Injecting Market Forces Into Missouri’s Health Care Welfare System

Imagine going to a grocery store where there are no prices on the food and the government has told you that it will pay for whatever you or the clerk think you need. How much restraint would you exercise? How much restraint would you expect the clerk to exercise? Most of us like to think that we’d do the right thing, and I believe most people would. But, as Madison pointed out, “If men were angels, no government would be necessary.” 

Incredibly, in many parts of our state (and nation), Medicaid operates on a fee-for-service basis similar in concept to the absurd thought experiment outlined above. A Medicaid recipient who has no money presents at a health care provider for services. The recipient pays no co-pay – or only a nominal amount. And at no point does price ever matter.  And then they send the bill to you, the taxpayer. It’s all gas, no brakes.

By contrast, in the I-70 corridor, recipients are covered by managed care plans which operate similarly to private health insurance plans. They inject a level of oversight into Medicaid transactions to protect taxpayers from wasteful and, in some cases, fraudulent health care claims. The I-70 corridor managed care plans have proven to be more affordable to Missouri taxpayers without sacrificing quality for recipients.

But Medicaid-managed care needs reform as well. Under the current system, managed care companies do not compete directly on price. Instead, the Department of Social Services names its price and asks the managed care companies to match it. Though DSS engages a top-flight actuarial firm to set its price, the more efficient approach would be to allow free market forces to establish the price, versus the decision of a single firm. If the price is too low, managed care companies will let DSS know and no bids will be received. If, however, the price is too high, no managed care company is going to tell DSS they’ve priced the bid wrong. Instead, they’ll be happy to pocket higher profits off of Missouri taxpayers.

Nor are recipients in the current managed care corridor given financial incentives to use taxpayer resources wisely. Because recipients have only limited financial resources, there are no penalties for misuse of the ER. Likewise, there are no bonuses for healthy or appropriate behaviors.

For the last two years, I’ve worked with many elected officials, health care providers, and ordinary citizens to develop a better plan for Missouri’s Medicaid system. House Bill 1901, sponsored by Rep. Noel Torpey, is one result of that work, and the House Committee on Government Oversight and Accountability has spent three weeks hearing the bill. To inject market forces into Missouri’s Medicaid system, House Bill 1901 would:

  • Eliminate fee-for-service and expand managed care statewide;
  • Require actual price competition in the bidding process for managed care companies;
  • Foster competition by allowing networks of health care providers to form Accountable Care Organizations to compete with more traditional managed care companies;
  • Turn recipients into participants by empowering them to choose their own health plan based on cost and services;
  • Encourage participants to choose low-cost plans by offering financial incentives for them to select the most affordable option. Just as you and I have financial incentives to choose more affordable health insurance plans, so should Medicaid participants.
  • Provide participants with a state-funded cost-sharing card that the participant must use each time they receive a health care service. To encourage healthy behaviors, if the participants use care efficiently and go to preventive care appointments, they should be rewarded. If they misuse the ER, they should be penalized.

House Bill 1901 is similar to previous proposals by stalwart conservatives like former Gov. Matt Blunt, Texas Gov. Rick Perry, and former Indiana Gov. Mitch Daniels – each of whom proposed increasing Medicaid eligibility far beyond what is contemplated in HB 1901. If passed, this market-based Medicaid plan could serve as a conservative model for the rest of the country on how to inject market forces into the system to save taxpayer money and improve the quality of care.

If we could turn the clock back to 2007, I believe HB 1901 would be considered a leading conservative alternative to ObamaCare. It extends health care coverage to the working poor who otherwise can’t  afford private health insurance. This can save money over the long-term.  I believe ideas still matter, regardless of political labels people try to affix to them, and I’m hopeful that HB 1901’s conservative plan for Missouri Medicaid will be passed into law.