Medicaid’s Massive Miasma: Taming Beacon Hill’s Burgeoning Budget Beast

Share on Facebook
Share on Twitter
Share on

Hubwonk 2/20/2024 – Medicaid’s Massive Miasma: Taming Beacon Hill’s Burgeoning Budget Beast

[00:00:00] Joe Selvaggi: This is Hubwonk. I’m Joe Selvaggi. Welcome to Hubwonk, a podcast of Pioneer Institute, a think tank in Boston. Even the most astute observers of Massachusetts public policy might be surprised to learn that out of the state’s more than $56 billion budget for fiscal year 2024, a third, or more than $20 billion dollars of it, is allocated to Medicaid programs.

[00:00:24] Originally established by the federal government in 1965 to provide health coverage to those with insufficient income and resources, the program known as MassHealth in Massachusetts has evolved substantially. With no budget cap and varying eligibility standards set at the state level, MassHealth now covers two [million] out of our seven million residents, including 40 percent of all children and 60 percent of all nursing facility residents, despite the state’s relative wealth.

[00:00:52] While federal funding covers 60 percent of these expenses, critics argue that the program’s structure incentivizes expansion, as federal matching dollars increase with state spending, potentially crowding out other essential state and local priorities. This growing challenge raises important questions about how a program initially targeting the most vulnerable has grown so extensively over its 58 years.

[00:01:17] Today I’m joined by Marc Joffe, a federalist and state policy analyst at the Cato Institute. His recent white paper, “Containing Medicaid Costs at the State Level,” delves into the program’s design flaws that have led to its unchecked expansion, leaving states grappling with the decisions on how to balance federal dollars with state-level needs.

[00:01:38] We’ll explore potential areas of reform that offer significant cost savings while safeguarding the well-being of those most in need. When I return, I’ll be joined by Cato Institute analyst Marc Joffe.

Okay, we’re back. This is Hubwonk, and I’m now pleased to be joined by Cato State Policy Analyst Marc Joffe. Welcome to Hubwonk, Marc.

Marc Joffe: Thanks, Joe.

Joe Selvaggi: Okay, in doing research for our conversation, preparing for this conversation, I certainly enjoyed reading your piece “Containing Medicaid Costs at the State Level,” but it led me to do a lot of analysis of our own Massachusetts state budget. We recently did a podcast on the topic of the budget. I was shocked to learn that we spend $56 billion a year, but we spend a heck of a lot of that on Medicaid. My perception of Massachusetts is that we’re wealthy, we’re healthy, and yet more than a third of the total money spent by Beacon Hill is Medicaid related. I want you to explain to our listeners, A, how we got here, and let’s talk about perhaps some useful reforms that you’ve looked at from studying all the states in the entire country. Let’s start at the beginning with a little history lesson. Your paper points to design flaws in Medicaid. when it was designed back in 1965. So where did this all begin and what were those flaws?

[00:02:51] Marc Joffe: So, Medicaid was a bit of an afterthought. The Social Security legislation that passed in 1965 was primarily focused on Medicare, but, uh, government had been working on a low-income medical program for some time.

[00:03:06] There had been a program in 1960 called Kerr-Mills, and there was a decision to amp that up and make it into the Medicaid program as part of the 1965 legislation, but it didn’t get a lot of attention. And I can tell you, what ultimately happened, if you’d like.

[00:03:21] Joe Selvaggi: Sure, you point to some flaws of how we got here, again, it was an afterthought, yet, I don’t want to spoil, bury the lead, but we now spend about $800 billion dollars on this afterthought uh, so that’s more the Defense Department, you know, that’s, that’s real money. what were those flaws that you saw in its original design?

[00:03:39] Marc Joffe: So, there was no real definition of what a low-income person was, and it was really up to the state to decide that. New York State was pretty clever. They said, hey, let’s set the threshold at $6,000 a year, which is sounds like not much money, but in 1965 was a lot of money, and I think about 40 to 45 percent of New Yorkers qualified for the Medicaid program. So very quickly, it blew out the anticipated budget and Congress had to go back in and fix it multiple times until we have what we have right now, which is that Medicaid is generally a program that’s limited to people making 138 percent of the federal poverty line.

