type because it is costing too much?
President Reagan has essentially said that he is going to sidestep this question entirely with respect to Medicare and thus avoid the attack of the powerful Social Security lobby as well as the medical interest groups. In the Medicaid arena, if he chooses the federal cap he will have decided to leave it to the states to fight out the issue with the special interest and advocacy groups -- who are even more powerful at the state and local level -- and, ultimately, the courts of law.
Such a decision would come close to being an evasion of the central responsiblity of the president to offer moral and political guidance on issues of pressing national concern, not simply to pass them on to more vulnerable and more narrowly representative groups and institutions. And even with a federal cap on Medicaid, the udget problem isn't solved. All the same issues must sometime be faced in the Medicare program that has been growing just as fast, and is almost three times as large a federal burden as Medicaid. The president has moved to confront one of these problems, but there is another, much larger one yet to be addressed.