Medicaid, the New Middle-Class Entitlement

by James A. Bacon

The Medicaid program was enacted in 1965 to provide a medical safety net for low-income families and for destitute elderly who had exhausted their personal resources. It has morphed into an entitlement to preserve middle-class standards of living. The reasons are understandable. You’d have to have heart of stone not to feel compassion for the millions of middle-class American families who have  caretaker responsibilities thrust upon them. But the end result is an ever-expanding program that will accelerate the nation’s slide to Boomergeddon.

The latest case in point is an op-ed penned by Kathy May, director of the Virginia Consumer Voices for Healthcare, in the Times-Dispatch (no link).

As May readily concedes, she and her husband both work, and their family’s income is one-third higher than the median family income for Fairfax County, one of the wealthiest counties in the country. Both are well educated and work hard. They live comfortably and have build a “decent nest egg” for retirement.

Where would they be without Medicaid, May asks. Her 76-year-old mother, who has dementia and requires daily nursing care costing $80,000 a year, will deplete her savings in half a year. May and her husband could not afford to pay her bills.

She also has a son, Sam, born with Fragile X Syndrome, resulting in a variety of disorders requiring more support, care and intervention than for most children. To stay flexible, May worked part-time jobs at home and passed up opportunities for advancement. Not including lost wages, the family has spent $100,000 over the child’s lifetime on special care.

After waiting for many years, she writes, her son recently qualified for a Medicaid waiver, which allows him to access resources paid for by the federal government. Now Sam lives semi-independently in a group home. “Sam’s new found independence has given my husband and me a bit more freedom,” May writes. “I am able to work full-time and focus on my job and saving for retirement. My husband and I will be able to spend a weekend away alone to celebrate our wedding anniversary!”

Anyone with an ounce of empathy would share May’s relief at having such huge financial burdens lifted from her shoulders. Frankly, you would have to be a beast not to. We are a kinder, gentler, more civilized society for having a program like Medicaid that cares not only for those whom we think of as poor but the elderly who have drained their life savings and the disabled who never had savings to begin with.

We are also a society heading for a fiscal meltdown. At some point, we will have to make some excruciatingly difficult choices. Obamacare is expanding the rolls of Medicaid beyond poor households to include the “near poor,” adding millions of new recipients. Meanwhile, the Baby Boomer generation is marching into retirement. In another 10 to 20 years, Medicaid expenses will explode as large numbers of Boomers wind up in nursing homes. The United States will be unable to maintain Medicaid at its current level of generosity while also maintaining other entitlement poverty programs, corporate welfare, globe-straddling military commitments and an activist government.

Something has to give. We can make tough decisions now, when small changes can make a difference over a long period of time, or we can wait until the system collapses and the choices become much crueler. I see no sign that the American people are willing to make those choices now, or even that they recognize the need to make them. As May concludes her op-ed after not a single word about America’s parlous fiscal condition, “Medicaid touches the lives of so many American families — a fact which many politicians too often forget.”

Ooh, those heartless politicians! Shame on them for looking 15 years down the road! Perhaps the question that May should ask is, how many lives will Medicaid touch when state and federal finances collapse? And who will pay for Sam’s care when it does?

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13 responses to “Medicaid, the New Middle-Class Entitlement”

  1. In this discussion, and in most of the political discussions about Medicaid, Medicare and Social Security, an important element is being missed, which is that the status quo financial, medical, and retirement industries have benefited significantly and financially from the current (broken) systems, and much of the angst about the deficit is simply an attempt to keep what they have already amassed from the (broken) systems that they created.

    This country spends way more for medical care with less effect than any other industrialized country! We’ve been doing it for years, probably since the advent of Medicare (I don’t have the stats). Many participants in the medical system have gotten rich, not just from physician’s hourly rates or actually talking to patients, but from new surgical procedures, new scanning equipment, and new drugs that often provide only minimal incremental improvements in health. I think we’ve been willing to absorb this overspending because it did create improvements that helped a few people, sometimes lifesaving treatments (we all think we will be the ones who get that new treatment) but now with the boomers looming, it’s clear that this approach cannot be sustained, at least not at government expense.

