Ryan's proposal specifically "would provide Medicare beneficiaries with lump-sum vouchers to buy private insurance and turn Medicaid into a block-grant system." States would get $11,00 per Medicaid beneficiary and the federal government could cap its exposure to health care costs. In other words, the federal government is turning its health care programs from a defined benefit to a defined contribution program and getting out of the health insurance business.
I used to think that block grants were a good thing because the word block has positive connotations. It makes me think of a block party or playing with blocks. The idea that the government gives you a block of money and a lot of freedom also sounds appealing. However, I have realized that block grants should really be called blockhead grants because they are generally used for programs that the granter doesn't like. That's why block grants won't cover the actual costs of the programs. Calling the programs, "Hey blockhead, how much money do I have to give you to go away? That's it? Great!" would be too honest and the acronym would be too long.
Ryan's idea of vouchers and block grants for Medicare and Medicaid is nothing new. Democratic and Republican politicians have proposed these ideas since 1981. What would make this proposal interesting is if Ryan attempted to design a market that would create an incentive to participate in these programs and provide care. That is the challenging part and why this is just another example of Republicans punting on actually coming up with a solution for the health care system. It will shift costs to employers who will become a main source of health insurance for older workers or beneficiaries who won't be able to cover their health care costs. It does nothing to change a fee for service system that will respond to lower payments with higher volume and more invasive treatments that get higher reimbursement.
The state of Oregon is seeking federal waivers for its Medicare and Medicaid funding in order to design a real system of health care. Waivers doesn't have the same warm and fuzzy feel as block grants. However, it's better because with waivers you actually get the same amount of money as before. Oregon is taking the ball and running with it by designing a care delivery system to support it called Coordinated Care Organizations (CCO's). They are similar to the federal governments Accountable Care Organizations (ACO) with 2 key differences. Patients select their CCO in advance and have a relationship with the providers while patients are assigned to an ACO retrospectively and don't have the same provider relationship. The other difference is that one starts with C and the other stars with A. I really wish Oregon could come up with a BCO acronym since they skipped that letter but the only one that I could think of was Boring Care Organization.
The relationship aspect of the CCO gives the organizations an opportunity to attract patients to join. The CCO's will start by serving the growing Medicaid population (which will become 30% of Oregon's under 65 insurance market in 2015) but will have business steadily funneled to it by the state government bodies like the Oregon Healthcare Authority. For example, the state has indicated that they may only contract with CCO's for the lucrative public employees insurance. That is how the system creates incentives to participate in providing care to difficult populations like Medicaid and Medicare. This is very different from Ryan's plan to have these beneficiaries fend for themselves with a 50% off coupon.
This Oregon proposal is something that I would call bold and game changing.
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