David Dayen: The Gradual Privatization of Medicaid

By David Dayen, a lapsed blogger, now a freelance writer based in Los Angeles, CA. Follow him on Twitter @ddayen

Over the past week, both houses of the Florida legislature have rejected the Medicaid expansion program endorsed by Governor Rick Scott. You may recall the huzzahs from the progressive world when Scott, a self-possessed anti-Obamacare warrior, decided to accept the Medicaid expansion. What didn’t get reported as much is that Scott’s announcement coincided with the go-ahead from the Administration for Florida to fully privatize their Medicaid system. The move into managed care represents an enormous cash cow for private corporate interests, including Scott’s former colleagues – he ran a health care company (notable for his racking up the largest Medicare fraud fine in history). A pilot project was seen as disastrous for almost everyone involved, save perhaps the insurers. Providers and patients alike are uneasy about full privatization.

So what was up with the Legislature’s rejection? Tea Party politics? Some unlikely show of principle against crony capitalism and corporate welfare?

No. They just want a different kind of privatization.

Arkansas’ privatization, in particular – which would just completely liquidate the public Medicaid program and have the state, in the immediate term, pay for premiums for everyone up to 138% of the poverty line to purchase private health insurance. There would be no more public disposition of Medicaid for the poor. It folds Medicaid into the as-yet-untested insurance exchanges.

Arkansas Governor Mike Beebe, a Democrat, said he got “everything he wanted” from the Department of Health and Human Services, who appear so desperate to expand coverage under Medicaid that they’re willing the privatize the entire thing. This actually jacks up costs over time, perhaps as much as 50%, as Medicaid is cheaper to administer, and always will be, considering that it involves the direct provision of services rather than running them through a middleman. It will only lead to more of the kind of price gouging chronicled by Steven Brill in that monster Time piece, not less. It makes the system more fragmented and unsustainable. It may not even be legal; it’s based on a fairly dubious reading of a 25 year-old clause in the Social Security Act.

But since the Supreme Court ruling that made Medicaid expansion under Obamacare more of an opt-in for states (which, granted, was unanticipated by most of the political class), the canniest of Governors have cajoled HHS into giving them whatever they wish. For some states, that may end up being a positive – Oregon springs to mind. But in the main, HHS is saying, “Just go ahead and provide the coverage and you can make Medicaid bear as little resemblance to a public insurance program as you want.” Among the goodies they’ve been handing out: allowances to states to cut payments further to doctors and providers (which often does restrict access in our fragmented system), blessings for throwing the entire patient base into managed care (which carries a myriad of challenges), and now this folding of Medicaid into the exchanges, with its promise of an even bigger market for the private insurance industry.

Needless to say, states are falling all over one another to get a piece of this action, this leverage opportunity, in the words of one Bush-era official. One of the remaining Republican holdouts, Pennsylvania Governor Tom Corbett, has a meeting set with HHS head Kathleen Sebelius. Indiana and Virginia have their own privatization plans. The Florida Legislature, while rejecting Governor Scott’s deal, put up an alternative that looks exactly like the Arkansas privatization proposal. As George Washington University’s Sara Rosenbaum said in an interview, “Every state will be eyeing this.”

If Arkansas is allowed to do this, I expect it to spread like wildfire. I have three calls with Texas reporters who want to know more about what Arkansas is doing. New York is another state that is looking at something similar… I think that every state is now going to be eying this thing. My own suspicion is it’s going to be very popular. I think CMS sees this as a way to lure in states that might not otherwise do the expansion.

So off we go into the ultimate privatization of the entire health care system… oh but “tightly regulated,” you see. Because this country has such a rich history of stringent regulation on powerful, deep-pocketed interests. The exchanges moved private individual insurance coverage into a private insurance pool with a few subsidies. But privatizing the public Medicaid program is another kettle of fish.