    But the question I always ask that the policitical class won’t answer is where did all the money go? My guess is that it went to the 1%ers, aka the “job creators,” aka as “political contributors.” Look at the movement of wealth (not just income) from the middle to the top in the last 30 + years. Based just on that, it looks like the middle class was drained in favor of the financial class, and to a less extent the professional class.

    The job creators will argue that they were smarter and harder working, but I would submit that they also knew how to work the systems to their benefit. I would submit that they created these broken systems and now they have a responsibility to fix them, which might require a disproportionate bit of sacrifice from them.

    1. I share your belief that the medical-industrial complex has gamed the system. The healthcare industry is one big reeking cesspool of rent seeking, as was most recently on display during the passage of Obamacare when the pharmaceutical, hospital and physicians industries were bought off to ensure their acquiescence.

      The question is, how do you change that? Giving government more power? No, that just increases the incentives for rent seeking. The only way to avoid rent seking is to create market-driven system so participants compete on the basis of productivity, price and quality — not how many lobbyists they hire and how much they donate to campaign funds.

      1. DJRippert Avatar

        Why will Obamacare result in less gaming of the system? There are some who see a pretty clear path to vast increases in profits from Obamacare.

        “In particular, investor-owned hospital chains like HCA Holdings (HCA); Tenet Healthcare (THC) and Vanguard Health Systems (VHS) will also win political cover in Washington and in the communities in which they operate where their commitment to charity care has long been called into question.”.

        Same thing happened in the last recession. After Enron and Worldcom, etc it was the accounting firms that made out like bandits under Sarbanes – Oxley.

        1. Ideally it would be internists, pediatricians and gynecologists who would manage individuals’ care and be rewarded for the health of their patients. Ultimately a healthy individual is the least expensive patient, but the medical industry isn’t rewarded for making individuals healthy, but for the number and costs of treatments.

          Under our current system the sicker an individual, the more lucrative to the provider. Specialists and end-of-life care generate most of the costs. So the providers in charge and the incentives have to be changed, and Obamacare is taking steps to do this. Theoretically, this would lower costs and improve health. Preventive care vs. chronic and end-of-life care. Politically, it’s difficult. Remember the demise of HMOs? Killed supposedly because they were bureaucratic and limited individual choice? I don’t think so. I think they were killed by the so-called rent seekers and their political allies – the same people who talk about death panels and equate freedom of choice with government and insurance company payments for whatever. When talking about health care, politicians easily slip into a “scare mode,” because fear is the easiest motivator.

          Actually, I’m quite disappointed in the medical community. As professionals, doctors should take responsibility for the health of the community and the sustainability of the health care system.

          1. DJRippert Avatar

            This is from a few years ago but still has a useful perspective …


            “In France, “If you are in medical care for the money, you’d better change jobs,” says Marc Lanfranchi, a general practitioner from Nancy, an eastern town. On the other hand, medical school is paid for by the government, and malpractice insurance is much cheaper.”.

            There is a lot more to containing health care costs than mandatory coverage.

            It will be fascinating to see how Obamacare really pans out.

  2. Breckinridge Avatar

    My mother spent her final six months in a nursing home and when the Medicare ran out my father switched to private pay. I remember when she needed a special mattress for bedsores the nursing home added some shameless amount to that month’s bill, until Dad inquired about buying one elsewhere and providing it himself. POOF. The cost of the mattress they provided instantly reduced by 90 percent. The system is riddled with inefficiencies, misplaced incentives and minor frauds. I wonder which price was paid by the government? The status quo is unstaintable and the future is filled with rationing and death panels.

  3. One of your very best columns and dead on.

    but let me first comment on the “cost” issue. ANYTIME you have a 3rd party payer – whether it is Govt or Private – the provider will charge the max they can … that’s just life – not a govt-only issue.

    Here’s the irony on Jim’s excellent article.

