Organizational structure and budget uncontrollability in health financing

This paper reviews the federal role in health care financing and explores the implications of budget uncontrollability on fiscal policies in the health area, both at the federal and state level. After a review of organizational structure and the evolving federal role in health care with a focus on those programs involved in direct delivery or purchase of care for individuals, the paper explores the way in which entitlement programs have operated and their impact upon the federal budget. Focusing first on the Medicare program, the federally funded and administered program to provide health care to the elderly and the disabled, the paper reviews the impact of rising costs and attempts in the 1980’s to control one portion of the costs of these programs hospital costs, via a major change in reimbursement strategy. Next the paper explores linkages between Welfare, Medicare, and Medicaid programs in the U.S. Medicaid is the jointly funded and administered state-federal program to provide health care to the categorically poor and other poor in the United States. Lastly, the paper explores the issue of budget uncontrollability from the state perspective. This includes a discussion of tensions between two different groups of recipients (the traditional poor composed of mothers and children and the elderly poor), an illustration of how difficult it can be to predict the impact of federal level changes on a state and how such changes can be mandated by legislative change at the federal level, and a discussion of ways in which the Medicaid program may be reformed in the next few years to at least help to rationalize some of the issues of federal-state conflict.