Recently in The New York Times, Robert Pear highlighted the major problems with the Medicaid program. His findings reveal that having a Medicaid card in one’s wallet is of little use if it doesn’t give beneficiaries access to the care they need.

A woman with several herniated discs and pain in her neck and arms told Pear that her Medicaid card is “a useless piece of plastic. I can’t find an orthopedic surgeon or a pain management doctor who will accept Medicaid.”

Pear interviewed doctors and Medicaid enrollees in Louisiana and reported that access problems are systemic due to low provider payment rates. In fact, Obamacare makes this problem worse by preventing states from reducing program eligibility. This leaves states with the options of either cutting provider payments or slashing benefits. Oregon Governor John Kitzhaber is proposing a 19 percent across-the-board cut for Medicaid providers. These cuts represent a top-down attempt to control Medicaid costs that will only worsen the program and harm its enrollees.

Ignoring Medicaid’s problems, Obamacare expands the program to cover over 20 million additional individuals. Pear reports that Louisiana officials expect to enroll an additional 467,000 people in Medicaid, and the state estimates that 40 percent of individuals added to Medicaid’s rolls will use it as a replacement for private insurance. This “crowd out” effect on private insurance already exists: Dr. Kim Hardey, an obstetrician-gynecologist in Lafayette, said that many of his patients have jobs with private insurance but switch to Medicaid when they become pregnant to avoid premiums, deductibles, and co-payments.

Medicaid’s existing shortcomings may lead some to conclude that we need to spend more money on the program. However, the Centers for Medicare and Medicaid Services estimates that the U.S. spent $427.3 billion on Medicaid in 2010, a six-fold increase from 1990 ($73.7 billion). Medicaid is increasingly crowding out spending on other state priorities, such as education and transportation.

The fundamental problem that drives increases in Medicaid spending is the open-ended federal reimbursement of state Medicaid spending. The reimbursement rate is at least 50 percent, and it increases as state per-capita income decreases. Being able to pass at least half of the costs for the state program to federal taxpayers has led states to expand Medicaid beyond what is affordable. Over the past decade, this has led to three Medicaid bailouts, which only delayed the inevitable day of reckoning for irresponsible and unsustainable Medicaid growth.

Thus, we arrive at the great Medicaid paradox: out of control spending coupled with limited access and low quality of care for beneficiaries. President Obama’s solution was to expand Medicaid and temporarily increase the federal government’s share of Medicaid spending.

Real reform should consist of four pillars that move the program in the opposite direction:

  1. First, Congress should replace the open-ended federal reimbursement with fixed payments to the states to discourage unsustainable spending growth.
  2. Second, it should allow states the flexibility to tailor their programs to their individual populations and engage in experimentation and learning.
  3. Third, children, their mothers, and pregnant women should be transitioned out of traditional Medicaid and into a program of premium support that offers greater choice.
  4. Finally, eligibility for the program should be limited to individuals that each state determines are in need of taxpayer assistance.

By following this path, Congress could put Medicaid on a sustainable path while also improving quality of care for those it already serves.