    We say that MedicAid (and Medicare) are going to pass a giant debt on to our kids – yepper…

    but then what do we do ?

    we bill Uncle Sam – and our kids for the nursing home care we say we “cannot afford”… so we can do what? pass on our assets to our kids.

    MedicAid needs to be tough as nails. If you do not have long-term care insurance but you do have assets – then you should pay.

    Anyone who talks about how we are going broke and does not conduct themselves accordingly on these kinds of issues is part of the problem not part of the solution.

    We need to get tough on middle-class use of entitlements – or else, we ARE going to go broke. It’s unsustainable and each one of us has a responsibility to recognize – to admit – that we cannot talk about what a “socialist” Obama is at the same time we are expecting Medicare and MedicAid to – ….not keep us form poverty – no… to help preserve our assets.

    We must change if we are going to really reform the entitlements.

  4. Here’s a breakdown of MedicAid spending in Virginia.

  5. not to belabor this – but we have a similar problem with Medicare.

    The idea that people have already paid for Medicare is promoted far and wide – that they “deserve” what they’ve paid for.

    But the facts are that the ONLY think they’ve pre-paid is Part A.

    Part B is a fee-for-service plan – a VOLUNTARY PLAN that a person has to go to submit a application to receive it.

    But here’s the problem. Medicare Part B charges premiums that pay for only 1/4 of the costs. The other 3/4 comes from tax payers.

    and the more people who retire and sign up for Medicare – including our military retirees – the more “boomergeddon” it gets.

    The numbers get even worse for the Part D drugs and PartC “gap” Medicare Plans – both passed by the GOP by the way, as Parts C and D are heavily subsidized and total up to be MORE than Part B costs.

    so we have these plans that start out in deficit – and as more people get on them – they just increase the deficit.

    I do not agree with the Romney/Ryan voucher solution although I admit this is a step in the right direction.

    I think the Medicare system encourages higher and more expensive utilization of health care in part because the original Medicare “skin in the game” was the 20% co-pay. If you wanted an expensive but not save-your-life operation – you had to come up with some of it.

    When Part C “gap” insurance was passed – it wiped out the 20% co-pay for a lot of people and the insurance companies paid for that gap with taxpayer subsidies.

    All of this would be as serious a quandary as MedicAid and nursing homes except that Middle Class people with significant assets are using heavily-subsidized Medicare to preserve their assets because the program allows people with a primary residence and a second home, like a vacation home, 3-4 cars, and a half million or more in assets to pay 1/4 what it actually costs for insurance.

    to put some real numbers in context. MedicAID costs about 300 billion with the states picking up another 200 billion or so.

    Medicare Part B is subsidized to the tune of 200+ billion but when you then throw in Part D drugs and Part C “gap” plans, the number goes to about 500 billion.

    But here’s the bigger problem. No one is presenting these facts in their writings.

    The liberals are not… for sure.

    But what explains the GOP not forcing this conversation?

    and journalists… themselves… are not reporting this nor does FAUX news…or talk radio.

    Most seniors that are on Medicare know what a good deal bit is. Few people who become seniors pass on signing on to Medicare unless they are independently wealthy because most folks who are “comfortable” but not wealthy KNOW that one major illness can wipe them out financially (like it does for folks too young to get Medicare).

    Most seniors know that the premiums are ridiculously low but who wants to pay more?… just like taxes…

    but Medicare is, at it’s heart, Charity, that comes from a working younger generation – and again an irony because it’s the same younger generation that many seniors try to preserve their assets to pass on to their kids – but in the process – they are also passing on to their kids the enormous debt that is accumulating, from Medicare subsidies.

    Unlike Bacon and others, I do not think we are doomed. I think most seniors realize that Medicare is too good a deal and is hurting the country – AND hurting the younger generation that is funding it.

    But as soon as we talk about changes – our right wing friends – the ones that keep talking about the debt – then, right on cue, start talking about “rationing” and “death panels”.

    The reason why is that they don’t want to reform Medicare – they want to kill it all together.

    we have to decide between the two paths but my bet is that most people, when they know the facts, will want reform not repeal.