[00:04:28] Joe Selvaggi: But in its original design, I don’t want to put words in your mouth, but effectively it was a blank check, right? There was no cap. And it paid states to decide more people were eligible. The more people who decide we’re eligible, the more money you got. Is that fair?

[00:04:42] Marc Joffe: Correct. And there was no control over how much providers could charge. And that’s something that California took advantage of. So, they were paying providers like the same that they would normally pay in private insurance. And, that really mounted up the costs, in California, so different states that were really good at figuring out how to maximize their federal funding came up with ways of taking advantage of the system. And that’s something that exists to this day, because the key thing about Medicaid is it’s a cost-sharing program where a state pays some percentage, usually between 50 percent and — 50 percent max, and sometimes as low as 20 percent — and the federal government pays the rest of it, and that’s where the bad incentives come in for the state, because the state’s like the, ‘How can I get as much money out of the federal government as possible to, to please my constituents in my state?’

[00:05:39] And those constituents are not only, or not even primarily low-income people that need medical care, but there are groups of providers that are looking to maximize their take from this program.

[00:05:52] Joe Selvaggi: So we got a little bit of mission creep. Just again for level set, I threw out the number $800 billion. How much in general is, of that is spent from state dollars that we pay with our state tax dollars and how much is spent from federal dollars that we spend with, federal tax dollars? Federal tax dollars, or printed.

[00:06:08] Marc Joffe: About, about two thirds of it, comes from the federal level and, the rest of it from states. So, it’s, most of that $800 billion is coming out of your 1040 form when you file that in April.

[00:06:20] Joe Selvaggi: Indeed. And I was really, I was fascinated to learn that we get money from the federal government, 90 percent of the money we get from federal government in Massachusetts is for these Medicaid related programs, are we typical, or are other states getting, lots of other money in other ways, or is like every state sort of on the hook or that are linked to the federal government is primarily a Medicaid?

[00:06:40] Marc Joffe: Well, I, oh, I certainly, Medicaid is gonna be, the biggest federal, federal revenue source for states. And it’s going to be among the top two spending programs in any given state. Massachusetts is going to be a state that relatively gets less Medicaid money because the federal matching percentage is based on the per capita income of people in the state. And, as your listeners well know, Massachusetts is the most affluent state in the United States. Massachusetts is among those that get the lowest federal match. A state like Louisiana or New Mexico is going to see a lot more money proportionally coming back from the federal government than Massachusetts would.

[00:07:27] Joe Selvaggi: And that’s some formula. It’s not that we don’t want it, it’s just that we can’t hide our wealth. They know at the federal level that we’ve got the highest per capita state income, so it’s a formula, right?

[00:07:38] Marc Joffe: Yeah, and I’m very jealous. I’m originally from the New York area, and I remember New Jersey and Connecticut being the top two states, and I lived in New Jersey for quite a long time, and then all of a sudden, what is this? Massachusetts passed us? What happened?

[00:07:50] Joe Selvaggi: Yeah, I’m a Jersey guy too. I used to live in that Jersey yeah. I dunno what happened to it. it’s gone away. So that’s another —

[00:07:57] Marc Joffe: You brought the higher income with you when you moved. Yeah.

[00:08:00] Joe Selvaggi: I moved north, but that’s another, I think people would be shocked to know that for a time we had the second highest per capita income in New Jersey. Again, I left there 30 years ago, let’s not digress too much. \Now this growth we talked about from a nascent program in ‘65 to $800 billion now. Has that growth, you know, we’ve sort of implied that more and more people have been included, but of course, the cost of, of health care for each of us is going up, which is really the reason. Has it grown because we’re just throwing more people into the ranks of Medicaid, or is it that each of those Medicaid patients is spending more?

[00:08:31] Marc Joffe: It’s for a variety of reasons, but it does ratchet when you have certain policy changes. So, the big one in the twenty-first century has been the implementation of the Affordable Care Act, popularly known as Obamacare.And that program added a lot of new beneficiaries. So previously, single adult making, 120 percent or 130 percent of the federal property line would not be included because it was really a program that was designed for children, mothers, pregnant women. But then with Obamacare, all low-income adults were included. So, that substantially raised the cost of the program.

