The Unhappy Legacy of Medicaid

In September, the non-profit organization Public Citizen (PC) issued a report comparing Medicaid and Medicare payments to doctors in 10 states and Washington D.C. The results underline the fact that Medicaid has been designed, from day one, to give states an easy  cop-out when it comes to health care for the poor.

The study highlights cases where the disparities between what different states pay a doctor to care for a Medicaid patient are greatest: “In New York, doctors are paid $20 for an hour-long consultation with a Medicaid patient, while in higher-paying states, doctors receive an average of $157.92 for the same service – a difference of greater than sevenfold. The difference within a state between what Medicaid pays [a physician to treat a patient who is poor enough to qualify for Medicaid] and what Medicare [pays a doctor to care for an elderly patient] is just as dramatic. For this hour-long consultation, a physician in New York could earn $196.47 from Medicare, almost 10 times more than from Medicaid.”

Last month the AMA posted a chart of these and other disparities on its medical news website, and seen side-by-side, the comparisons are startling: a physician in New Jersey or Pennsylvania gets, on average, about one quarter as much for seeing a Medicaid patient as a Medicare patient; in New York and Rhode Island, less than a third; and in the nation’s capital less than half as much. Other states lie at the other end of the spectrum. Alaska, Wyoming, Delaware, and North Carolina all pay more for Medicaid than Medicare.

Is there any rhyme or reason to how states reimburse Medicaid care? Looking at Alaska (which pays more for Medicaid, relative to Medicare, than any other state) and New Jersey (which pays the least) it initially seems that poverty rates may factor into disparities. Alaska’s poverty rate is the 7th highest in the nation, so it would make sense that it would want to encourage health care for the poor. New Jersey, on the other hand, is almost last in the nation when it comes to poverty rates (no. 47 on the list) so the state may not feel as strongly about the need to ensure care for the poor.

But this logic doesn’t hold past the two extreme examples. Pennsylvania
and Rhode Island’s reimbursement rates are comparable to New Jersey’s,
despite the fact that both are almost smack in the middle of poverty
rankings. Meanwhile, Wyoming and Delaware both boasts low rates of
poverty and high reimbursement.

The real culprit behind variable Medicaid payments is policy design:
Medicare is federally funded and an entitlement program in the fullest
sense; Medicaid is neither. This has unsettling implications for how
much effort states are wiling to expend in ensuring access to care for
the poor.

Medicaid is a joint state-federal program, a condition that Tim Jost of Washington and Lee law school calls in a 2003 Health Affairs article
“an artifact of a history of which we should not be proud”. The reason
Medicaid has such a strong state-centered component, says Jost, is
because state autonomy makes it easier to sweep the poor under the
rug—an option that was important when Medicaid was passed in the 1965,
when many states were reluctant to spend much on poor black citizens.

With poverty being so closely tied to race, the state-centric design of
Medicaid appeased Southern Democrats in Congress “who insisted on
control over who got welfare and how much.” And so the door was opened
to “endless gaming” on the part of the states, with local politics
affecting Medicaid in ways it can’t affect Medicare.

States also get some added wiggle room to politicize the delivery of
care by virtue of the fact that Medicaid is, as Jost puts it, a “weak
entitlement.” Jost notes that “although Medicaid is regarded as a
federal entitlement program, nowhere does the Medicaid statute
explicitly recognize a federal right of action to enforce recipients’
rights.” This is in stark contrast to Medicare, which is all but
enshrined in the constitution. Looking at the letter of the law, you
find that “Medicare beneficiaries are referred to as ‘persons entitled
to benefits,’ a phrase that appears more than 100 times in various
forms in the current Medicare statute.” The emphasis on entitlement
means that “Medicare beneficiaries are explicitly granted access to the
federal courts to seek protection of their entitlements to eligibility
and services.”

Medicaid is much more modest in its claims, starting as “an extension
of the earlier Kerr-Mills legislation titled ‘Grants to States for
Medical Assistance Programs.’” Medicaid was designed to provide “funds
‘for the purpose of enabling each State, as far as practicable under
the conditions in such state’ to furnish medical assistance to welfare
recipients and the medically needy.” In other words, Medicaid was
institutionalized as charity—a nice idea, if you can make it work—while
Medicare is an explicit legal right.

