I grew up on government assistance. In the mid 1980s we received $40 dollars a month in food stamps. Each week I made one large pot of soup that served as breakfast, lunch, and dinner. My mother was schizophrenic and in and out of hospitals and so I did the shopping and cooked those meals myself. My mother’s chronic medical needs made Medicaid essential as well. Without it what little stability we had would have been destroyed.
When I got to medical school I hoped that achieving this milestone would mean I could put my childhood poverty behind me. I was wrong. Most of my classmates were middle class, and many were wealthy. My experience was not just rare - it was invisible in the culture of medicine. Years later, I became a medical director for a Medicaid plan. Most people with backgrounds like mine do not end up in positions that enable them to see how the healthcare system, let alone Medicaid, works from the inside.
Unlike Medicare, which like Medicaid was formed in 1965, Medicaid was designed as a comprehensive safety net. It was meant to serve people with the least: those who were chronically poor, disabled, or whose family structure had collapsed. Serious mental illness was central to that design, and long-term care and drug benefits were included. There was a recognition that mental illness would impact not just the ability to earn income, but to navigate community support systems, and often would lead to enduring poverty. Medicaid remains the single largest payer for mental health services in the United States, and covers nearly a quarter of the spending for mental health and substance use disorders for the system as a whole. It was a generous but targeted program for people who had nowhere else to turn.
But over time, that mission began to drift. By the mid-1990s, following the enactment of the Omnibus Budget Reconciliation Act of 1993, federal rules for Medicaid eligibility formalized spend-down and spousal protections. What had started out as a compassionate response - excluding the family home from the spend-down required for a middle-class person to qualify for Medicaid - had become a routine part of financial planning, and made Medicaid the default payer for long-term care. The consequences were predictable. In my next professional role, as a nursing home medical director, I saw that when beds became available they went to middle class families who subsequently would spend down assets and then remain in the facility once they qualified for Medicaid. Openings were rarely, if ever, available for people already on Medicaid. Middle-class planning for long-term care simply hasn’t happened. No robust, private long-term care insurance ever developed, Medicare was never redesigned to cover extended custodial care, and there was no sustained public debate on how to finance years of six-figure costs. Medicaid simply picked up the slack.
Drug costs have followed a similar model. The last decade has seen a revolution in the ability to treat rare diseases, but many of these treatments are extraordinarily expensive, costing upwards of $1 million each year. The new hemophilia medications fall into this category, and nearly 30% of people on them are covered by Medicaid. Despite its rarity, treatments for hemophilia were the largest single drug cost for the Medicaid plan where I worked. We have avoided difficult discussions about catastrophic insurance or direct price discipline that private insurers could exert on drug manufacturers that might have disciplined the market. Medicaid has become the payer of last resort, but it cannot absorb these costs indefinitely.
The combination of long-term care and high-cost pharmaceutical costs now mean that fewer than 10% of Medicaid enrollees drive nearly half the program’s costs. States have no option but to continue to provide Medicaid, and what we are left with is the certainty that the other 90% will see cuts to their benefits. I am grateful for Medicaid, but I also am clear eyed about how it currently works. The program cannot continue to drift into a catch-all financing mechanism for long-term care and high-cost pharmaceuticals. Inaction assures a gutted program with nothing left for families like mine.
Dr. Monique Yohanan is a Senior Fellow for Health Policy at Independent Women.