[00:09:14] And one interesting thing about that is that the federal matching percentage for those who are eligible for Medicaid due to expansion, the federal share is 90 percent relative to, say, the 50 to 80 percent that applies to the traditional Medicaid beneficiaries. That particular change really increased costs at the federal level much more than it did at the state level.

Joe Selvaggi: [00:09:38] So the federal government was paying us to spend. You have to spend one dollar and we’ll spend nine. The math is good, states theoretically were being paid to encourage more people to sign up. s

[00:09:50] Marc Joffe: Yeah, it was even more conspiratorial than that, because it started with the federal government paying 100%, then it went to, 98, 96, 94, until it finally stabilized at 90 percent in 2020, I believe. Yeah, they really were giving states a very strong incentive to add people to the rolls.

[00:10:10] Joe Selvaggi: So, you established earlier, of course, you pointed out that we’re a relatively wealthy state, arguably the wealthiest we’ve got 50 states, and each gets a certain amount of money from the federal government, but also spends a certain amount of money on Medicaid. Now, let’s assume that poor people are poor people everywhere, is there any correlation between how much we spend, for each of our Medicaid recipients and health outcomes? In other words, is more money, in theory, producing healthier populations?

[00:10:35] Marc Joffe: Yes, we looked at that in the study. And I think the first thing I would say is that it’s difficult to really make a firm determination, because, health statistics are normally not provided by a type of medical coverage. So, it’s hard to tease out Medicaid health outcomes from those or those who are on other kinds of programs or private insurance. But, we looked at low birth weight and we found that states that spent more on Medicaid didn’t necessarily get good outcomes with low birth weight. And that means a newborn being 2,500 grams or less, which is an unhealthy Weight. D.C. is a quasi-state. It’s a territory, but it’s really functions for Medicaid purposes, like a state that has very high Medicaid dependence ratio. 40 percent of people in D.C. are on Medicaid, has very high per capita Medicaid spending, and yet it has very bad outcomes with low birth weight. So, it doesn’t seem like all this Medicaid spending that’s going on in D.C. is really moving the needle on low birth weight. We also looked at, 0-64, age 0-64 accrued death rates. And, we focused on 0-64 because that’s where most of the Medicaid beneficiaries are. There are Medicaid beneficiaries getting Medicaid funding to stay in a nursing home, but they are, but that’s not the medical part of their, their coverage. That’s still coming from Medicare.

[00:12:15] The medical benefits themselves are focused on those that are 0-64. And again, we found really no correlation in terms of more Medicaid spending. Causing potentially lower death rates among those 0-64.

[00:12:28] Joe Selvaggi: So, we’ll put a pin in there that more money does not equate to better outcomes — not necessarily, it may, but no evidence has been found yet. You actually, in your paper, cite an interesting article. I had a study that I had long forgotten, but you reminded me of it. It was the Oregon study where, our listeners could say, look, the people in D.C. are different than the people in Massachusetts. So, you know, that doesn’t really persuaded me that more money doesn’t produce better outcomes. We really would have to have more money in the same state or the same population and compare those that have Medicaid versus those that don’t have Medicaid that are otherwise identical. What is your, what were your observations of the Oregon study?

[00:13:07] Marc Joffe: Well, that just found that people who were in Oregon were given the opportunity to get on a medical program versus those that were in sort of a lottery kind of system. The people who got on the medical program got more health services, but they didn’t necessarily have better outcomes. And that goes back to a concept that is pretty old in the world of health economics from Alain Enthoven called “flat of the curve” medicine. So, we get to a point where we’re spending so much and providing so many medical services to people that incremental medical services actually provide little or no benefit. So, I think that kind of thing can happen when you make more benefits available to folks.

[00:13:52] Joe Selvaggi: Yeah, in your view, what might account for this counterintuitive observation that, it seems public orthodoxy that, look, healthcare is an unalloyed good. More is better. Why wouldn’t it be better? Why wouldn’t, you know, spreading lots and lots of healthcare among otherwise unfortunate people, why wouldn’t that help them? I mean, you, you alluded to the “flat of the curve” kind of concept, but what might other factors be?

