Published Date: July 18, 2023

Summary: Medicaid is the largest single provider of health care coverage in the United States, covering 1 in every 5 Americans. But over the past 25 years, this public health care program has been largely privatized. Today, 70% of Medicaid beneficiaries — approximately 54 million Americans — receive their Medicaid coverage from a private insurance company. The literature shows some reductions to medical spending, which is a primary supporting argument of the move, but these reductions tend to be driven either by reductions to providers’ fees or by reductions in medical utilization due to added administrative requirements on the authorization of care. Both avenues can hinder beneficiaries’ access to care. Moreover, these savings have been found to be absorbed by the private insurers themselves, yielding little to no evidence of a net fiscal benefit to the state. 

Findings: Authors argue that private insurers’ profits derived from the administration of Medicaid represent a transfer of wealth from the taxpayer, beneficiary, and safety net medical provider to the administrators and shareholders of private insurance. After examining this evidence, authors then review the modern political history of how this financing approach came to dominate Medicaid in the 1990s, and two state case studies from more recent history — one that recently embraced private insurance and another that has developed an effective public alternative.


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