When Health Insurance is Free

John C. Goodman

9/10/2011 12:01:00 AM - John C. Goodman

Did you know that an estimated one of every three uninsured people in this country is eligible for a government program (mainly Medicaid or a state children’s health insurance plan), but has not signed up?

Either they haven’t bothered to sign up or they did bother and found the task too daunting. It’s probably some combination of the two, and if that doesn’t knock your socks off, you must not have been paying attention to the health policy debate over the past year or so.

Put aside everything you’ve heard about Obama Care and focus on this bottom line point: going all the way back to the Democratic presidential primary, Obama Care was always first and foremost about insuring the uninsured. Yet at the end of the day, the new health law is only going to insure about 32 million more people out of more than 50 million uninsured. Half that goal will be achieved by new enrollment in Medicaid. But if you believe the Census Bureau surveys, we could enroll just as many people in Medicaid by merely signing up those who are already eligible!

What brought this to mind was a series of editorials by Paul Krugman and Health Affairs blog and at my blog) asserting that government is so much more efficient than private insurers. Can you imagine Aetna or UnitedHealth Care leaving one-third of its customers without a sale, just because they couldn’t fill out the paperwork properly? Well that’s what Medicaid does, day in and day out.

Put differently, half of everything Obama Care is trying to do is necessary only because the Medicaid bureaucracy does such a poor job — not of selling insurance, but of giving it away for free!

Writing in Health Affairs the other day, health policy guru Alain Enthoven and health care executive Leonard Schaeffer revealed some of the gory details of what people encounter when they do try to sign up for free health insurance from Medi-Cal (California Medicaid) in the San Diego office:

Of the 50 calls made over a three-month period, only 15 calls were answered and addressed. The remaining 35 calls were met by a recording that stated, “Due to an unexpected volume of callers, all of our representatives are currently helping other people. Please try your call again later,” followed by a busy signal and the inability to leave a voice message. For the 15 answered calls, the average hold time was 22 minutes with the longest hold time being 32 minutes.

This study, by the way, was conducted by the Foundation for Health Coverage Education (FHCE), a nonprofit organization dedicated to helping the uninsured enroll in available health coverage programs. The head of FHCE’s national call center reports that his staff has taken hundreds of calls from people who have tried in the past to enroll in Medicaid, but who found the process so complicated and difficult that they simply quit trying.

I know what you are thinking. What about doctors and hospitals? Can’t they help poor people sign up for public programs and isn’t it in their self-interest to do so? Turns out that medical providers have just as much difficulty with the Medicaid bureaucracy as the patients do:

[I]t routinely takes more than 90 days for the state to enroll uninsured patients into public programs. This is because it is the patient‘s responsibility to apply directly to the state program to receive the needed documentation for hospital reimbursement. Once treatment is provided and the medical incident is over, it is difficult to ensure that the patient continues with the enrollment process.

Can you imagine Aetna taking 90 days to sell someone an insurance policy? What about WellPoint? Or Blue Cross?

Another problem is the Medicaid payment rates. They are so low that California hospitals frequently don’t even bother to try to enroll patients who come to the emergency room, unless they're admitted to the hospital:

[P]ublic program reimbursement is often so low that hospitals are more likely to only seek reimbursement for patients who are eligible for public coverage that fall into the “treat and admit” category rather than those patients who enter the Emergency Room with minor emergencies or illnesses. Furthermore, hospitals estimate that they receive as low as nine percent of fully-billed charges for Medi-Cal patients. Therefore, the providers have little financial incentive to encourage patient enrollment in public programs.

Most people view ObamaCare as a radical reform. Here’s an idea that is even more radical: why not abolish Medicaid? Texas A&M professor Thomas R. Saving, a former Trustee of Medicare, has proposed the idea of Health Care Stamps. They would work like Food Stamps. People who have them would be able to shop around andbuy care in the same medical marketplace that caters to the needs of all other patients — rich and poor alike.

I’ll write more about this idea in the future.