[00:14:21] Marc Joffe: Ultimately just seeing more and more medical providers is going to have diminishing marginal returns at some point. And, the main things that a younger person can do for his or her health is just have a healthy lifestyle, including proper diet and exercise. If you get into a situation where you start eating poorly and not taking care of your physical health, you know, you can start seeing a lot of doctors or other specialists, but ultimately you know, when you see the fourth or fifth, it’s not going to really make that much of a difference.

[00:14:52] I learned a really interesting thing when I first started studying Medicaid in graduate school. I interviewed a — I think it was a nurse practitioner in Alaska. Alaska is a state that has actually very high reimbursement rates for practitioners. And there’s a very high Medicaid cost relative to the size of the population. And she told me, it gets dark in Alaska for several months each year. And people get lonely, and one way to deal with their loneliness is to go see the doctor. So, you can imagine, that might be somewhat psychologically beneficial, but I don’t know if it would make too much of a difference in terms of a person’s ability to continue living

[00:15:35] Joe Selvaggi: Yeah, and of course, that’s an anecdotal observation. But I read the recent report, again, I was incredulous. I couldn’t believe how much money is being spent on this program. Here in Massachusetts, we have a $56 billion budget. $20 billion is being spent on Medicaid. That’s more than a third. I don’t know who of our listeners thinks that makes sense, but I read the Mass Health report, which essentially seems to suggest that because it’s growing, it’s evidence that there are additional needs that are yet unmet. Do you see that sort of interesting logic, which is the larger it grows, the more it validates the need for the program. It’s proof that it’s necessary because it’s so damn big?

[00:16:13] Marc Joffe: Yeah, I think this is really a fundamental problem in policy analysis that goes across lots of different areas, which is a confusion of outcomes and outputs. We can say, we paved the road 100 times, but the road still is full of potholes. It really isn’t providing a good policy outcome. And so, uh, you know, conflating the amount of spending, the size of the caseload, the number of interventions provided, that’s not the same as people being healthier and living longer and living at a higher quality. And we just don’t do a great job of measuring those latter metrics, and we spend a lot more time in government measuring the former. And I think that’s — I think it’s very misleading, and it provides us with a lack of information that really can help us improve policy.

[00:17:08] Joe Selvaggi: In reading that report, again, our Medicaid program is called Mass Health, it wanted to reassure the readers that they were doing, had measures to contain costs. So, I want to propose their reassurances and say, do you think those, you know, we should be reassured by their cost containing, um, measures? In this case, they were talking about they use a lot of, you know, paying for value instead of volume, particularly with managed care programs, ACOs, these kinds of things, all kinds of three-letter programs whereby you’re paid for sort of the general health rather than the amount of services that are provided. You did some analysis on this. Is this, from a state level, an effective way to improve outcomes and reduce costs?

[00:17:46] Marc Joffe: Well, you know, Medicaid managed care is something that’s had a very good reputation. The idea of managing care with a third party that potentially acts as a gatekeeper sounds intuitively attractive, but when we’ve looked at studies on applying managed care to Medicaid, because managed care providers don’t have a lot of flexibility in Medicaid, number one, and number two, they can be paid up to 15 percent of the cost of the Medicaid program. It generally just doesn’t pencil out very well. And in fact, your neighboring state of Connecticut dropped managed care in 2012, went to something that they called managed fee for service, which is basically traditional fee for service with, you know, company or a nonprofit, I believe in Connecticut’s case, doing sort of the paperwork on behalf of the state, and that has resulted in Connecticut’s Medicaid spending curve flattening out relative to other states. So, it doesn’t seem that managed care is really a great idea. it might be great in theory, but it doesn’t seem to work very well in practice. I should also mention that I’m aware that Rhode Island has been looking at getting rid of their managed care as well.

[00:19:02] Joe Selvaggi: Okay, so the idea is catching on, perhaps it’ll find its way further north to us here in Massachusetts. Let’s talk about another topic that we covered a lot when this podcast began in the heat or the peak of the pandemic. We did a lot about telehealth, right? We didn’t want people afraid of hospitals to be stuck at home not being served.

