Solving the problem of the uninsured

Reform of the United States health care system is less complicated than at first might appear. The building blocks of an ideal system are already in place. The federal government already generously subsidizes private health insurance and safety net care. What is wrong with the current system is that there are too many perverse incentives. One could reasonably argue that government is doing more harm than good, and that a laissez faire policy is better than what is now in place. Nonetheless, if government is going to be involved in a major way in the health care system, perverse incentives should be replaced with neutral ones. At a minimum, government policy should be neutral between private insurance and the social safety net, never spending more on free care for the uninsured than it spends to encourage the purchase of private insurance. Careful application of this principle would go a long way toward creating an ideal health care system.

The inequity of Medicaid reimbursement in the United States

The United States Medicaid programme aims to provide public health insurance to certain categories of the low-income population. Considerable non-uniformity exists within the programme because each of the 50 states, Washington, DC and 5 territories are individually responsible, within broad federal guidelines, for its administration. The non-uniformity shows up in different eligibility requirements, benefits and health care provider reimbursement rates. This paper examines reimbursement rate variations across individual programmes and discusses how these variations affect health care provider participation. Dual market theory suggests, and empirical results conclude that low reimbursement rates cause health care providers to participate less fully in the programme. Variations in access to medical care because of differences in reimbursement rates thereby create severe horizontal and vertical inequities across programmes. To reduce these inequities, the federal government might offer earmarked grants for the mandated purpose of raising reimbursement rates to a uniform percentage of private rates in all programmes.