Using Vouchers for Medicaid Would Lower Health Insurance Rates in Missouri

 February 27, 2008

By Beverly Gossage

The goals of any health care reform should include an emphasis on wellness, individual accountability for a healthy lifestyle, and wise consumption of health care. Subsidies should be reserved for the truly needy, with a system in place for smooth transition away from the program.

Missouri has an active, competitive individual and group health insurance market.  A healthy male in his twenties could have a policy for around $50 a month. We know that putting more people on government plans crowds out the private market and raises the rate for private plans.

Missouri might want to consider a waiver which would use matching government funds earmarked for Medicaid and SCHIP to provide vouchers where individuals of low income could purchase private plans.  Voucher amounts could be based on income, gender, age, and existing health issues. Those that are ineligible for an individual private plan due to existing health issues could purchase policies through the high risk pool or carriers’ guaranteed issue plans or their employer’s plan. The very low income would receive the voucher with a health account, and the state would pick up the difference in out-of-pocket between the funds paid by the beneficiary to the provider and the insurance carrier’s responsibility.

Funds in the account would continue to grow to be used for later medical expenses or to pay for premiums when they no longer qualify for the plan.

Beneficiaries could select a medium-priced co-pay plan, or add their own funds (those who are able to do so) to buy up to a more expensive plan, or purchase an HSA plan with a lower premium thus having funds to place in a Health Savings Account (or Health Opportunity Account for children) with a “smart card” to be used only to pay for medical expenses. The benefits would be many.

Benefits to beneficiary:

1) Beneficiaries have a greater choice in selecting a plan and a carrier.
2) They may select to put their children on their employer’s plan or the family’s plan. Most insurance carriers give a family discount.
3) Broader choices of providers for the beneficiary, since most providers accept patients on private plans as opposed to those on Medicaid.
4) All family members could have same doctor, providing more consistent medical home
5) If beneficiary’s income increases and he no longer qualifies for the plan, he may keep the policy and be responsible for the premium.  He does not lose a health plan because his income increases.
6) If he is no longer qualified for the program but develops an uninsurable condition while on the program, he can keep the plan and will not be forced to seek insurance at a higher rate in the high risk pool or at guaranteed issue rates
7) Beneficiaries can have a free physical, since most private plans include a free annual physical

Benefits to providers:

1) Providers receive a higher compensation level from insurance carriers than Medicaid
2) More patients with insurance could mean better chance of receiving payment, and healthier patients.
3) Since providers are more highly compensated by a larger portion of the population, they can accept less from the insurance carriers and charge less to cash-paying patients

Benefits to Missouri:

1) Adding this generally healthy population to the total pool of the insured would allow carriers to lower rates for all in the private market.
2) Carriers can negotiate lower rates with providers, which allow carriers to lower rates for their clients
3) Risk is reduced since insurance carriers pick up the greatest share of a large claim
4) Carriers compete for a larger share of the population. Competition helps reduce rates.