From the states’ perspective, that makes Medicaid beneficiaries a much
less powerful constituency: they simply don’t have the same clear legal
recourse as do the elderly, Medicare has to ensure that the elderly get
the care they are entitled to—which means making Medicare services more
attractive to physicians. But states can get away with skimping on
Medicaid payments. And they do: as the Washington Post noted last year, “reimbursements are 69 percent of what Medicare pays and even lower compared with what private insurers pay.”

Of course, understanding how political history and arcane legal
distinctions have shaped low Medicaid payments isn’t the same as
excusing them. Last year, a Center for Studying Health Care System
Change report found that
in 2004-2005, the percentage of physicians who accepted no new Medicaid
patients was “six times higher than for Medicare patients and five
times higher than for privately insured patients,” because “Medicaid
reimbursement rates… have long deterred physician participation in

This is a big problem. There’s nothing intrinsically more important
about caring for the old than there is about caring for the poor.
There’s no logic to the Medicaid-Medicare disparity—it’s just an
unhappy legacy of racism. The payment gap needs to be bridged.

The easiest solution would come state-by-state, with local officials
pushing to boost Medicaid reimbursements within their jurisdiction.
States like Alaska, Delaware, and North Carolina show us that the
payment gap can be bridged without overhauling the whole system. Even
some of the worst offenders are coming around. Earlier this autumn, New
York Governor Eliot Spitzer submitted a request to increase Medicaid reimbursements in the 2008-2009 budget.

Of course, we can’t count on every state following New York’s lead. It
may be that the only way to ensure reasonable Medicaid payment levels
is to incorporate more federal oversight—or to retool the letter of the
law, legally empowering the poor the same way Medicare does for the
elderly. But these are both ambitious undertakings that are probably
best avoided in our era of budget crunches and competing priorities.

For now, we just have to hope that more state and local officials
realize a simple fact: just because Medicaid is designed to give them
an out when it comes to health care for the poor, doesn’t mean that
they should take it.

14 thoughts on “The Unhappy Legacy of Medicaid

  1. Thank you for the tutorial on Medicaid.
    You hit the nail on the head here with
    “There’s no logic to the Medicaid-Medicare disparity—it’s just an unhappy legacy of racism.”
    Let us hope all the Governors have a soul until inevitable reform comes.
    Dr. Rick Lippin
    Southampton, Pa

  2. The whole Medicare issue is starting to get out of hand all over the country. Dr’s are looking at their pay cuts, and patients are facing these extremely high and increasing premiums. All the while, the big insurance companies sit back and collect everyone’s money. AARP has set up so we can sign a petition to make our voice heard. You can also read updated news, watch videos, and even write an e-mail to your congressman to tell him how you feel. I’m working to help AARP promote better Medicare, because no matter what, this affects all of us in one way or another.

  3. Rick and Heather,
    Thanks for your comments. Heather, you’re right, Medicare payments are increasingly an issue as well. I fear though, that any successful advocacy on the part of Medicare would de facto come at the expense of Medicaid, that has no strong voice. This doesn’t mean there shouldn’t be lobbying; just a sad observation.
    An interesting addition: after I posted, I found this great paper from April of this year, available at
    The author, Lawrence Jacobs, discusses how Medicare started off as a back-door approach to incremental universal coverage. This gives us another reason for the strong wording of rights and entitlements in Medicare–it was meant to institutionalize the ethos of health care as being a basic component of citizenship, which would in turn (ideally) trickle down to the young as well.
    Medicaid, however, was not perceived as being an initial contribution to universal coverage. Why? Because “the stigma of the means-tested program would potentially undercut future demands from the nonpoor.” In other words, you had to make health coverage something dignified, and tying it to the poor seemed like a surefire way to torpedo popular respect.
    This is another reason why Medicaid is a state-based, weak entitlement: Johnson didn’t pin his hopes of universal coverage to it, because he never thought a program for the poor would convince America of anything.
    Another sad statement on the politics of poverty–even in the midst of the progressive 1960s.

  4. In September, the non-profit organization Public Citizen (PC)

    PC? The same PC started by a Harvard Law grad with the first name “Ralph” and last name “Nader?”
    Thank God this isn’t the MSM. Minor details like facts just get in the way.