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About David Dayen

David is a contributing writer to Salon.com. He has been writing about politics since 2004. He spent three years writing for the FireDogLake News Desk; he’s also written for The New Republic, The American Prospect, The Guardian (UK), The Huffington Post, The Washington Monthly, Alternet, Democracy Journal and Pacific Standard, as well as multiple well-trafficked progressive blogs and websites. His has been a guest on MSNBC, CNN, Aljazeera, Russia Today, NPR, Pacifica Radio and Air America Radio. He has contributed to two anthology books, one about the Wisconsin labor uprising and another on the fight against the Stop Online Piracy Act in Congress. Prior to writing about politics he worked for two decades as a television producer and editor. You can follow him on Twitter at @ddayen.


  1. Ned Ludd

    I think “cajoled” is the wrong word. Ezra Klein, who acted like an unofficial spokesman for the Obama administration during the push for the ACA, says complete privatization was the plan all along.

    If Republicans can make their peace with the Affordable Care Act and help figure out how to make the Affordable Care Act’s exchanges work to control costs and improve quality, it’d be natural to eventually migrate Medicaid and Medicare into the system. Liberals would like that because it’d mean better care for Medicaid beneficiaries and less fragmentation in the health-care system. Conservatives would like it because it’d break the two largest single-payer health-care systems in America and turn their beneficiaries into consumers. But the implementation and success of the Affordable Care Act is a necessary precondition to any compromise of this sort. You can’t transform Medicaid and Medicare until you’ve proven that what you’re transforming them into is better. Only the Affordable Care Act has the potential to do that.

    I would guess that Obamacare was drafted in order to lay the foundation for the eventual elimination of Medicare and Medicaid. “Only the Affordable Care Act has the potential to do that.” Obama was, as it turns out, thinking several moves ahead. He and his administration, however, thought the exchanges would need to be set up before they could “migrate Medicaid and Medicare into the system”. The governors aren’t cajoling him. For Obama, this is an opportunity to end Medicaid as we know it, earlier than he planned.

    1. mac

      I think you give our legislators credit for far too much ability, planning to the tip of their nose is a stretch or them.

      1. Ned Ludd

        The legislators may be dolts when it comes to policy, but the framework for the ACA was literally written by Liz Fowler, a former Wellpoint exexutive.

        Take a look at the document properties of the pdf that [Marcy Wheeler] links to above. The author is Liz Fowler. The Liz Fowler who was vice president for public policy and external affairs for Wellpoint, the nation’s second-largest health-insurance company, until she re-joined Baucus’ staff in Feb. 2008. She had done an earlier stint with Baucus from 2000-2005.

        The PDF metioned is here, hosted by Ezra Klein at the Washington Post website. Max Baucus openly thanked Fowler on the Senate floor:

        Liz Fowler is my chief health counsel. Liz Fowler has put my health care team together… She put together the White Paper last November–2008–the 87-page document which became the basis, the foundation, the blueprint from which almost all health care measures in all bills on both sides of the aisle came.

        In December, Fowler left the Obama administration “for a senior position in Johnson & Johnson’s government affairs and policy group.”

        Moreover, Fowler’s hiring by the pharmaceutical giant comes after the president’s team cut a deal with the industry’s lobby arm that limited the government’s ability to negotiate for cheaper drug prices. In exchange, the lobby arm, the Pharmaceutical Research and Manufacturers of America (PhRMA), backed the legislation.

      2. different clue

        It certainly looks well planned by whoever actually wrote the law. It looks like this was the Obama goal all along, including the abolition of Medicare and the privatization of the wreckage and the revenue streams.

        Will “socialtarian” states, if there are any, get the same Obamastration permission to create “Single Payer in One State” that the “privatarian” states will get to privatize and voucherise Medicare and Medicaide? If so, states with a commanding plurality of socialtarian citizens should be taken over by that commanding plurality (if they can be) and Single State Payer instituted step by step in those states.

        How is the drive to State Single Payer going in Vermont?

    2. jrs

      Even privitization is too generous a term, although it usually is the term used for this type of cronyism. Much of the U.S. healthcare system was in private insurance companies hands before, but this turns the full government spigot to flow endlessly into their coffers forever (or until bankruptcy – of all the states eventually when they are footing the bill). Boot stamping on a human face forever if you ask me.

    3. jrs

      “Obama was, as it turns out, thinking several moves ahead.”

