Federal Medicaid Spending Would Plummet Under Ryan Plan

Today’s Managing Health Care Costs Indicator is $243 billion

There's been a lot of attention on the potential impact of converting Medicare into a voucher program. There's been a lot less attention to the Ryan proposal to convert Medicaid into a block grant program and limit the federal government's contributions.

The Kaiser Family Foundation Commission on Medicaid and the Uninsured has released its analysis of the Ryan budget plan – which shows that the Federal payment to states for Medicaid would drop by about a third by 2021 – a decreased transfer of $243 billion in that year.

Medicaid covers 60 million Americans -- about 1/3 of all children in this country, and 40% of births.    However, it also covers 70% of all nursing home residents, and pays for their custodial care, which is not covered by Medicare and which the frail elderly can rarely afford based on their savings. The elderly “dual-eligibles” on Medicare and Medicaid represent 15% of Medicaid beneficiaries, but 40% of total Medicaid costs.

There are a limited number of actions states can take to address increasing Medicaid costs.

1)     Decrease number of people on the Medicaid rolls.   That’s straightforward – but the problem is that the really expensive Medicaid members, those with disabilities, severe psychiatric illness, and nursing home residents, simply cannot be removed from the program

2)     Decrease payment to providers.  Medicaid payment rates are already egregiously low in most states, and they’ve been cut further over recent months.  Medicaid beneficiaries already have a hard time finding a physician, and this could get even worse.  Hospitals already state that they have to shift costs to employer-based health plans because of low Medicaid rates. This is a special issue in some service lines like maternity – where across the country Medicaid pays for a quarter of all deliveries.

3)     Better manage the care of those on Medicaid.  That’s not easy – since the most expensive Medicaid members are so complex, have so many simultaneous illnesses, and are cared for in fragmented systems.  State Medicaid programs tend to be administratively underfunded, and their ability to invest in health management programs is severely limited.

4)     Transfer the risk for Medicaid beneficiaries to managed care companies.  The managed care industry has developed some good models to better care for those with complex illness, and there are some very competent companies that can manage Medicaid “risk” contracts.  This means less choice for Medicaid members, as these plans have strictly limited networks. It means new marketing costs and sometimes the requirement for profit margins, so states should be very careful to avoid allowing managed care companies to “skim” the healthiest Medicaid members.  It’s always more profitable to cherry-pick healthy patients than to better manage those at high risk.

Notice I haven’t mentioned “administrative savings” as a viable approach to solving states’ Medicaid crisis – the administrative costs tend to be low.   Some states probably overspend on qualifying Medicaid beneficiaries – although it’s cheaper to throw someone off the Medicaid rolls than to keep paying their bills.

States are still reeling from decreased tax revenue due to the Great Recession, and many are making substantial cuts in their Medicaid outlays already.  Medicaid is a lynchpin of decreasing the rate of uninsured in the country; the Congressional Budget Office estimates that under the Affordable Care Act an additional 16 million Americans would qualify for Medicaid.

The federal leverage over states to expand Medicaid access is based on funding, and if federal funding is plummeting, Medicaid rolls will shrink rather than swell.  Hence, this decreased funding would lead to a dramatic increase in the uninsured.  These proposed cuts will have a a very high cost in disruption of medical coverage for the most vulnerable. As such, they are bad social policy. 

Read More

Census Data: Government Role in Health Insurance Grew in 2009

Click to enlarge

Today’s Managing Health Care Costs Indicator is 50.7 million

The census report came out yesterday, showing a distressing increase in the number of Americans without health insurance in 2009.  There were50.7 million uninsured Americans in 2009, 15% of the population.  The decrease in employer-based health insurance is even steeper than it appears, since the number of Americans on government insurance (Medicare, Medicaid and military) has grown sharply. The total number of insured Americans declined for the first decline since 1987, even while 5.7 million more Americans were on government insurance programs. 

These numbers understate the magnitude of the transition in health insurance.  For one thing, those who have insurance are likely to have less coverage than in previous years.  Those with $1000 or greater annual deductibles doubled in the last year.  Also, the census category  of “government sponsored” insurance doesn’t include government employees.   There are 2.5 million full time federal employees  3.8 million full time state employees  11.0 million full time local government employees   Assuming that the full time governmental employees get their insurance from their employer, and that no part time employees get governmental insurance, the percentage of those with governmental insurance goes up from 28% to 33%.  And that’s not counting another government health care expense -- the tax subsidy for employer-based health insurance, valued at $200 billion per year. Finally, last year those who had lost jobs were eligible for subsidies to purchase insurance (COBRA); these subsidies have since expired.  

The rise in the uninsured makes controlling health care inflation even more important.  Rising health care costs are directly associated with the rise in the number of uninsured.   Support for health care reform in the US has declined .  Support for universal health insurance could collapse altogether if we don’t rein in health care cost increases.  

Read More

Insurance Up, but Emergency Visits Up Too

Blog Note:

I’ve become a devotee of NPR’s Planet Money npr.org/money – which starts each podcast off with a number – and then dissects the implications of that number.  I think that’s a great idea – so today, I’ll inaugurate beginning each post with a relevant statistic.

Today’s Managing Health Care Cost Number is…..

9%

That’s how much emergency department use in Massachusetts has risen over the past 4 years.  The Division of Health Care Policy and Finance released this report at the end of June, and the Boston Globe reported the results on July 4.    The total number of ED visits in the Commonwealth went up to almost 3 million. 

Emergency Department Visits in Massachusetts, 2004-2008

Massachusetts has the lowest rate of uninsured in the country – so many figured this would help decrease emergency department utilization.

