If You Can’t Use A Hatchet, Opt for a Scalpel: Reformations to AHCCCS

Governor Doug Ducey continues to live up to his campaign promise of bold reform and better government with his proposed modifications to Arizona’s Health Care Cost Containment System (AHCCCS), also known as Medicaid.  The proposal, which requires federal approval, contains several common sense reforms that will reduce fraud, save taxpayers money and empower Medicaid recipients to have more control over their health care decisions.

Arguably the most controversial reform in the package is the proposal to cap Medicaid benefits for childless adults to a lifetime maximum of five years.  Already the drumbeat of opposition to this change is mounting, and as deafening as the outcry may be, one only needs to look back to the 1990’s to know that we have seen this movie before.

When Congress passed and President Clinton signed sweeping welfare reform, it was declared by opponents and pundits across the nation that reduced benefits would increase poverty, harm low income families and damage the economy. Curiously enough, included among the reform package was a lifetime limit of 60 months (five years) for welfare recipients.

What was the result of these reforms: Employment for single mothers soared from 44 percent to 66 percent through the mid 90’s and early 2000’s!  Imagine that, the very reforms that were suppose to harm low income families resulted in higher employment and a better quality of life. The proposed AHCCCS limit will achieve the same result.

Incentivizing employment is important, controlling costs is critical.  Currently AHCCCS is wrought with moral hazard.  Recipients are insulated from the costs of care as they share in no part of the expense.  The system lacks accountability for missing appointments, seeking hospital service when primary care would suffice or participating in preventative care.  According to the Oregon Health Exchange Study (OHES), the only randomized and controlled study of its kind, individuals covered under their state’s expanded Medicaid utilized “free” emergency rooms 40 percent more than when they were uninsured.  To boot, recipients reaped no significant health benefits in two years of the study.

That is why the Governor’s proposed AHCCCS reforms include cost sharing of copayments up to three percent of household income.  Recipients will now be more invested in making wise choices about their health care choices when they are conscious of the bill.

In addition to copayments, Ducey’s plan includes mandatory contributions to a Health Savings Account (HSA.)  Recipients pay a premium equal to two percent of their household income which can be used to pay for non-Medicaid covered expenses such as dental or vision.  HSA funds can only be accessed if a recipient is employed, actively seeking employment, enrolled in school, or taking a job training program.  This better equips beneficiaries to budget healthcare costs as they transition into self-sufficiency.

Due to Obamacare and the expansion of Medicaid, the government now controls nearly half of all the health care spending and more than half of the health insurance dollars in the country.  Unsurprisingly, hundreds of billions of medical dollars are wasted each year, which add no benefit to the patient.

It is easy to see why these Medicaid reforms are so important, we will know soon enough if the feds see it the same way.