[00:19:20] And the adoption, just like we’re talking across continent here, people could talk to their doctor, whenever they like. Mike, this, it seems obvious, saves Medicaid or all healthcare, but particularly Medicaid, a great deal of money if you don’t have to go and see the doctor.

[00:19:36] Marc Joffe: The answer is yes, but. So, theoretically telehealth makes, a lot of sense because you could see a practitioner in maybe a lower cost state or even in a foreign country that has lower medical costs. Unfortunately, due to state licensing laws and often just pressure from the provider community, there’s been limitations on the ability to use out of state or even out of country providers. And second, there’s been a lot of pressure to keep the provider fees for telehealth visits on a par with in-person visits, which to me doesn’t make a lot of sense because if the physician doesn’t have to commute to a location that’s staffed and that has associated costs with it and can do the visits from his or her home, even if you’re not using a lower-cost provider, you should be able to provide telehealth more economically than you can provide in person.

So, telehealth is a great idea for reducing Medicaid costs if and only if the reimbursement rate for telehealth visits is differentiated from in-person visits.

[00:20:49] Joe Selvaggi: Indeed, and if the doctor now is being paid the same for telehealth and the patient is now paying the same for the telehealth, it would have to come from the outside. Somebody would have to say as a policymaker, let’s pay a different rate for telehealth in person, right?

[00:21:03] Marc Joffe: Exactly. And the same thing with nurse practitioners and physician’s assistants, right? So, again, a lot of primary care can be cost effectively provided by non-physician providers, but again, we’ve seen a lot of pressure on not differentiating the rates for a nurse practitioner visit versus a physician visit. And I think taxpayers have a right to expect the savings if a practitioner who, I’m sure, is very competent, but it was nonetheless has had less of an educational investment than a physician, if that person is able to charge the same rate, I think the taxpayer is not really being well served.

[00:21:42] Joe Selvaggi: Indeed. Let’s change the topic to hospitals again. I told you I’m on top of Beacon Hill and there’s no shortage of hospitals here, including right down the street is — we call it Mass General Hospital. The joke is it’s MGH, Man’s Greatest Hospital. But apparently Medicaid compensates or reimburses hospitals about the same, whether one assumes a hospital that serves a lot of Medicaid patients might also be financially fragile, whereas a juggernaut like Mass General is fine and may not need the same amount of reimbursement for the federal government. How does that work? Should we be paying the same, you know, every hospital, the same regardless of its financial status?

[00:22:20] Marc Joffe: Medicaid hospital payments is an incredibly complicated onion and we only filled a few layers of it. We’re continuing to study it as we speak. The general thesis, which I don’t think is necessarily empirically supported, but the general thesis is that government payers, Medicare and Medicaid, pay an inadequate amount to the hospital, per patient visit. And as a result, they, the hospital needs to have one or two things happen. Either needs to have a lot of private pay patients to subsidize the government pay patients, and/or it needs Medicaid supplemental payments, and the main example of a Medicaid supplemental payment is something called a DISH payment, a disproportionate share of hospital payments. So, the idea being that if a hospital is taking care of a disproportionate share of Medicaid patients, and their per-visit reimbursement for Medicaid is too low, the state’s going to step in and give the hospital this additional amount of money. You know, so looking into it, we cite some examples in the study of hospitals or hospital groups. that don’t really seem to need this money. We do hear a lot about smaller hospitals and rural areas, often known as critical access hospitals that are absolutely going broke and closing and something needs to be done about it. But a lot of the disproportionate share of hospital payments are going to large urban medical centers that are actually, if you look at their form 990s — which is the form that a nonprofit organization has to submit to retain its tax exemption — they’re usually doing quite well. They often have hundreds of millions, or even billions of dollars of reserves and, in many years, they are receiving income in excess of their expenditures, so they’re continuing to build reserves. Also, we find that a lot of these institutions have very lavish executive compensation. So, you could see, uh, CEOs making a million, $5 million. In one case we looked at over $10 million, which is, which, you know, I’m a libertarian, I believe in the free market. I don’t, I’m not against people making a lot of money, but I am against people making a lot of money when it’s paid for by the taxpayer. And so, you know, I think it’s hard to, it’s hard to reconcile the idea that a hospital needs a DSH payment at the same time that it’s built up hundreds of millions or billions of dollars of reserves and is paying its CEO a very generous pay package. Those two things don’t seem to compute to me.