      Haha, what if he REALLY IS playing 11th dimensional chess, only it turns out he’s playing it against you?

    4. Doug Terpstra

      Four years of implacable right-wing policy shift, more twisted even than W, prove that Obama is indeed thinking well ahead. And the formula for eroding Medicare is the same for Social Security — destroy it gradually, in piecemeal divisions, in order to save it. It’s the perfect recipe for boiled frog — easy does it.

    5. Sanctuary

      I think if this move to privatization depends upon Obamacare working successfully, then we have nothing to worry about. The entire enterprise is so shabbily cobbled together, so inefficient and uncontrolled, that prices are destined to rise much faster and care quality to be much less than what was promised. When a business only faces a $2000 fine for not providing health care, and a policy costs 2-3 times that, it’s not hard to see a future wave of policy cancellations as a means of bolstering corporate balance sheets in a very difficult if not contractionary economic environment. I think a bunch of people being forced to find the same policy they now currently get at work on a rickety Obamacare exchange at twice the price won’t find it to be a bargain or a pleasure at all.

  2. tongorad

    So with Obamacare, the right was able to:
    -fulfill their privatization agenda
    -achieve plausible plausible deniability and insulate themselves from the political/social fallout of privatization
    – shift focus from Bush II and re-brand themselves via the Tea Party
    -re-invigorate their small-government platform
    -establish austerity/fix the debt as a permanent political instrument/fixture

  3. Theo

    Just to say I am really glad that David Dayen is now on NC, as I have almost stopped reading FDL since his departure, only checking in once a week, and every day at NC.

    1. Ned Ludd

      I agree. Today is David’s last day of guest-posting, but hopefully Yves will invite him back in the future and cross-post his articles, with his permission of course.

  4. TomDor

    “But privatizing the public Medicaid program is another kettle of fish.”
    Should be Barrel of Fish.

    It makes privatizing as easy as shooting fish in a barrel.

  5. Ms G

    The only “enforcement” that will be vigorously pursued will be the DHS’s Inspector General and DOJ and IRS aggressively pursuing hapless “insurance exchange” members who will be finding themselves rolling from trap to trap in the Rube Goldberg of regulations about “subsidies”, which look more like a grid of ways in which to ensure that any person unfortunate enough to end up in a “healh insurance exchange” violates one, or two or more provisions.

    This is an excellent time to read (or reread) Paul Craig Robert’s “Obama Care a Deception.” Note especially, relevant to the Medicaid privatization efforts, that one aspect hihglilghted in piece published by PCR is how someone who one day qualifies for a “Silver Plated” insurance with a subsidy will be automatically down-enrolled into Medicaid should his/her income fall below $xX.XX during a given year. And that a new provision to claw back Medicaid benefits allows the Insurance Complex to have standing at any probate proceeding to claim a piece of a deceased’s estate in order to pay back any Medicaid benefits received.

    One could be forgiven for wondering whether Obamacare was not very painstakingly designed to create a system where Medicaid is turned into a double-barelled income stream for private insurers (paid by Gov during life of the patient; paid by the estate at death of the patient).


    1. different clue

      The patient should give everything he/she has to his/her children enough years before the patient’s eventual death that “intent to defraud ObamaCaide” cannot be legally accused. If the kids want the house the patient should sell the house to the kids in return for permission to live in the kids’ house until the patient dies, if there is a legal way to do that.

  6. Jagger

    I am trying to understand the logic of converting every segment of society into a marketplace showing a profit. Why don’t we ask the military or public schools grades 1-12 to open up a spreadsheet and show a profit? Why do we provide utilities to people that live in sparsely settled countryside when the costs are so much higher than in densely settled areas such as towns and cities?

    Should healthcare be considered a marketplace which must show a profit or die? Or should healthcare be considered a service for the public good deserving of government subsidy if necessary to ensure availability?

    It really does seem this country is going crazy.

    1. NotTimothyGeithner

      Much of the military is privatized. Its what the contractors are. Many of the contractors represent overpriced contracts to do what soldiers use to do when an army was in the field. Soldiers put together Arlington National Cemetary during a war and military occupation. The United States privatized the service and bodies were misplaced.

