May 21, 2015

Under ObamaCare, the insurance companies are guaranteed a steady flow of customers mandated to buy insurance and subsidized by taxpayers to buy it. And if the insurance companies misprice the product and lose money, they get access to a government bailout fund. It’s a very good deal.

Now let’s look at Medicaid reform as outlined by the medical industry. After a four year transition, groups of doctors and hospitals called provider led entities will handle Medicaid cases on a fixed price contract. This is supposed to bring stability to the Medicaid budget.

Can doctors and hospitals really run an insurance business which is what they are trying to do?

Rahm Emanuel’s brother, Zeke, helped design Accountable Care Organizations or ACOs in ObamaCare. They are provider led entities. Emanuel says “The key skill these ACOs and hospital systems lack—the skill insurance companies specialize in—is the actuarial capacity to predict and manage financial risk” (CPRNC)

So what happens if the doctors and hospitals don’t accurately judge the risk in Medicaid and start losing money? Will they get a bailout like under ObamaCare?

Taxpayers need a champion in the Medicaid reform issue. Competition between managed care companies and the medical industry’s ACOs or provider led entities is a reasonable way for the Legislature to get the best deal for taxpayers.

And no bailouts for either side.