Medicaid for everyone but where is the supply?

The House-passed stimulus bill puts nearly $100 billion into Medicaid, mainly to cover the newly-unemployed regardless of what jobs they lose. But where will the supply come to meet this demand?

The House-passed stimulus bill puts nearly $100 billion into Medicaid, mainly to cover the newly-unemployed regardless of what jobs they lose. (The map illustrates how states already differ in Medicaid eligibility. From Workworld.)

But where will the supply come to meet this demand?

It's not coming from technology, although there is $20-23 billion in the plan for health IT.

IT requires users, in this case primary care doctors, and their supply is going down. With 70% of our physicians in specialties, and most medical students prepared to follow, it's hard to see where these new users will come from.

Doctors are already complaining as states freeze reimbursement levels under Medicaid. Patients covered by the program complain they can't get care. Yet the proposal would place millions more people into the program, without addressing supply.

Unlike the federal Medicare program, Medicaid is run by states, so there is minimal standardization. As many as half the states are cutting Medicaid rolls to make ends meet. Others are looking at controversial tax increases.

This lack of standardization is likely to extend now to health IT, since states would control the health IT dollars under the plan.

Add this to increases in SCHIP coverage, now going through Congress, and you have a situation where unprecedented demand comes up against falling supply in a market with no price elasticity.

The economists' answer to that is called shortage. That's what happened when Massachusetts mandated health insurance a few years ago. Demand rose, supply fell. Ready buyers appeared with no sellers.

It's very possible that the Obama Administration is depending on these consequences to pass more far-reaching health reform. Demand that can't be supplied will pressure politicians to accept major changes to the system.

Those changes will have to include a plan to increase the number of primary care doctors, and reduce our reliance on specialties, or the market will not clear.

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