      The continued support for NCLB and Arnie Duncan’s soul effort as education secretary has been about privatizing education. The only reason it hasn’t been more extreme is people care for their own public schools. Even the debacle at UVA over the firing of the President was about for-profit education efforts.

      1. juliania

        I think instead of saying ‘privatized’ we should say ‘corporatized’, since private enterprise can be a very good thing with respect to small farms and small shops, for instance. I think ‘corporatized’ sounds bloated, and that is the problem.

        I would not mind seeing a private physician, for instance, should I need to, were he or she not part of a corporate behemoth and I not beholden to corporate insurers for what I could or more likely could not be reimbursed for.

        Let them corporatize themselves out of existence. Soon.

        1. NotTimothyGeithner

          Obviously, I’ve fallen victim to the right wing lexicon. You are quite correct, or at least I agree with your point and enjoy the use of “corporatized.”

    2. NotTimothyGeithner

      There isn’t an actual logic. Privatization is about stealing from existing sources of revenue. The only logic is “why can’t I get a piece of that for doing nothing?”

      1. Art Eclectic

        Well, if you’re a Republican, you already believe that the funds for those programs have been “stolen” from their rightful owners and privatization is a way to divert those funds back to their rightful owners.

        1. 1 Kings

          You’re right..water from the sky, gas and oil in the ground, electricity in the wires, Haliburton sandwiches for our troops..yep, definitlely all belong in certain select few hands.

        2. NotTimothyGeithner

          I suppose, but I can’t bring myself to find logic in the behavior and views of Republicans beyond tribal obsession. It would explain why the Republican base ignores the utter hypocrisy and refuses to endorse white, conservative Democrats or even the President when he is delivering every right wing promise on a silver platter. Republicans don’t care about the actual why or how as much as pissing off *perceived* “liberals.”

          1. different clue

            That may be our only hope. If so, how do we encourage and heighten the Republican tribalism?

          2. NotTimothyGeithner

            Outsiders can’t change Republican tribalism. It is what it is. 59 million dipshits voted for McCain/Palin. Obama sounded like any token Democrat at a local Chamber of Commerce breakfast, but my god, 3 million more people voted for McCain/Palin than Bush/Cheney in 2008. DEmocratic voters haven’t done themselves any favors over the last few years, but my god, 59 MILLION PEOPLE VOTED FOR THAT DIPSHIT SARAH PALIN. Anytime, a Democrat discusses reasoning with Republicans they need to be told to shut up just for being bloody ignorant.

            John Dean’s books (one is “Conservatives without Conscience” and I’m too lazy to google the other one) get to the point that the GOP is very authoritarian. They will follow their leaders blindly except on a few key issues (taxes, defense spendings, hating Democrats etc.). If the leaders don’t follow those perfectly, they will become the enemy. Look at Chuck Hagel.

            Pissing off Democrats and perceived liberals is a favorite sport. They would never tolerate Joe Lieberman on a VP ticket, but they love him because he pisses me off.

            There isn’t much we can do except to make sure issues are still front and center. They can’t oppose what isn’t in the media or being discussed. If Obama had just sent over a hideous budget like he is supposed to do instead of trying to call a hideous budget a grand bargain, this would all be done, and we would be back to hearing about those “fatcat postal carriers” or some other equally non-sensical situation.

            Since the essence of being Republican is tribalism and subsequently opposing the Democratic/black President, the rank and file will oppose any deal. Even with the countless “concessions*” the President offered over healthcare, he didn’t receive any Republican votes because the GOP electeds were terrified of their base who were concerned with pissing off Democrats.

            If the goal is to oppose the President’s attacks on Medicare/SS, then merely talking about is sufficient to enrage the GOP base to action.

            *There were concessions on top of the industry sellout.

