From Welfare Statism to Capitalism: Medicare and Medicaid
#21 in a series of Think Right or Wrong, Not Left or Right: A 21st Century Citizen Guide (2nd Expanded Edition)
I trust you survived the turkey fest and are ready for some intellectual nutrition before the next football (or soccer) game. The serial continues with the last (and short) health sector installment about transitioning Medicare and Medicaid from welfare statism to capitalism. If you missed the previous two installments of the health sector transition, start here. Next week, I’ll take another break from the serial with some thoughts on the fascinating topic of public broadcasting from a think Right or Wrong, not left or right perspective. Cheers!
7.4 Medicare
With the deregulation of health related industries and the resulting vibrant marketplace, the stage is set for gradually phasing out Medicare (subsidized healthcare for people over 65). Several paths are possible. One option is to give current enrollees and those approaching 65 an incentive to leave the system by offering tax deductions for healthcare expenses for a predetermined number of years. The tax deductions are gradually eliminated as the deregulatory efforts discussed in the previous sections start to pay off in the form of better health insurance and healthcare at lower prices.
Current enrollees may choose to stay in the system, but it is entirely possible that the thriving health insurance and healthcare marketplace with its unimagined advances will eventually entice a majority to seek out the plethora of new market-based opportunities. The same goes for people below the eligibility age who will soon realize that the competitive health insurance rates and choices in the free market are better than the available Medicare options.
As people who are dependent on Medicare live out their lives, the system will slowly fade away. It may take 30 to 40 years, which is something we have to accept. Over its 55-year existence, Medicare has turned most senior Americans into dependents of the welfare state. Even with the most vibrant and attractive marketplace emerging, many may not have another option. Therefore, restoring the individual right to be in control of your healthcare in retirement will most likely be a long process.
7.5 Medicaid
Medicaid is a federal and state welfare program that helps with medical costs for people with limited income and other resources. Medicaid also offers benefits not normally covered by Medicare, including nursing home care and personal care services. According to Wikipedia, “Medicaid is the largest source of funding for medical and health-related services for people with low income in the United States, providing free health insurance to 74 million low-income and disabled people (23% of Americans) as of 2017.”22
How do you transition out of a massive welfare program like this? Just as with Medicare, the number one step is creating a thriving health insurance and healthcare marketplace by deregulating the various health-related fields. This will set the stage for phasing out Medicaid because a well-functioning marketplace is critical for supporting people with affordable health insurance and healthcare as the Medicaid options gradually go away. In parallel, charitable alternatives will emerge for the few who are otherwise left without health insurance and healthcare.
The phase-out will take time but fortunately there is no shortage of solutions. Here’s one scenario for how it could be accomplished, assuming a 20-year timeframe:
1. Repeal all federal Medicaid rules and regulations.
Medicaid is riddled with rules and regulations aiming at controlling the exploding costs of the system: regulations reimbursing providers at or below cost, rules forcing hospitals to admit patients to the ER, regulation prohibiting copays and deductibles, etc. Removing federal rules and regulations will allow states the freedom to experiment with modifying eligibility, deductibles, copays, coverage, provider payments, fraud management, etc., and to learn from one another’s successes and mistakes.
2. Divide federal funding between the states based on population and current spending, and reduce the funding by 5% per year over 20 years.
Today’s Medicaid funding is a system of large federal grants matching what the states spend themselves. The individual states basically get a big federal subsidy, which removes much of the incentives to manage the costs. This should be replaced by so-called block grants that give the states full financial freedom and responsibility to manage the transition, no federal questions asked. Dividing the federal funding based on both population and current spending accounts for the fact that some states have a higher Medicaid spending per capita than others because of the population makeup.
A risk with this scenario is that individual states may decide to expand the program. However, such an expansion would only hit the wallets of residents in those states, not all U.S. taxpayers, so state politicians would most likely hesitate to take this route. And potential court challenges questioning the constitutionality of state-side expansions may help keep the transition on track as well.
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This concludes our overview of the removal and repeal of welfare statist, rights-violating government involvement in healthcare. We have covered the big-ticket items. Many other areas need reforming as well, but the above would be a fantastic start. If you come across an area that we haven’t covered, follow the approach that we’ve used in this chapter of first removing regulatory barriers to allow the free market to flourish, and then getting the government out of financing and running the operations. That should help you figure out the proper course of action in other areas to phase out government and restore protection of individual rights, allowing people more control over their lives.