The Case for Abolishing Medicaid

In my previous post I discussed the case for replacing the current Medicaid system with block grants to the states; the states would spend this money on indigent healthcare, and nothing more.

But must we think only in terms of keeping the poor in a separate healthcare system?

Is there any reason to partition low-income people in a separate health plan called Medicaid? Is there any reason to sequester low-income children in a separate health plan called CHIP? I can’t think of a reason to do either. So I propose a radical idea: let’s abolish both programs. Use the money instead to subsidize the integration of poor patients into the same healthcare system everyone else has access to.

The Mechanics of Abolition: Private Insurance

Low-income families would get the same refundable health insurance tax credit other Americans get—$2,000 per person and $8,000 for a family of four, in my example. Low-income families would not get cash. Instead, they would be able to direct their refund to any participating private insurance company. The refund, in other words, would function as a voucher.Some may worry that the $8,000 refundable tax credit would not be sufficient to purchase adequate health insurance, and the private package could be worse than Medicaid itself. This is not something I worry about. Surely private entrepreneurs can produce a better health plan for $8,000 than what Medicaid offers. But just in case the critics are right, let’s keep traditional Medicaid around as a stopgap. Let people choose between Medicaid and private insurance, and let the government’s $8,000 check go to the plan they choose.

The Mechanics of Abolition: Point-of-Service Reimbursement

Getting enrolled in Medicaid is so burdensome that many people who are eligible don’t bother to enroll. Perhaps it’s time to ask a fundamental question: why do we care whether people have health insurance when they are healthy? Isn’t the real point to make sure they get care when they are sick? Put differently, why do we care whether people have insurance when they are not seeing doctors if our only real purpose is to ensure that they have coverage once they do see them?

Instead of sending out an army of social workers to track down and enroll people in a program they may never use, why not qualify them at the point when they engage the healthcare system?

The Foundation for Health Coverage Education ( has developed a Health Coverage Eligibility Quiz to identify people who qualify for public programs or health coverage in all 50 states.[1] This is a tool that can also help hospitals identify uninsured patients eligible for Medicaid, who have been treated in the ER. In most cases, eligible but unenrolled individuals have up to 90 days to sign up for Medicaid and receive retroactive coverage for medical services they have already received. Although the eligibility quiz cannot sign people up, it takes them along that path. The purpose is to make the process as easy as possible. This tool could be used in any community health center or any hospital emergency room. It is freely available on a website ( for anyone with a computer and Internet connection.

But why bother with enrollment at all? If the point of the whole exercise is to determine how much the state is going to pay the hospital or the community health center, why not stop there? Point-of-service-eligibility determination would seem to be all that is needed to authorize the delivery of free care. The paperwork associated with formal insurance would seem to be superfluous and maybe even counterproductive.

In my next blog post I will discuss less radical measures that would nevertheless be better than our current system for dealing with healthcare for the poor. In the meantime, please see my Independent Institute book, Priceless: Curing the Healthcare Crisis.


  1. Conversations with Foundation for Health Coverage Education President, Ankeny Minoux, and Executive Director, Phil Lebherz.

[Cross-posted at Psychology Today]

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