BY BRENDAN MINITER
Tuesday, August 30, 2005 12:01 a.m. EDT
One reason the public has resisted President Bush's idea of private
Social Security accounts is that voters demand a little work in the
laboratories of democracy before signing on to any big idea. There has
been scant experimentation with large-scale private entitlement accounts
in any of the 50 states. Social Security is a purely federal program, but
several states are looking at a different form of a private entitlement
account--for Medicaid.
The federal government started Medicaid in the 1960s as part of the
Great Society to provide a "safety net" for poor people who couldn't
afford health care. Its costs are split between Washington and the states,
and each state administers its own program subject to federal regulations.
Medicaid wasn't intended to grow into a behemoth, but today it consumes a
fifth to a third of many state budgets. So far nothing--not "managed
care," not "preventive care"--has been able to check its growth.
Now some state lawmakers are turning to the ownership society.
South Carolina's Gov. Mark Sanford, a Republican halfway through his first
term, is furthest along. About one million people in his state, or one in
four South Carolinans, receive Medicaid benefits each year, at a cost of
$4 billion in combined federal and state dollars. Medicaid consumes about
19% of South Carolina's budget. Within a decade the state will see 29% of
its budget disappear into Medicaid.
That trajectory is clearly unsustainable, so last year Mr.
Sanford rolled out a preliminary plan to create private Medicaid accounts
that individuals would use to buy health insurance. The details are still
being worked out, and the size of each account will vary widely depending
on individual circumstances. But the idea is simple: Give most adults
about what Medicaid spends on them now, approximately $4,000 a year, and
let them shop around. If they find insurance for less than what's in their
account, they can spend the remainder on other health care needs.
The advantages would be twofold. The state would be able to draw a line
around the portion of the budget Medicaid gobbles up, reserving other
pieces of the pie for education and other priorities. It would also enlist
the help of those best able to judge what care they really need, the
patients themselves, in the effort to control costs. And, of course, there
will be safeguards. The state will require the health insurance bought
under the program to provide at least the level of care Medicaid offers
now, and the federal government as well as the state Legislature will have
to weigh in before any reforms can move forward.
States can learn from one another's failures as well as successes.
For many states, Tennessee is an example not to emulate. There, state
officials are wrestling with a Medicaid monster gobbling up a third of the
state's budget. Though there is little doubt this is what's in store for
most other states unless they act soon, the Volunteer State got to this
point faster than most by rolling out a version of HillaryCare called
TennCare in the 1990s that gave expanded benefits to hundreds of thousands
of people.
This year Gov. Phil Bredesen, a Democrat who inherited the program, was
forced to cry uncle and is now in the process of dismantling part of
TennCare. He hasn't come out for private accounts, but he's a believer in
some market-based reforms that hold costs down by giving those in the
program the opportunity to make rational choices about their health-care
needs. He's also willing to buck his party in calling for Medicaid
reforms. He told me that the system is a failed dream from the 1960s that
needs to be modernized.
After recently expanding Medicaid, Maine is about where Tennessee was
in the late 1990s, watching a new entitlement gobble up a surprising
portion of the state budget. But as states incubate ownership society
ideas, we can expect to see them grow and eventually make a return to
Washington.
Mr. Miniter is assistant editor of OpinionJournal.com. His column
appears Tuesdays.
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