  5. Russ,
    Funny you should mention Nader…originally this post was to begin with “Say what you will about Ralph Nader…” but then I realized that he has absolutely nothing to do with low Medicaid payments, so what’s the point? It would just divert attention from the relevant facts.
    And at any rate, the information in the PC report is accurate, corroborated by many other sources. Nader fan or not, Medicaid payments are low, and they’re low for no other reason than Medicaid is structured in such a way as to encourage them to be low. The fact that Nader is controversial, and that he founded PC, really has no bearing on the issue at hand. And since Nader has nothing to do with low Medicaid payments, I decided not to discuss him–sensible enough, I think.
    Thanks for commenting.

  6. You’re not really implying that Medicare is a constitutional right are you?
    Medicare is no more of a “right” than the fact that there is a law that created the program.
    Using that paradigm, a driver’s license is also a “right” because its enshrined in state laws.

  7. Hi Joe,
    No, I’m not implying Medicare is a constitutional right–hence “…all but enshrined in the constitution.”
    What I am saying is this: when you’re dealing with the law, language is everything, and the language of Medicare clearly frames it as an entitlement–an absolute guarantee–while Medicaid is very much a means-tested program, designed to be more malleable based on which way the political wind is blowing.
    This in part contributes to the greater variability and generally lower amount of Medicaid payments relative to Medicare.

  8. Niko,
    I’m sure you are aware that NY’s Medicaid program is already the most expensive in the country by far at $50 billion per year including the federal share. That equates to almost 15% of the entire nationwide spending on Medicaid even though NY state accounts for less than 7% of the national population. Indeed, NY spends more than California and Texas combined. Moreover, in a three part, 9,000 word series in 2005, the NY Times documented a program riddled with fraud and suggested that as much as 40% of total spending might be fraudulent or inappropriate. The very high state and local tax burden in NY is already driving business out of state (especially upstate), yet you suggest that NY (and other states) should increase spending on Medicaid dramatically so many more doctors will be willing to see Medicaid patients.
    Perhaps we might be better off if the scope of benefits were less generous, the reimbursement rates for services that are covered were closer to Medicare’s, and we invested significantly more in fraud mitigation including national ID cards for all of us, not just immigrants. Every doctor who performs or orders a test or procedure should have a unique provider ID number even if he or she is part of a large group that is able to bill using a single ID number for all of them. We should be able to attribute utilization of all healthcare services to the specific doctor who drove the utilization.
    Ideally, Medicaid should probably be folded into Medicare so we could have a single national set of benefits and means tested eligibility criteria. There would need to be a mechanism for dealing with Medicare’s deductibles and copays which the poor, presumably, could not afford. Perhaps that piece could be left to the states to fill in. The bottom line is that resources are finite and it would be helpful if progressives were more sensitive to that fact of economic life.

  9. I may not know much, but I do know that there are millions of people without any healthcare coverage, including Medicaid. May God Bless us all.

  10. It is important to maintain good eating habits and do exercises routinely, not only because it makes us physically see more slender and attractive, but because our internal organs work better and feel very well what will be reflected in the appearance and obtain a total welfare.

  11. we can sign a petition to make our voice heard. You can also read updated news, watch videos, and even write an e-mail to your congressman to tell him how you feel. I’m working to help AARP promote better Medicare, because no matter what, this affects all of us in one way or another.

  12. It will only develop legs if we allow it to do so!The major flaw in this new wrnilke is that those drawing pensions from assorted public, as with private, entities have done something to earn that pension. They have produced something for which they were and are compensated. While not all have truly earned it (yes, we all know idiots who sat on their duffs for an entire career of duff sitting at a public trough), most really did put their lives on hold for the public good. (Congress being a notable exception.)Medicare/Medicare et al should never have been instituted and should simply disappear. Medicare may be the single most significant contributor to the financial destruction of this country. It did, however, serve as a most excellent vehicle for advancing the progressive agenda by making dependent on government the least likely segment of society to become dependent on government. It was a brilliant plan, and it worked.

    • Nadia–

      No facts in your comment. Just much misinformation mingled with mean-spirited opinion.