[00:25:01] Joe Selvaggi: So, let’s shift our conversation to the individual Medicaid patient. We point to a very common — I don’t know if you want to call it a myth or just a sort of a known fact — that people, let’s say, who are less fortunate and need healthcare, for whatever reason, choose, rather than to make an appointment, they will walk into the emergency room and we all say you have learned that an emergency room visit is far more costly than the equivalent, non-emergent doctor visit. How — do forgive me, you can’t turn people away — how do you discourage poor people who want to see a doctor from walking into the emergency room?

[00:25:36] Marc Joffe: Well, the tool that insurers normally use to deter non-emergency room visits is co-payments and, I don’t know about you, but the last time I think I had to visit an emergency room, the c-pay was something like $200. So, you know, it is something that you’re going to think about. Obviously, if you are in very bad condition, that $200 is not going to make that much of a difference and you probably need to be going to the emergency room. ut, there are those things where you’re on the cusp, should I really go to the emergency room? Or maybe I should just call the doctor or whatever. And that hundred or two-hundred-dollar copay, that could alter your thinking at the margin. So, in Medicaid, there is a lot less in terms of disincentives from copayments or other kind of patient responsibility. The federal government allows states to charge an $8 copay for a Medicaid patient that visits a hospital for what then turns out to be a non-emergency situation. So, that requires, a lot of steps, so the state has to decide to enforce that. And then the hospital has to turn around and tell the state, ‘Hey, this Medicaid patient presented, but didn’t really have an emergency. So that $8 doesn’t get collected that often. we do really have to think about ways of tightening that up.

[00:26:55] And I think one thing that looked like to me to be a solid idea was attempted in Kentucky, but it didn’t last long enough to really see whether it would work. The idea there was that Medicaid patients, or Medicaid beneficiaries, I should say, were given personal health savings accounts, and those health savings accounts were funded based on them getting payments, virtual payments, because they didn’t actually collect cash, but payments for doing healthy things like participating in a tobacco cessation program. But then, if the patient presented at the emergency room without really having an emergency, the state would take away a lot of the money, way above $8 from that account. So, that could provide more of a disincentive without really, further impoverishing Medicaid beneficiaries who obviously are by definition quite poor. But because of a change in administration, that program was very quickly rolled up before it was rolled out, and so we don’t really know whether it would have worked.

[00:28:02] Joe Selvaggi: Uh, and your paper, again, if I’m being sympathetic to someone who uses the emergency room inappropriately, it may be the fact that they just can’t get a doctor. Your paper suggests that states could do a lot more to help everybody to be able to get the care they need by making it possible to use nurses assist — or physician assistants, or nurses, or other medical professionals that, are more appropriate for, let’s say, less emergent events. Not every, we don’t have to see a brain surgeon for everything. There’s probably all kinds of other people we could use. I don’t want to beat that to death. Let’s leave that where it is. One, I think what might provoke some of our listeners some controversy, but one that’s commonly floated for all, let’s say, transfer payments or all welfare programs is, some sort of work requirement.

[00:28:46] Now, setting aside work requirements as a useful measure for everything — it helps get people better integrated into society, gives them useful skills and, better sense of well-being — But how does a work requirement affect a Medicaid patient’s health?

[00:29:05] Marc Joffe: Good question. We didn’t really look into that, but, let me spitball that one for you. So, the work requirements that we looked at generally have three options. You can either work 20 hours or more a week. You can be in education. Or you can be volunteering. So that’s not a heavy — that should not be a heavy lift for most people, especially those in the expansion population, which may be single adults, not even taking care of children. Uh, obviously, getting out and doing things should be good for a person’s health. But, of course, the reluctance to impose work requirements — and the Biden administration has been very reluctant to allow any state to impose work requirements. Those have been first attempted under the Trump administration, and most of them have now been canceled. And the reason is, that if the work requirement deters somebody from going on to Medicaid, then that means that person is going to be uninsured, and that comes along with the consequences of being uninsured, which means, worse medical access. It’s a double-edged sword.