As Nancy Turnbull pointed out in the Globe, the rate of health insurance among Massachusetts residents has been high for some time. Therefore, the percentage of those going to the ED who were uninsured was low even before we passed health care reform – so any change in the number of uninsured was not likely to have a big impact on ED utilization.  ED utilization was increasing before health care reform, and the increase has continued unabated since we passed health care reform. 

The real problem is that there is a lack of access to less-expensive alternatives to the emergency department.  Many Massachusetts residents have a hard time finding a primary care physician. That’s especially true for healthy people who have acute illnesses and haven’t already developed a primary care relationship.   We’ll need retail clinics and non-physician providers (nurse practitioners and physician assistants) to create enough access so that ED rates don’t keep on going up.  We also need tools (like nurse lines) to allow patients to make the best decision about when it’s necessary to go to an emergency department.

Health care reform has improved access to health insurance in Massachusetts.  We now need to make substantial improvements to the delivery system if health care reform is to fulfill its promise.

Read More

“As Good as it Gets”: RAND's Evaluation of Health Care Reform Bill

RAND researchers Elizabeth McGlynn et al have used a microsimulation model to conclude that the health care reform bill signed into law did about as good a job of expanding coverage without increasing the bill (much) as we could reasonably expect within the confines of the real political world.

The researchers did a sensitivity analysis with multiple variables, including:

1)       Varying individual or employer penalties for not obtaining or providing health insurance.  Researchers found that lower penalties increased the cost of expanded coverage.  Increased penalties lowered the cost of increased coverage – but were not likely politically palatable.  

2)       Varying the threshold for Medicaid eligibility. If this is lower than the federal poverty level, the rate of uninsurance remains high.   If it is set above 133%, there is more ”crowd out” with members leaving employer-sponsored plans, which increases the cost to government.

3)       Varying the restrictions on increased costs for older enrollees.,

All modeling was done as if there was a single national exchange, and the researchers did not consider penalties collected (essentially discounted these at 100%).

The researchers also evaluated which scenarios led to the highest value for consumers.  Invariably, there was a proportionate relationship between government spending and value to consumers – so to reliably give more benefit to consumers, government spending would have to increase. 

In the graphic above, the origin (red square) is the health care reform bill as passed.  Area 1 represents less government spending AND more people insured.  It’s the smallest area – meaning the fewest of the simulations were here.  All of these were judged by the authors to be political non-starters,.  Area 2 is unequivocally worse outcomes – higher government cost with fewer new enrollees covered.  Area 3 represents more coverage and higher spending, while Area 4 represents less coverage and lower spending.  (3B and 3B represent better ‘value’ – in that there is less government spending for each newly insured person).

We all know what’s wrong with the Patient Protection and Affordable Care Act (PPACA).  We wish that its cost saving was more iron-clad, and we wish some of the benefits came more quickly. We are worried that some of the cost savings might be overstated.  Having said that, the sausage-factory that is Congress ultimately passed a bill that does an admirable job of increasing coverage and being prudent with taxpayer dollars.  

Read More

Selected URLs

I'm traveling - so not doing full postings.

A few articles of note

The Boston Globe reports that Harvard Pilgrim has identified which providers are paid the most for different services.  This is not risk adjusted - but the differences are far larger than you'd expect to be eliminated by risk adjustment.

The New York Times reports that more physicians are dropping out of Medicaid because of fee cuts.  The article also points out how difficult it is to care for Medicaid patients when many cash-strapped states eliminate vital benefits?  How do you treat a Medicaid beneficiary with an infected tooth when dental is no longer covered?  Not well, obviously.

The LA Times reports that the number of uninsured in California continues to rise rapidly - now approaching a quarter.  The issue of how to pay for health care for the uninsured grows larger by the day.

Read More

Those Who Lacked Insurance Are More Expensive When They Qualify For Medicare

Annals of Internal Medicine reports in the December 1 issue (now on the web) those with prolonged periods of uninsurance in late middle age have substantially higher Medicare costs when they become eligible for Medicare at age 65.    The researchers interviewed individuals in the early 1990s, and tracked most of them down after they turned 65 and ascertained insurance coverage history. They then procured and analyzed Medicare claims for each study subject.

The uninsured were, predictable, different than those with continuous insurance even at the start of the observation period. They were less white, had lower educational levels, had lower incomes and were more likely unemployed. They were less likely to be married, had more functional impairments, were more likely active smokers, and were more likely diabetics.   When this group turned 65, those with previous periods of uninsurance had more hospitalizations than those with continuous insurance, especially for cardiac disease and diabetes and joint replacement.

The authors calculate that while providing insurance for such enrollees would be expensive (almost $200 billion for four years that they were uninsured on average), the savings in Medicare from having these people insured prior to turning 65 might fund half of this cost. 

That’s optimistic. In fact, the group lacking insurance had such fundamental differences from the insured group at the outset that merely giving them insurance wouldn’t likely make their future medical costs equivalent.

Still, the authors demonstrate that the needs of those with periods of continuous uninsurance are real and large.  Those lacking insurance didn’t get treatment for their diabetes – and thus had more hospitalizations after they finally became eligible for insurance. The uninsured lived with the pain of “bone on bone” joints, and suffered unnecessary disability.

I am skeptical of the authors' conclusion that we could fund half of the cost of insuring these patients  from future Medicare savings.  I’m certain that the personal and societal cost of this delayed care is a substantial moral issue, and one of the reasons we miss many opportunities to deliver optimal care to Americans.

Read More