          3. different clue

            This merely reinforces my belief that it is Republican tribalism (and authoritarianism also then) which may save us from the BS Obama Catfood Plan. And if the Republicans oppose letting Obama be the one to achieve it because they think it would piss liberals off to see Obama fail to achieve the Catfood Plan; then it makes perfect sense to re-inforce the Catfood Democrat Party in its desire to support Obama’s support of the Catfood Plan. Because as long as the Republicans see the Catfood Democrats conTINuing to support Obama’s support for the Catfood Plan, they will continue to oppose it in order to piss the Democrats and liberals off.
            We get into Wilderness of Funhouse Mirrors territory here.
            If the vast majority of the Dparty voters and their officeholders themSELVES visibly obstruct and reject the BS Obama Catfood Plan and the Republicans SEE the vast majority of Democrats eFFECtively reJECting the Catfood Plan, will the Republicans decide to suPPORT the Catfood Plan as the new best way to piss off the liberals and the Democrats? If so, should we support the Democrat’s support for the Catfood Plan? In hopes that the Republicans will keep obstructing it to piss off Catfood Obama and the Catfood Democrat Party and the Race Card/ Obamabot base?
            Funhouse Mirror Wilderness territory indeed . . .

          4. NotTimothyGeithner

            I think the GOP lacks the self-awareness to make that conclusion. The nominal leader of the Democratic Party will always be the enemy. Their reality is too limited (if they were that savvy its unlikely they would be Republicans) to make that leap.

            Another thread I mentioned the 2000 election theft while bashing Democratic behavior in the same point, and a Republican dutifully arrived to complain about something that happened 13 years ago and accuse all Democrats of not accepting reality. The base GOP thinker and probably most Democrats is incapable of thinking outside of that paradigm.

            I suspect if Obama faced a revolt we would see articles about how people are becoming conservative. Think of the Republican articles on how MLK Jr. would be a Republican today that get bandied about every now and then.

    3. Ned Ludd

      It is not about the showing a profit. It’s about creating unnecessary middlemen to pocket the public’s money. It’s a form of corruption. The middlemen pay off the politicians (with campaign contributions and with well-paying jobs after they leave public office). In return, the government quits providing services directly and instead diverts money to the middlemen, who cost more and provide less.

        1. Doug Terpstra

          Right, Ms. G, and now that public and private are fused we have the “perfect” neo-fascist kleptocracy. (I first typed kelptocracy & wish we had that instead, seaweed aquaculture!)

      1. jake chase

        But you do have to admire the artful ways in which they pretend they are doing something else. This, in reality, is what business school is all about. Nothing Else. There, now you have your MBA. Put it in your resume; tell them it came from IOFM University. They won’t know where it is but will be afraid to reveal ignorance. Don’t worry though, it does not exist. It’s just an acronym for Its Only Money (the F is silent in polite conversation).

  7. marym

    The ACA imposes a Medical Loss Ratio of 80-85% on insurance companies selling policies on the exchanges (generous to the insurance companies compared to Medicare’s MLR of about 97-98%, but that’s another topic).

    The MLR for Medicaid managed care is left up to the states, only 11 of which impose any. According to the article in the link, CMS required an 85% MLR for FL’s earlier partial transition to managed care. I haven’t yet looked for information about whether this is part of any current deals with the states.

    Link: http://www.kff.org/medicaid/quicktake_medicaid_mlr.cfm

    As far as using Medicaid funds to buy insurance on the exchanges, something to watch is what will happen regarding prescription drug prices. Medicaid imposes some controls, (Link: http://www.gao.gov/products/GAO-09-819T ) while the ACA does not.

  8. briansays

    the votes existed in the then democratic House to pass a public option if not even single payer as a part of obamacare–pelosi had the votes

    you were sold out by a handfull of democratic senators–blanche lincoln, ben nelson, max baucus and joe lieberman

    1. Eric377

      The effect of a single-payer model almost certainly would have been revolutionary. Public option would not have been, except in the easing the hypothetical possibility to evolve towards single-payer later, provided advocates had sufficient political muscle to enact changes. Since advocates didn’t have sufficient political muscle to even risk fighting for it through the normal congressional conference process, this seems a very remote chance of having happened. While you can see that public option would not have needed to generate profit, the bulk of the non-medical loss revenue would have been needed to handle all the same chores as private insurance and, if starting with no infrastructure, personnel, provider agreements and the like, it is entirely possible that its administration costs might have been higher for years, even without need for profits. Public options would have been available product on the state exchanges, but it is hard to imagine that the premiums and service levels would have shifted the market norms very far. It is possible that the most important function of a public option on the insurance exchanges was to disappoint enough people to demand single-payer with more energy.

