Sen. Brian Schatz wants to let everyone buy in to Medicaid.

Letting People Buy In to Medicaid Is the Hot New Democratic Health Care Idea

Letting People Buy In to Medicaid Is the Hot New Democratic Health Care Idea

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Aug. 23 2017 3:17 PM

Letting People Buy In to Medicaid Is the Hot New Democratic Health Care Idea

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Sen. Brian Schatz is a man with a plan.

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With Obamacare repeal defeated for the time being, Democrats have begun looking ahead and crafting plans to expand health coverage to the millions of Americans who still remain uninsured. On Tuesday, Vox previewed one such proposal from Sen. Brian Schatz of Hawaii, which would let middle- and upper-income Americans buy into Medicaid through the Affordable Care Act's exchanges. “Exclusive: Sen. Schatz’s New Health Care Idea Could Be the Democratic Party’s Future,” declared the somewhat breathless, if technically accurate, headline. (I mean, Dwayne Johnson could be the Democratic Party's future, too.)

Jordan Weissmann Jordan Weissmann

Jordan Weissmann is Slate’s senior business and economics correspondent.

When I asked Schatz's office for more details, I was told the bill is still a work in progress with some pieces subject to change. But after reading a draft summary of the plan that's been making the rounds in health-policy circles, it strikes me more like an old idea with some important new twists: Schatz wants to bring back the concept of a strong public option on the Affordable Care Act's exchanges. Medicaid just happens to be the vehicle to do it.

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As you no doubt recall, Democrats spent much of the 2009 Obamacare wars arguing over whether to create a government-run health plan to compete with private insurers. But even among public-option advocates, there were two camps. On one side, you had progressives, including Sen. Bernie Sanders, advocating a “strong” public option that would save costs by using the same doctor payment rates as Medicare. Moderate and conservative Dems saw this as a step too close to socialized medicine and preferred a weaker public option that would have to negotiate rates with providers just like Aetna or Humana.

In the end, both ideas proved objectionable to industry-friendly centrists like Connecticut's Joe Lieberman. The public option died.

Eight years later, liberals are now seriously debating the merits of full-on Medicare-for-all. In this new, lefty0friendly milieu, Schatz is more or less resuscitating the strong public option and serving it up as a political half-measure, just in case Congress can't muster the votes for single payer whenever Democrats next regain power.

As I said, though, it's not quite the same idea as before.

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Instead of creating a federally run insurance plan, Schatz would give states the option to offer Medicaid coverage for purchase through their Obamacare exchanges. The plans would be open to all residents who were not otherwise insured and, according to the outline, would be modeled on the sort of insurance offered through Obamacare's Medicaid expansion—which, among other things, means it would cover the ACA's 10 essential health benefits. Crucially, premiums would be capped at no more than 9.5 percent of a family's income. Customers could also use their Obamacare tax credits toward the cost.

Letting middle-class families buy into Medicaid this way would fix two of the Affordable Care Act's fundamental flaws. First, it would create a health plan of last resort in places where private carriers decided not to do business. That seems more necessary than ever now that dozens of rural counties have just narrowly avoided being left without insurance options for next year. Second, it would create a new guarantee of affordable coverage for upper-middle-class families. Today, households that make more than 400 percent of the poverty line aren't eligible for Obamacare's tax credits. That's created millions of disgruntled Americans, who've been left exposed to rising premiums on the individual market. Opening up Medicaid to everyone, and putting a ceiling on its cost, would give that group some protection.1

It's not clear that either of these moves would vastly expand the number of Americans with health coverage. But they would sure up Obamacare's promises. Every family would have access to coverage on the individual market, and it would cost less than a tenth of their income, no exceptions.

Schatz's plan has one other important plank. It would increase Medicaid's payment rates to doctors and hospitals so that they matched Medicare's, with Washington picking up the full cost of the change. This move would be expensive—Medicaid pinches its pennies today, paying providers 72 percent of what Medicare offers, on average. But it would likely go a long way toward fixing what many people consider Medicaid's biggest flaw: the fact that many doctors simply won't accept the program's patients because it pays too little. Hiking the pay rates would give Medicaid enrollees access to wider networks of care and make the program more appealing to middle-class customers.

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One quirk of using Medicaid to create a public option is that it might not really be public, strictly speaking. While Medicaid is funded by states and the feds, most of its enrollees today actually receive their insurance through private managed-care organizations that contract with the government. Judging from Schatz's outline, a state could lean on the same companies to offer buy-in plans. Some of these carriers, like Centene and Molina, already sell coverage on Obamacare's insurance exchanges; in places where they do, Schatz's plan might simply serve as a way to extend ACA-like subsidies to more upper-middle-class families.

That might make the Medicaid buy-in a bit more palatable to the insurance industry, which came out hard against the public option in 2009. Instead of putting them out of business, it could pad their profits. Of course, that might also be a turn-off to the left-wing activists who've been driving the Democrats' health-care debate, many of whom want to drive the private sector out of the health insurance business entirely.

There's at least one other obvious downside to using Medicaid as a public insurance backstop: States might simply choose not to expand it, just like many chose not to expand the program under the ACA. For that reason, some Democrats might still prefer to let Americans buy in to Medicare, since it's available everywhere.2 The upside of using Medicaid, so far as the left might be concerned, is that it would give states flexibility to make their buy-in's more generous. A state like California might even use it as a vehicle to pursue single payer, with federal funding.

Potential qualms aside, Schatz's plan says something interesting about the changing politics of health care. Once maligned as a poor program for poor people, Democrats are now treating Medicaid as a viable option for ensuring the middle class. For that, we can thank its successful expansion under Obamacare, as well as the Republican Party's failed attempts to slash its budget, which helped rally liberals in support of Medicaid.

Schatz's plan has also shown how far the Overton window has shifted on health care. Less than a decade ago, the public option was a bridge too far Democrats. Now, it's being treated as a modest step toward something bigger. “If there’s ever a vote for single-payer, I’m a ‘yes,’ ” Schatz told Vox. “But there are lots of things we can do in the meantime.”

1For families that earn 300 to 400 percent of the poverty line, Obamacare's subsidies cap premiums at about 9.6 percent of income. So you could argue that Schatz's plan is effectively expanding Obamacare-like subsidies to everyone.

2 I suppose Congress could also let people buy into both, and see which gets more traction.