Medicaid drives costs up, care down.

ITEM: The Providence (R.I.) Journal for September 30 opined: "A national universal health plan is, of course, the logical solution to America's chaos of private insurance, state health plans, and federal programs. Every other large industrialized democracy has a national health system, as opposed to the rather barbaric U.S. 'system.' "

CORRECTION: One need not be an enthusiast of the healthcare status quo in the United States to recognize that more government involvement is the problem, not the solution. Set up to pay for healthcare for the poor, Medicaid has grown exponentially, and now covers a wide variety of groups, including children, pregnant women, the disabled, and the elderly.

As it is, almost $500 billion, or about 60 percent, of U.S. hospital bills are already being footed by the federal and state government, according to a recent study by the Department of Health and Human Service's Agency for Healthcare Research and Quality. Expanding that to 100 percent is not rational.

Consider that Medicaid pays for almost half the nursing-home care in America, while Medicare picks up an additional 11.7 percent. This is ominous considering that the senior population is projected to grow four times as fast as the overall American population during the next 25 years.

Seniors in the United States already have a version of national healthcare. Does anyone really think that has been a panacea or helped bring costs under control?

To be sure, healthcare costs for everyone are rising. But Medicaid costs have long since passed through the roof and headed for the stratosphere. "Every American spent almost five times as much on private health care in 2004 as in 1967," observes the Albany (N. Y) Herald. "But the amount every American contributed to Medicaid went up in that same period by 14 times."

Predictably, the states have been trying to get as many "free" federal dollars from the feds as possible. The Dallas-based National Center for Policy Analysis, in a new study, notes how inequities are built into the system. The NCPA says: "Since there is no limit on the number of state dollars the federal government will match, states that spend more receive more federal dollars. This has provided states with a perverse incentive to spend money wastefully." Examples cited by the NCPA include:

* In Colorado, Michigan and many other states Medicaid has paid for services to dead beneficiaries.

* Many states underpay physicians and overpay hospitals, encouraging more expensive hospital-based treatment.

* Many states pay premium prices for brand-name drugs even though lower-cost generic and over-the-counter medications may be just as effective.

* All too often Medicaid expansion encourages people to drop private health insurance and get their health care at taxpayer expense.

As a result, supposed "optional" coverage is expanding rapidly since Washington is providing a blank check--albeit one that bears the collective signature of the American taxpayers. About two-thirds of overall Medicaid spending is on "optional" services, says the Kaiser Family Foundation.

All these costs, needless to say, don't translate into good care. When states do try to cut corners by holding down some more visible direct costs, less obvious indirect costs balloon--as has occurred following government price controls for countless centuries. Similarly, many doctors hate how the system administers prices and treatment. As noted in a Heritage Foundation report: "Medicaid's reimbursement rates have dipped so low and its bureaucracy has become so burdensome that many providers, especially physicians, have been forced to stop accepting Medicaid payments. A 2002 Medicare Payment Advisory Commission (MedPac) survey found 'more than 30 percent of all physicians now refusing to accept any new Medicaid patients.'"

Medicaid has detrimental effects not just for its supposed beneficiaries, but also for those who are not in the system, driving up the cost of private care. This is hardly a secret. Michael Cannon, director of health policy studies at the Cato Institute, observes that everyone who works in this field knows it, though some refuse to admit it in order to make it seem as if more Medicaid is needed to make up for a lack of insurance coverage. Expanding Medicaid, he says, "causes private coverage to decline, and can even increase the number of people counted as 'uninsured.'"

Despite all the problems that have inevitably flowed from having so many government intrusions in the healthcare field, leftists keep pushing for more.