    2. NotTimothyGeithner

      Yawn. Why was Joe Lieberman still in the caucus much less the chairman of Homeland Security? What did the D’s and the President get for that? Oh thats right, they received a convenient excuse.

      What has the President (the leader of the Democratic Party and top fundraiser) done to punish these guys? The DSCC gave Ben Nelson $2million, and then he didn’t even run. The President made Max Baucus his pointman in the Senate. Gee, was the President betrayed or too lazy to watch for Baucus was up to? Can you provide examples that counter these or even support your point?

      1. different clue

        Or was the President secretly co-ordinating it with Baucus, Nelson, Lincoln, Lieberman right from the beginning?
        That seems more likely to me.

        1. sanctimonious

          Obama was in on the deal to kill the public option for the get go:
          NY Times Reporter Confirms Obama Made Deal to Kill Public Option
          According to an Aug 2009 article in the New York Times (Obama Is Taking an Active Role in Talks on Health Care Plan), Obama negotiated with “cold-eyed realism” at “odds with his rhetoric” with the hospital and insurance lobbyists and with Max Baucus, “tacitly signaling as early as last spring that it might end up accepting something more modest than the government insurer the president has said he prefers.”

          “Mr. Obama and his top aides have immersed themselves in the Senate Finance Committee process. The president talks to Mr. Baucus several times a week, people briefed on their conversations say.”

          Several hospital lobbyists involved in the White House deals said it was understood as a condition of their support that the final legislation would not include a government-run health plan paying Medicare rates — generally 80 percent of private sector rates — or controlled by the secretary of health and human services.

          “We have an agreement with the White House that I’m very confident will be seen all the way through conference,” one of the industry lobbyists, Chip Kahn, director of the Federation of American Hospitals, told a Capitol Hill newsletter”

          1. sanctimonious

            “..industry lobbyists say they are not worried. “We trust the White House,” Mr. Kahn said. “We are confident that the Senate Finance Committee will produce a bill we fully can endorse.”

        2. sanctimonious

          NY Times Reporter Confirms Obama Made Deal to Kill Public Option

          “For months I’ve been reporting in The Huffington Post that President Obama made a backroom deal last summer with the for-profit hospital lobby that he would make sure there would be no national public option in the final health reform legislation. (See here, here and here). I’ve been increasingly frustrated that except for an initial story last August in the New York Times, no major media outlet has picked up this important story and investigated further.”
          “Kirkpatrick also reported in his original New York Times article that White House was standing behind the deal with the for-profit hospitals: “Not to worry, Jim Messina, the deputy White House chief of staff, told the hospital lobbyists, according to White House officials and lobbyists briefed on the call. The White House was standing behind the deal”.

          This should be big news. Even while President Obama was saying that he thought a public option was a good idea and encouraging supporters to believe his healthcare plan would include one, he had promised for-profit hospital lobbyists that there would be no public option in the final bill.”

          “..More deeply, there are serious questions about the extent to which Obama, with the help of Rahm Emanuel, used a K Street strategy to pursue health care reform. The strategy seems to have been to make backroom deals to protect the interests of the likes of the drug industry and the for-profit hospital industry in exchange for campaign cash, even if this meant reversing campaign promises to include a public option to put competitive pressure on private insurance premiums, and to allow Medicare to negotiate for lower drug prices and Americans to buy cheaper drugs from Canada. The result is a health care bill that is generally unpopular with voters. Questions need to be asked, too, about the extent to which the White House is following a similar K Street strategy with Wall Street financiers when it comes to shaping financial reform and new regulations to rein in the banks who brought the economy to its knees.”

