While a New England Journal of Medicine article on a poll showing high physician support for Massachusett's health insurance reforms* captured some of the news cycle, the Disease Management Care Blog was much more interested in catching up with this jewel from a week earlier on the logic underlying Medicaid's inclusion in healthcare reform.

This article by George Washington University academician Sara Rosenbaum is a very handy and well written summary. Recall that Medicaid covers a whopping 60 million Americans that generally meet three broad conditions: 1) age (children and the elderly), 2) a qualifying condition (pregnant, disabled or a caretaker of children) and 3) income (a percent of the Federal Poverty Level or FPL). The latter category threshold varies from State to State (from a low of 17% to a high of 275%). The first two conditions trump the latter. If you are a ‘nonelderly’ adult and don’t have a qualifying condition, you are out of luck when it comes to Medicaid no matter how low your income is. You probably can't afford commercial insurance either, which means you are uninsured.

That may change thanks to the bills before Congress. They bascially do two things: 1) eliminate the age/qualifying condition barriers, and 2) create a one size income standard as a percent of the FPL across all States.

Fans of the private market may wonder why health reform is turning to Medicaid. According to the article, it is more than just a matter of the Democrats’ policy preferences.

First of all Medicaid is the cheaper alternative. States are required to cover part of the Medicaid budget, Medicaid has a lower fee schedule and its administrative costs are partially carried by the government. Private insurers can't match this. Ms. Rosenbaum quotes research showing comparative policies for private insurance could cost approximately $6000 while Medicaid’s cost would be less than $2000. That’s over 4000 reasons in favor of Medicaid.

Secondly, absent highly vigilant and extensive regulation, the private market could easily tilt toward ‘cherry picking’ and actively enroll a younger and healthier population. Medicaid programs, in contrast, are configured to be a fiduciary for the poor and ill without any of the enrollment or benefit gamesmanship.

Last but not least, the professionals that administer Medicaid understand the special needs of persons living at the margins of society. They understand how community health centers, public hospitals and local agencies can be used to best serve underserved persons living in inner cities or rural settings. This kind of expertise is simply unavailable in the commercial insurance market.

The article closes with three 'show me the money' recommendations:

1) Show me (the States) the money. Without credible support from the Feds, the States may be simply unable to afford their share of an expanded Medicaid program.

2) Show me (the docs) the money. Without credible support from the Feds, the States may simply squeeze their payment rates down to unsustainable levels. Spotty physician refusal to accept Medicaid patients could uptick considerably.

3) Show me (the system) the money. Medicaid needs to become more a visible player in each of the States' efforts to rationalize health care, increase quality and drive greater value.

Readers may or may not agree with the rationales described above, but they make sense from an insurance reform perspective. Unfortunately, other than reducing benefits and lowering payment levels, the DMCB sees few other options for a new and improved Medicaid to hold down costs if health care inflation continues unabated.

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*The DMCB cannot resist. Of course physicians prefer it when their patients have an ability to pay for health care services. Check out this telling article on the Brit's introduction of the National Health Service in the 1940's and politician Nye Bevan's "bribe" to win the support of the physician consultants: "I stuffed their mouths with gold."