[00:30:14] I think that it’s a good thing from a personal responsibility point of view, as you indicated. It can be healthy in terms of giving people activities, giving people a sense of purpose for their daily life, which is, usually, consistent with good health, but if it drives people away from getting coverage, then it could have some negative health impacts.

[00:30:35] Joe Selvaggi: Sure, I, good job, spit-balling that one on the fly and so, one thing you — we alluded to it earlier — but I want to address it because Medicaid is not just for, let’s say, children, or poor people, or pregnant women, or, all these kinds of, you say zero to sixty four, but once you hit 65, theoretically, you’re a Medicare patient, but Medicaid might assist with your nursing home costs. We all know that’s expensive. They say it costs more than to send you to Harvard or whatever to go to a nursing home you have some, I thought were some good ideas and some, you know, well, I might even, I would say controversial ideas on how to, let’s say, reduce the cost. You, in your paper, mentioned something like $89,000 a year for a nursing home, just for the home, not for even the attending medical care that goes around it. What are some of your ideas of, let’s say, reforming the way Medicaid pays for nursing home care?

[00:31:23] Marc Joffe: So, yes. Nursing homes are incredibly expensive. And people can stay in nursing homes for several years, and at an average of $89,000 a year, and it’s obviously a lot of variance, depending on the state, that can really, create a very large burden for taxpayers. There are a number of things to look at. One thing that I didn’t discuss in the paper very much, but I’ve covered in op-eds, has to do with really who is going to qualify to get these nursing home benefits. Normally the idea is that, to qualify, you have to have both a low income and a low amount of assets.

[00:32:02] But what a lot of people are doing is they’re working with attorneys and consultants to move their assets to their heirs before they need to go to a nursing home, so it seems like they qualify, but, from a spirit-of-the-law perspective, they don’t really qualify. Now, in California, the state’s gone even further and said, we’re not even going to have an asset test anymore.

[00:32:27] You could have a very low income, but have $10 million or $20 million of illiquid assets that aren’t earning any interest — because obviously that would put you over the income threshold — and still get Medicaid benefits to go into a nursing home. So that’s really, that’s I think something that states need to look at. I think that asset qualification should be more rigorously enforced so that the program is just focused on people who really need it, as opposed to looking for a workaround to get more money to their heirs. And just, I’ll just say one thing. I have a friend who’s an estate lawyer who thought, oh, my God, this is really a horrible idea that you’re suggesting, Marc, because, people should be able to transfer money to their children. And I’m sympathetic with that. I’ve been on the receiving end and I will be on the giving end of the inheritance thing. But you are talking about taking money away from taxpayers and giving it to people who can afford it. So, I really think that’s something that should be considered. So, if you like, now I can go on to some of the more micro ideas about controlling costs.

[00:33:36] Joe Selvaggi: Sure, sure. we’re running out of time, so let’s do some fast bullets of what else we could do.

[00:33:40] Marc Joffe: Sure. one thing is, is looking at alternatives to nursing homes. one thing that California leads in is something called board and care facilities. So, these are regular houses where you can fit up to six elderly individuals and you have two people in the house taking care of them. So, it doesn’t have all of the fixed costs associated with nursing homes. And for most people, it’s adequate. There’s only people who are really in extreme need of specialized care that have to be in a skilled nursing facility, which is another name for a nursing home. So, that’s something that has a lot of precedent.

[00:34:16] Perhaps more controversially, I talk about the idea of having people go to nursing homes in states that have a lower average cost of a nursing home. And that seems objectionable because, well, you want to be able to visit your older relative and you shouldn’t have to go across state lines to do that. The thing is, it turns out that, sadly, more than half of people in nursing homes do not receive visitors. They’re, unfortunately, they’re aging out alone. And so, um, really, it doesn’t make that much difference what state that person is in. I do think that’s worthy of consideration in those cases, along with the possibility, a bit more extreme, of looking at nursing home options outside of the United States, where the cost of care and lodging is going to be a lot less than it is in the States.