  6. re: ObamaCare “panning” out.

    When you have the entire GOP blather about REPEAL and they have no REPLACE how can you get to any kind of a solution other than the rube goldberg-like ObamaCare?

    Further changes need to be made… which means it’s a “failure” according to DJ’s view of the world.. 🙂

    Germany has a 100% private health care system that is Universal.

    Singapore has 100% universal health care as well as a 30% mandatory payroll tax to pay for it (and pension).

    Singapore has one of the highest life expectancies in the world at the same time they spend just 6% of their GDP on health care.

    we could do that or some version of it … if we had both sides agreeing to individual mandates to have everyone pay into the system.

    instead we do stupid stuff… like pretending that we don’t already have rationing …. even with private providers… and private “bureaucrats” (insurance gatekeepers) “getting between us and our doctor” and of course the ever popular “death panels”.

    this is the state of the dialogue from the GOP and others opposed to ObamaCare.

    they spent 4 years doing what? betting big that they’d win and get rid of ObamaCare.. not an ounce of offering a competitive alternative to ObamaCare.

    so now what are they doing? Well.. more than a few of them are doing what McDonnell is doing.. putting his head where the light don’t shine…

    1. DJRippert Avatar

      “Singapore has one of the highest life expectancies in the world at the same time they spend just 6% of their GDP on health care.”.

      LiberalLarry: What do you think happens if you remove fatal accidents from the calculation of life expectancy?

      The US ends up with the highest life expectancy in the world.

      Will ObamaCare prevent fatal accidents?

      LiberalLarry’s comment also speaks to American education. I wrote, “There is a lot more to containing health care costs than mandatory coverage. It will be fascinating to see how Obamacare really pans out.”. Larry’s reading comprehension translated that into, “Further changes need to be made… which means it’s a “failure” according to DJ’s view of the world.. “.

      Larry never lets an issue get clouded with facts.

  7. re: ” if you remove fatal accidents from the calculation of life expectancy?”

    for all countries for an honest comparison or just one side so it confirms your bias? You’re back to doing what the GOP did which
    is construct your own set of facts to fit your own beliefs.

    why would you think one country or the other would have a significantly different accident rate in the first place? How does that make sense?

    re: Liberal Larry – I’m far, far more fiscally conservative than you’ll ever hope to be guy – and you know it.

    re: ObamaCare – …. is NOT Medicare..

    re: mandatory payroll and health care outcomes

    yes.. of course.. but you cannot begin to address the rest if you
    do not have individual mandates because without them -you
    have a wealth transfer system like we have now where people
    without insurance receive their health care funding from those who do have insurance and taxpayers.

    that’s the problem. We have this totally psychotic and Schizophrenic belief system from the opponents that rejects entitlements and also rejects individual mandates – which leaves no middle ground, no way to go forward.

    and that’s who DJ is associating with. He has no solution other than opposition to what’s on the table.

    that pretty much defines many of those who oppose ObamaCare.

    It’s not about “compromise”.. nope.. this is no compromise…any kind of universal health care is – 100% unacceptable.

    Nevermind that every single industrialized country in the world has it and the countries that do not are all 3rd world…

  8. the opponents talk about ALL countries with UHC as doomed to go broke and they cite Greece … Spain, etc.. but they ignore Germany, Singapore, Hong Kong, Sweden, Japan, Australia .. and they ignore the the inconvenient fact that Singapore accomplishes UHC with just 6% of their GDP ….

    they play games with claims that countries don’t measure fatal accidents the same way or even more comical that we have more fatal accidents in this country than other countries.

    Anything …to deny the facts….

    for some reason, we have this mindset that UHC is “socialism” even though all industrialized countries in the world – have it. That does not seem to matter to the opponents who go right on and say that ALL of them are doomed to fail because of UHC and that our only option is to come up with something that works a lot like health care works in 3rd world countries.

    We should be so lucky as to have a system that covers everyone – for 6% of our GDP, eh?

    but we can’t do that.. because.. it would be …..socialism…

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