MEDICAID Essay, Research Paper



Medicaid is a Federal – State entitlement program that pays for medical services on behalf of certain groups of low income persons. (O’Sullivan, 1990) Title XIX of the Social Security Act provides for the medical assistance commonly known as Medicaid. (O’Sullivan, 1990) This means-tested entitlement program became part of federal law in 1965. Medicaid makes direct payments to medical providers for their services to eligible persons. It is the largest health program providing medical assistance to the poor.


In order for one to be eligible for Medicaid, one must meet very strict requirements. These requirements vary from state to state, but in this paper the Federal requirements will be discussed as well as the general state requirements The correlation between those receiving public assistance and those receiving Medicaid seems to be directly related. “Medicaid has generally been linked to actual or potential receipt of cash assistance under a welfare program. Thus, eligible individuals have to meet the welfare definitions of age, blindness, disability, or membership in a family with dependent children where one parent is absent or incapacitated.” (O’Sullivan, 1990) These stringent requirements leave out part of the population such as singles, childless couples who are not elderly or disabled.

Besides falling into one of the above mentioned categories, they must also meet specified income and resource criteria which vary by State. “While the link to cash assistance has been the primary way to establish eligibility, states have been able to extend coverage to children who meet the income and resources requirements, but do not meet the definition of dependency.” (O’Sullivan 1990).

The other group that is affected by this institutional policy are the providers. Providers can be defined as those who perform services for the Medicaid patients. They include, but are not limited to physicians, hospital, dentists, pharmacies etc. “Low medical fee schedules, relative to physicians’ usual charges to other payers, are a major deterrent to participation.” (O’Sullivan 1990) Recent data suggests that the gap continues to widen between Medicaid and private rates. Virtually all hospitals participate in Medicaid. However, a Medicaid patient will more than likely be transferred to a public hospital for in-patient treatment.


Social Impact

It is merely impossible to try to obtain an actual number of people affected by Medicaid. If the picture was painted with a broad brush you could say that virtually every person in the United States is affected by Medicaid. For example any person who pays taxes is affected, any doctor who accepts Medicaid is directly affected by the low fee schedule that is put into place. Any person receiving public assistance is affected as well. The amount of people who are currently receiving Medicaid will be broken down: 6.2 million or 24.9 percent adults in families with dependent children, 10.4 million or 41.8 percent dependent children, 3.5 million or 14.1 percent aged, .4 million or 13.7 percent disabled or blind, 1.4 million or 5. 6 percent fall into the category of others. (O’Sullivan 1990) The total amount of people on Medicaid is 24.9 million. It’s obvious that practically everyone is affected by this program.

Problems With the System

The Medicaid program was one of many programs designed to help the poor and disadvantaged enjoy the benefits of receiving the type of medical care provided to those who could afford it. According to Karen Davis, author of Achievements and Problems of Medicaid, from its initiation the Medicaid program has had two major objectives: insuring that covered persons receive adequate medical care and reducing the financial burden of medical expenditures for those with severely limited financial resources. Before the introduction of Medicaid most poor persons had little or no private insurance and many went without needed care. Medicaid attempted to alleviate this situation – if not for all poor persons, at least for those on welfare and the medically needy. (Davis, 1996)

A Lack Of Equality

Perhaps the greatest flaw in the Medicaid program is that it does not treat people in equal circumstances equally. Davis goes on to say that the inequitable distribution of Medicaid benefits is caused in part by the joint Federal – State nature of the program and its tie to the Welfare system. As stated previously the Medicaid eligibility is linked to the Welfare system. Therefore Medicaid is working within the complexity of the Welfare system, which, as we all can understand, is virtually impossible to work in conjunction with, due to its own inconsistencies. It is safe to assume that there is a complex set of restrictions that not all low-income persons are not eligible for Medicaid assistance. Given all the holes through which needy family can fall through trying to obtain assistance to meet their medical care costs, it is not surprising that a large number of poor people are not covered by Medicaid.

The Medicaid program has had a major impact on the health care of the poor. Davis feels that “It’s many achievements have gone unheralded and largely unappreciated obscured by an all consuming concern with its unanticipated high cost. Reform is clearly needed.” (Davis, 1996)

The area of reform that will be discussed is the exclusion from the Medicaid program of many poor persons. “The category with restrictions on eligibility, the varying tests for income and assets, and State administrative actions to curtail costs by restricting eligibility have served to exclude many poor persons from the program., Estimates indicate that at any given time from one third to as many as one half below the poverty level does not receive Medicaid benefits.” (Davis, 1996) These poor persons continue to lag behind the rest of the poor in access to health care. It is clear that Medicaid has not achieved its goal of bringing the poor into mainstream medicine and provided them with treatment by the same type of physicians, hospitals and other health facilities as other Americans. In fact it seems as though Medicaid has gone out of its way to discourage many physicians from participating Medicaid accomplished this by low rates of reimbursement for service, tremendou!

s amounts of paperwork, etc.

