Medicaid and health choice
Medicaid in North Carolina desperately needs
patient-driven reform. State and federal expansions of
Medicaid in the last 20 years have helped make it the fastest
growing portion of the state budget.
North Carolina already has one of the most expensive
Medicaid programs in the Southeast. Needed reforms go
beyond cracking down on abuse and implementing a preferred
drug list. Without reform, the state must either reduce
the number of services covered or reduce the number
of people eligible for Medicaid. With patient-driven reform,
most enrollees can help reduce costs by making decisions
about their own care.
- Medicaid was 5.5 percent of General Fund spending
in fiscal year 1990 but climbed to 15.5 percent by fiscal
- North Carolina has one of the most expensive Medicaid
systems in the Southeast.
- Getting per-capita or per-enrollee costs in line with
the regional average would save North Carolina more
than $400 million per year.
- The North Carolina Division of Medical Assistance
expects the recently passed national health care reform
to add 500,000 people to Medicaid in North Carolina
- North Carolina Medicaid enrollment among adults
under 65 more than doubled between 1999 and 2008
and is now near the national average.
- Private health insurance coverage in North Carolina
fell from 77 percent in 1999 to 67 percent in 2008.
- Medicaid and NC Health Choice covered 31 percent
of all North Carolina children in 2008, up from 19
percent in 1999.
- The Congressional Budget Office estimates that six
children lose private health insurance for every ten
added to SCHIP.
- Losing Medicaid benefits is equivalent to paying a very
high marginal tax rate.
Analyst: Joseph Coletti
- Seek a block grant. State policy should not be held
hostage to the whims of politicians in Washington,
D.C. North Carolina should seek a block grant that
would give the state more freedom to reform Medicaid.
- Use funds for premium support, not government
insurance. Despite its expense, Medicaid pays providers
less than private insurance and leaves customers
with less choice. The state should provide risk-rated
subsidies to Medicaid recipients that can be used to
purchase private insurance, with the option to continue
coverage after they lose eligibility.
- Offer patient-controlled accounts. Medicaid dedicates
significant resources to monitoring and approving
health expenses, but fraud and abuse remain
major problems. Individuals with private sector health
savings accounts have been more active in managing
their health and had lower costs than those with traditional
insurance. Medicaid patients could find similar
savings. If the state allowed recipients to keep these
accounts, the benefit could offset the high effective
marginal tax rate that results from losing benefits.
Director of Health and Fiscal Policy Studies
919-828-3876 • [email protected]