Reforming Medicaid with Health Stamps

My top recommendation for improving healthcare for the poor is to replace Medicaid with subsidies that enable them to access the same healthcare system that everyone else has access to. My second pick would be to turn Medicaid into a competing health plan and make it available to everyone.

If those proposals aren’t adopted and Medicaid is retained in anything like its current form, it will still need radical reform. So the third proposal to be considered is to get Medicaid out of the business of dictating prices and replace that activity with a health stamp program, fashioned after the food stamp (SNAP) program.

How would this work? Enrollees would get stamps, depending on their health condition, and they would be free to add their own money and pay any price for any service the medical marketplace has to offer. In this way, low-income families on Medicaid would be empowered patients who could compete for healthcare resources on a level playing field with other patients, at least for small dollar health purchases, which would include almost all primary care.

The idea behind health stamps is straightforward. Like food, health is generally considered a necessity. So why not treat it the same way we treat food?

We don’t segregate grocery stores into those that sell to poor customers and those that do not. Grocery stores take all comers, and they charge the same price to each of them. The way we subsidize low-income families is through the food stamp program, a highly successful poverty program that now reaches 50 million people. The program allows poverty and near-poverty families to have access to the full range of food products. Because they pay market prices, food stamp families are welcome customers at every grocery outlet. Although they live with more limited budgets, food stamp families are able to make tradeoffs in grocery choices—using food stamps in a way that meets their own preferences and needs. Competition for food stamp dollars forces stores to compete on price and, unlike healthcare, the prices are transparent. Every paper contains full-page ads in which price plays a dominant role.

This proposal makes certain that the poor have the wherewithal to pay for their healthcare not by forcing them to wait or take poorer quality, but with healthcare dollars. These healthcare dollars are full dollars to providers, insuring that the poor can complete for resources with all other buyers of care.

This concludes my recent series on reforming Medicaid. For more ideas, please see my book Priceless: Curing the Healthcare Crisis.

[Cross-posted at Psychology Today]

John C. Goodman is a Research Fellow at the Independent Institute, President of the Goodman Institute for Public Policy Research, and author of the Independent books, Priceless: Curing the Healthcare Crisis and A Better Choice: Healthcare Solutions for America.
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