There are two theories that would help alleviate many of Medicaid’s short comings. The first one is “Providing Federalization of the Medicaid program with uniform coverage of all the poor and comprehensive benefits.” The second theory is one that is a well known theory these days – “Integrating the financing of health care for the poor into the financing of health services for all Americans through national health insurance.” (Davis, 1996)

The Efficiency of the Medicaid System

The Medicaid policy is not very efficient This is true for several reasons: Medicaid is regulated by both the Federal and the State government. This in itself should say it all, but for clarification it will be discussed. When Medicaid was first developed most moneys came from the federal budget and there was no limit on what was spent. There were no checks and balances placed in the system. Essentially the state ran the program and took the money from the federal government. The federal government began to limit the astronomical amounts of money spent, so naturally the states were forced to crack down on what money was spent and where it was spent. This takes the Medicaid policy into the realm of eligibility. State governments proceeded to make up there own eligibility requirements. At this point Medicaid progressively became less and less efficient. When all the states have different eligibility requirements and the money funded federally, who puts the checks and !

balances into place? The amount of communication that would have to take place for this policy to run effectively, not even efficiently, would be impossible. It is clear that when the policy makers were planning this institutional policy they clearly were not trouble shooting. In order for this policy to become efficient there needs to be many incremental changes to help repair the present inefficiency. I believe that the way Medicaid will become most efficient is by getting rid of both the Federal and the State’s involvement. It should be either one or the other, not both. It is like the old clich? “To many chefs in kitchen spoil the soup.” (Wolfe, 1993)

The optimality of this policy can be looked at from the several different angles. Every policy does have it’s winners and it’s losers. The winners are definitely those who get to experience the benefits of Medicaid. Those persons who are in fact eligible to receive Medicaid benefit for the obvious reason – they receive health benefits for free. Granted it may not be the top of the line service, but for all intents and purposes they do receive more than many. The losers of this policy clearly are those who do not qualify for Medicaid, but can not afford any form of health care services. Due to the inconsistencies of the eligibility requirements, it makes that harder for those who are in severe need of assistance, but can not seem to be able to crack the system and its bizarre eligibility requirements. Over the past years Medicaid has realized that they do need to do something about there policy to improve its optimality.

Omnibus Budget Reconciliation Act

“In the 1981 Omnibus Budget Reconciliation Act OBRA, Congress mandated what are perhaps the most substantial changes in the Medicaid program since its’ inception in 1965. Aimed at curbing what had previously been uninterrupted and rapid growth in Medicaid costs, the Medicaid provisions of OBRA set new limits on eligibility for the program, reduced the federal share of program costs, and increased the flexibility of the states for managing the program. To provide the ability of the states to finance their share of program costs, and increased the flexibility of the states from managing the program. At the same time, the ability of the states to finance their share of Medicaid costs was constrained by a severe recession and continuing high inflation rates. The outcome of all these phenomena was the first reduction in real spending for Medicaid in the history of the program.” (Wolfe, 1993)


A Time For Solutions

It seems as though when Medicaid was being developed they did not adequately look at the whole picture. The idea of synthesis was not even considered. Now that Medicaid is costing Americans an astronomical amount of money, people are starting to look at different options. Now they are looking to synthesize the policy. Here are some examples of possible options to help reform Medicaid. Some would like to see the whole policy scraped. “Maintaining the present Medicaid program, with State governments continuing to exercise their current authority to expand or restrict eligibility, benefits, patient charges, and provider reimbursement.” (Cutler, 1995) These are other possible solutions:

? Giving the State governments even broader authority to use Medicaid funds for health services for the poor.

? Providing for tighter cost control through federal actions.

? Providing for Federalization of the Medicaid program with uniform coverage of all the poor and comprehensive benefits.

? Integrating the financing of health care for the poor into the financing of health services for all Americans through national health insurance.

? Reassessing the current financing services delivery mix of health care programs and using financing mechanisms to promote the development of health services delivery.

Debate on these alternative future directions for the healthcare of the poor should be a key focus in the period ahead. By recognizing the strengths and weaknesses of our current programs, we can build new ones on the past and continue our progress toward the goal of health care for all Americans.


O’Sullivan, Carol. Poverty San Diego, Ca: Greenhaven Press, 1990.

Davis, Karen. Incremental coverage of the uninsured. V276, n10, p831(2) The Journal of the American Medical Association, Sept 11 1996

Wolfe, John R. The coming health crisis. Chicago Press, 1993.

Cutler, David M. The effect of Medicaid expansions. American Review, 1995

Tenison, James. The Medicaid Dilemma. Washington: Brookings Institution, 1995

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