UnitedHealth Group’s Suggestions for Medicaid Savings

Some 35 to 40 million Americans are currently covered by Medicaid and as many as 15-20 million more are likely eligible but not in the program.  Many don’t enroll, a leading cause of high numbers of “uninsured” persons.  The new health law raises the income level for Medicaid eligibility uniformly and for a few years, pays part of the extra cost that otherwise would be born by the states.  About 15 million new eligibles will be created, at a cost of $430 billion over nine years.  Most states are in dire financial straits that even a recovery won’t help–their spending is too high.  The expanded Medicaid eligibility won’t help.  One technique many states have used is putting all the Medicaid eligibles into managed care plans.  This allows the states to only deal with one set of entities and to potentially blame them for dissatisfaction among enrollees and providers.  One effect of the new law will undoubtedly be to expand Medicaid managed care plan membership.  One company with a large Medicaid enrollment, UnitedHealth Group, has released a report detailing how Medicaid might try to control its spending better.  (UHG Report)

UHG says its proposed savings would amount to $366 billion over the next decade, with about $149 of that going to the states.  Where would these savings come from?  The usual suspects:  better coordination of care would save $93 billion; more use of managed care to support people with long-term care needs, including keeping people in their homes longer, would save $140 billion and more efficient administrative processes would save $133 billion.  Excuse us for being dubious that these targets can realistically be achieved.

The most alarming information in the report is the finding that many of the newly eligible persons will likely have much higher medical costs than the current Medicaid population and that those high costs will persist after enrollment.  Just another example of the fantasy economics underlying the “reform” bill.  Many of the changes suggested in the report are sorely needed, but they have been known for years, if not decades and somehow policymakers have not had the will to implement them, nor to allow managed care companies to fully apply the techniques they know will reduce costs.  This report is well-intentioned and has a number of well-thought out suggestions, although the projected savings are not likely to be achieved.  The report does anticipate that at least some of the savings would be needed to address the biggest looming problem for Medicaid–the unwillingness of many physicians to treat these patients due to inadequate reimbursement.