[00:35:09] Joe Selvaggi: So, those are all good ideas, but let’s pull back, because this is maybe my last question or last sort of conceptual question, which is: We’ve talked about how the fact that the federal government in a sense pays states to spend more. And so, not surprisingly, states spend more. Also, Medicaid, you know, at the federal level gives rules as, what you must spend money on and who you must include. There’s a lot of talk about, let’s say, we have 50 states, 50 laboratories of democracy wouldn’t, let’s say, conceptually speaking, the whole thing be better if we allot, by some formula, a certain amount of money goes to Massachusetts or California or your old Connecticut or Jersey, and they decide how they spend it, and in a sense, that’s their lot. The more they spend, the less they have. It’s in a sense contained. It’s not an endless open, you know, blank check to infinity, and also they can tailor it to the specific needs of that specific state and their sort of culture and their priorities and their values. What do you say to something like that?

[00:36:06] Marc Joffe: Yeah, absolutely. We call that in the study Medicaid block grants. So, the idea is that, on some basis other than the amount that the state spends, perhaps the population, the Medicaid population, maybe you’d look at the cost of living, the federal government would just give a flat amount to each state, and then it would be up to the state to supplement that money and provide a cost-effective Medicaid program.

[00:36:30] And that gives the states the right incentive. It doesn’t, uh, create incentives where the state says, ‘Hey, I can generate these additional costs and most of that’s going to be taken care of by the federal government.’ You’re getting a fixed amount from the federal government. So, you as a state are then responsible for 100 percent of those costs.

[00:36:48] Joe Selvaggi: Indeed. To me, that sounds appealing in that it meets everybody halfway. It says, look, money is an infinite, and every dollar we spend on this worthy program is a dollar less we spend on a different worthy program. So, it essentially requires us to make choices. we’ve run out of time. I could keep talking and I find this very interesting. I hope our listeners do as well, but now, I’ll give you the opportunity to plug your work and have our listeners find more, read more about your studies and your future research. Where can our listeners read more about Marc Joffe?

[00:37:20] Marc Joffe: You can go to and look me up. It’s Marc, M A R C, Joffe, J O F F E, and you’ll see all of my content. I do a lot of blog posts for Cato. I do a lot of op-eds. Covered Medicaid, a lot of other state finance issues there. And I look forward to hearing from your listeners if they find any of that interesting.

[00:37:44] Joe Selvaggi: Wonderful. Okay. I’m sure we’ve got some pretty active listeners, so I wouldn’t be surprised to get a few emails. I don’t know that’d be helpful or argumentative, but then I’m sure you’ll get some. So, thank you for joining me today on Hubwonk, Marc. your research is useful. It opened my eyes. It caused me to do a deep dive on this issue and you really helped clear it up for me and our listeners. Thank you for joining me today on Hubwonk.

Marc Joffe: Thank you, Joe.

Joe Selvaggi: This has been another episode of Hubwonk. If you enjoyed today’s show, there are several ways to support Hubwonk and Pioneer Institute. It will be easier for you and better for us if you subscribe to Hubwonk on your iTunes podcatcher. It would make it easier for others to find us if you offer a five-star rating or a favorable review. We’re always grateful if you share us with friends and family. If you have ideas or comments or suggestions for me about future episode topics, you’re welcome to email me at Please join me next week for a new episode of Hubwonk.

Joe Selvaggi talks with Marc Joffe, a state policy analyst at the Cato Institute, about his research on Medicaid’s cost and size. They explore how Massachusetts can control spending growth while protecting other priorities.


Marc Joffe is a federalism and state policy analyst at Cato Institute. After a long career in the financial industry, including a senior director role at Moody’s Analytics, he transitioned to policy research, having most recently worked at Reason Foundation. Joffe’s research focuses on government finance and state policy issues. His financial research has been published by the California State Treasurer’s Office, UC Berkeley, the Mercatus Center at George Mason University, California Policy Center, The Center for Municipal Finance, and the Macdonald-Laurier Institute. Joffe’s op-eds have appeared in The Wall Street Journal, The Orange County Register, The Fiscal Times, Governing, National Review, The Hill, and The San Jose Mercury News. He has an MBA from New York University and an MPA from San Francisco State University.