Future of Healthcare Operations the Term Paper

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Then, when you combine this with the fact that Medicaid serves 53 million people with an annual budget of $329 billion, means that rising costs is severely affecting this program. ("Medicaid Reform," 2005) the inflexibility of this program has contributed to problem as a one size fits all approach is taken. Then, when you combine the different state programs offered through Medicaid, means that an uneven standard of inflexibility is used. An illustration of this can be seen by looking no further than the overall focus of Medicaid, where an emphasis is placed on addressing major health issues. This is problematic because like with Medicare, an approach must be taken of dealing with the patient once they are facing major health issues. Then Medicare has to engage in multiple functions to include: comprehensive acute / primary care, long-term care services (for those who qualify), a source of funding for uncompensated care at hospitals and it helps finance health care services for those who are suffering from chronic illnesses (i.e. HIV / AIDS). ("Medicaid Reform," 2005) This inflexibility adds to the overall costs, where some people could face dual coverage to include: those who are eligible for enrolment in both Medicare / Medicaid and those who receive reimbursements for out of pocket expenses. In total, these people account for just 7 million of the Medicaid beneficiaries and 42% of all Medicaid expenditures. ("Medicaid Reform," 2005) However, because they have access to multiple options, means that they are using more health care services. This is because those who are eligible for both programs are more likely to: have worse health conditions, they are from a lower economic class and the costs for institutional care are far higher. As a result, the government has been cutting back on the overall amounts of services that they are reimbursing. This is a similar to the corporate value principal that the government is using in Medicare. Where, they are reducing their overall amounts of costs by requiring the consumers to have to pay more out of pocket health care services. The thinking is, that by increasing the costs of various programs you can effectively control costs for those who require the most expensive services. The problem with using such an approach is it does not eliminate the overall amounts of bureaucratic waste that is created from this program.

This can be seen by looking no further than what Medicaid is paying for prescription drugs. In this particular situation, Medicaid has been known for having overpays, as a system of determining the cost has proven to be outdated. The reason why is: because Medicaid serves a wide variety of families and individuals, as each one that has its own needs. Then when you combine this with increased enrollment since its inception, means that you are looking at program that was designed in the 1960's to address the health care needs of today. As a result, the government is focused on using an ineffective policy and inflexible approach in the reimbursement of medication. Then, when you combine this with the fact that the law prohibits Medicaid from applying co payments to select groups, makes the situation more untenable. As the government, has no way of determining if the beneficiary will pay a percentage of their medical costs. This allows for the overall reimbursements to increase more, because there is no accountability in the Medicaid program. ("Medicaid Reform," 2005)

Another way that bureaucracy is affecting Medicaid is through the cumbersome procedures to make changes that are occurring in the field of health care. For any state to make even smallest changes to their Medicaid policies / procedures, requires that they must receive a waiver from the Department of Health and Human Services. ("Medicaid Reform," 2005) This was intended to provide the states with an effective guideline. The inflexibility of the system and the changes that have occurred in the field of health care are causing, the overall number of waivers to rise dramatically. This is due to the inflexibility that the federal government is giving the states in regards to adjusting and adapting Medicaid policies. Then, various court decisions have made the situation even more confusing. An example of this can be seen in the State of Arkansas, which can not make any changes to the fees paid to physicians unless receiving court approval. This is because the state entered into an agreement with the Arkansas Medical Society. As a result, the state is forced to waste time and resource going to court to be incompliance with different agreements. These funds could be used to improve the overall quality of care of provided to the recipients of Medicaid. The effect that this has on the Medicaid policy of the states can be far reaching; as previous court decisions are cited by both lawmakers and the legal community, pertaining to the Constitutionality of various policies. Once this take place, it makes it very challenging to adapt to the needs of citizens and the changes that are occurring in the field of medicine. ("Medicaid Reform," 2005)

Medicaid Reforms

In spite of the overall challenges, an approach of giving state officials more flexibility can help reduce the overall cost that are being paid for various improvements. One way to do this is to mirror the S. CHIP Program. This program is designed to provide children in low income families with additional coverage. Under this program, the overall amounts of costs have been more restrained, as families have more flexibility in choosing which options make the most sense for them. What makes it so successful is: that it does not become caught up in the different legal distinctions that have often affected the coverage of Medicaid. A good example of this can be the difference between mandatory and arbitrary populations. These legal distinctions matter in Medicaid because they are used to determine the overall levels of eligibility. This distinction is significant, because it gives programs like S. CHIP greater amounts of flexibility to: eliminate redundancy, establish employer buy in programs, determine co payment schedules and to offer a variety of different benefits packages (some that can be targeted to geographic regions). As a result, the overall costs are less while the number of people covered are higher on a percentage basis. This type of model can be used to effectively address the issue of Medicaid reform as it will provide the program with greater flexibility. This will have ripple effects, as it will allow the state to adapt to changes that are occurring in the industry, lowering costs. ("Medicaid Reform," 2005)

To address increasing prescription drug prices, the state should engage in a policy that takes a multi-prong approach to include: increasing the number of rebates that states / consumers can use, requiring the use of authorized generics, requiring immediate discounts on prescriptions drugs, eliminating those areas that offer similar coverage as Medicare Part D and greater flexibility in establishing co pay structures. Together, these different elements will reduce the overall costs associated with prescriptions drugs. This means that the overall amounts of reimbursement will begin to decline. ("Medicaid Reform," 2005)

Clearly, both Medicare and Medicaid are two entitlement programs that are being affected by rising costs. This has led to an increase in the overall number of cuts, as the different services that were reimbursed by the government are reduced. However, from a corporate finance perspective this issue is reflecting the idea of corporate value. This is where you are attempting to increase profits while reducing risks (costs). In this particular case, the government is not trying to increase profits from both programs. Instead, their objective is to reduce reimbursement costs as much as possible. To effectively address these issues requires that the both Medicare and Medicaid begin using a system that gives recipients a choice on: various health care services, provides increased flexibility for adapting these programs to changes that are occurring, focuses on preventive care and uses multiple strategies for controlling prescription drug prices. These ideas will require having to see the short-term costs rise, as the system focuses on addressing these issues. However, over the long-term these changes will make drastic reductions in the total expenditure in health care services as they provide each program with flexibility. This is the key to addressing the pressing issues of cost reimbursement in both Medicare and Medicaid. It is through understanding this aspect to the issues surrounding these programs; that will provide the greatest insights for reforming them.


Medicaid Reform. (2005, June 15). Retrieved March 3, 2010 from National Governors Association website:


President Cuts Medicare, Medicaid to Help Reform Costs. (2009, June 15). Retrieved March 3, 2010 from California Health Line website: http://www.californiahealthline.org/articles/2009/6/15/president-outlines-cuts-to-medicare-medicaid-to-help-cover-reform-costs.aspx

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