  9. Cynthia

    I’m for single payer or Medicare-for-All, but because neither program is ever likely to materialize, I do support Gov. Mike Beebe’s, D-Ark., plan to manage the Medicaid expansion program through the insurance exchange (see link below), instead of managing it as a separate and distinct insurance program. This will make it a lot easier for the large number of Arkansas residents, who are at or near the border between qualifying and disqualifying for Medicaid benefits, to transition back and forth between Medicaid and the insurance exchange. That way they won’t have to shop for and purchase a healthcare plan on the open exchange every time they go over the income requirements to qualify for Medicaid.

    I’m also very leery of any one single insurance or managed-care company being awarded a contract to manage the entire Medicaid program, even if it’s only in one state. It reeks of plutocracy and crony capitalism. If there are no other managed-care companies in the mix to compete for customers, costumers are more likely to have their claims denied, causing quality of care to suffer.

    That said, I’m still no fan of ObamaCare. It does nothing whatsoever to lower healthcare costs, particularly administrative costs, or improve the quality and accessibility in our health care system.

  10. petridish

    Not sure I understand all the angst here. A health “insurance policy” is not the same as “healthcare.” Far from it.

    Take a look at the analysis in the above linked Paul Craig Roberts article. Do some back-of-the-envelope calculations. Regardless of who pays the premiums, “health insurance” companies have a very simple business model–collect healthcare dollars up-front and then don’t spend any on “healthcare.” So, with a $5000 “deductible,” the first $5000 in “healthcare” costs somewhere north of $7000 (premium + deductible + co-insurance), most of which is borne BY THE PATIENT. ANNUALLY. Exactly how many current Medicaid recipients have a spare $5000 laying around?

    So, a patient walks into the ER. “Do you have insurance?” “Yes.” (Provides federally funded Medicaid policy number and receives treatment.) Insurance company pays $0–balance is the “patient responsibility” since deductible has not been met. Since Google and Apple have not yet produced an app for getting blood from a turnip, the bill is not paid. EVER. No assets, wages or inheiritances to attach. No means to satisfy the debt even in the face of collection agency diligence and harrassment. FAIL. WRITE-OFF.

    Exactly how long do you think providers will go for this?

    The devil is most assuredly in the details. Pundits should keep their powder dry until all the information is available. Things may not be exactly as they seem.

    Logically, if this was such a great idea, why didn’t somebody think of it before? (Hint: It’s NOT such a great idea, even if the governor of Arkansas came up with it.)

    1. Ms G

      In your very apt hypothetical you ignored one possibility — that a an ACA regulation will spring into being allowing hospital ERs to deny care to private Medicaid patients. In which case the #fail will be a dead American, rather than a hit to the hospital corporation’s P&L statement.


  11. rps

    The Illinois Medicaid program ended dental care. Seriously, who needs teeth to eat? Ha, the devil is in the details -Loss of teeth perhaps a slow process of mouth pain and starvation of the poor. Of course there’s always the added perk of the food stamp/Link card program as unecessary. I’m always amazed that Gov. Pat Quinn had attended Fenwick Prepatory Highschool; run by the Dominican friars. The school philosophy: the courage to act on one’s beliefs, turning study and reflection into a life of strong moral character and compassion for others.

    1. Eric377

      Um, Ilinois is pretty broke. They have enacted significant tax rate increases, to the obvious detriement of their attractiveness for business investment, and still are a long way from a fiscally sound situation. Some things have to get tossed overboard and teeth seem to be in that category. I don’t exactly blame Quinn: he did not personally create the situation in Illinois where many other interests are stronger than poor people. He is the executive, not the legislature and nothing in his studies at Fenwick can change that. If the legislature gave him several more millions for teeth, I would expect he would gladly spend it on teeth.

      1. rps

        “They have enacted significant tax rate increases, to the obvious detriement of their attractiveness for business investment…”

        You’d think that must be reason Illinois is broke right?

        In Illinois the state income taxes withheld from you paycheck may be kept by your employer under a law that took effect in May 2011.

        Instead of paying for police, teachers, roads and other state and local services that grease the wheels of commerce, Illinois workers at these companies will subsidize their employers with the state income taxes they pay.

        The deal to let employers keep half or all of their workers’ state income taxes represents a dramatic expansion of a little-known trend in the law: diverting taxes from public purposes to private gain.

        Throughout the United States, big box retailers like Wal-Mart, Lowe’s and Cabela’s, and in some cases entire shopping malls, often negotiate deals to keep sales taxes that customers pay at the cash register, using the money to finance construction of their stores. This gives them a huge advantage over retailers without such subsidies, while reducing revenue to local governments, which in turn creates pressure for higher taxes.

        Our current governor (Pat Quinn) had the genius idea of giving to Motorola and Navistar and others, he said to retain their business here, yet he is allowing Navistar to fire up to 25 percent of their workforce and still get millions from the state” by holding onto the income taxes of employees.

        The Illinois law lets companies retain all of the income taxes withheld from the paychecks of workers whose hiring expands the payroll and half of the taxes for existing workers whose jobs are retained.
        (Reuters article 7/9/2011 by David Cay Johnston)

        1. rps

          In May 2011, the Illinois General Assembly passed Public Act 97-2 allowing certain corporate entities to simply pocket all or some portion of the money deducted from employee paychecks for state income tax for up to ten years. In effect, the employees are subsidizing their employers.

          Illinois is not alone. This is a national trend. Fifteen other states participate in diverting taxes to private gain. As it is, most big companies pay little or no income tax. The 35% rate is meaningless. Companies declare expenses in high tax states and profits in states with little or no income tax.

        2. rps

          “Job blackmail” occurs when a company threatens to close a plant unless it gets tax money.

          In Illinois, the law requires companies to threaten to leave before they can keep taxes withheld from paychecks. Motorola Mobility, now being acquired by Google; the truck maker Navistar; the German manufacturer Continental Tire, and three auto makers – Chrysler, Ford and Mitsubishi – get to keep $346.8 million in taxes over 10 years because they threatened to leave Illinois. Navistar can pocket $62.1 million even if it fires a quarter of its Illinois workforce, its contract shows. A recent deal gives Sears $150 million. (CommonDreams David Cay Johnston)

          1. Ms G

            Is there a difference between these, er, arrangements and a hold-up at gunpoint? No, really. I’m dead serious.

            Second the query for the 14 other states … if you have a link that would be wonderful.

  12. Cynthia

    The question I have is, is Arkansas’ Medicaid expansion plan more costly because insurance and managed-care companies will keep more Medicaid dollars for themselves in the form of higher profits, or because reimbursements to hospitals and other healthcare providers will be based in private insurance rates, which tend to be much higher than the ones through Medicaid?

    I don’t know the answer to this question, but what I do know is that by NOT having a large group of people switching back and forth between a Medicaid plan and a private plan on the exchange, which causes a lot of “churning” (see link below), should save a lot in administrative costs.


    1. different clue

      But will those “saved Administrative costs” get spent on more care? Or will they get spent on more profit for the Obamacare InsuraCo racketeers?

  13. Lambert Strether

    It’s “the market state” in action. Health insurance is a test market. There’s really no reason why any public service can’t be replaced by a market that citizens — or as we call them these days, “consumers” — are legally mandated to enter.

    * * *

    The implanted RFID chips will help, of course. Kidding!

  14. Klassy!

    Maybe this is a little before my time, but was there actually a time when the private sector delivered goods and services more efficiently than the public sector?
    Was there a time when the private sector was actually, uh, private?

    1. Ms G

      Klassy! on a roll today!

      And excellent question — no joke. Though to ask it is to answer it … Not at all clear to me how people hang on to the mental impression that there ever was (and is) such a thing as a “private sector” (as a sort of pure “thing”). Despite obvious facts known to all. Unreal. Speaks to the desperation with which social humans cling to idea frameworks to feel oriented/valid.

      1. jrs

        But then was there ever such a thing as a government that hadn’t been bought out? I really am starting to wonder.

  15. ginnie nyc

    I got news: New York State is in the midst of doing Medicaid privatization, as well. In fact, they are forcing “dual eligibles”, meaning those who have both Medicare and Medicaid, into HMO-like managed care, which is against the Medicare regulations.

    1. Ms G


      Has anyone taken this issue to the NYS Dept. of Financial Services (which now handles all the insurance stuff)?

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