Be careful what you wish for

Charlie Baker is the president and CEO of Harvard Pilgrim Health
. This post first appeared on his blog, Lets Talk Health Care.

The show is
pretty much the same – every time. Public sector entity gets in budget
trouble, cuts have to be made, and providers who do business with the
public sector get hammered – hard. It’s happened with Medicare at
the federal level for years, and it happens with Medicaid at the state
level with some frequency as well.

Well, the show is back in town, as state governments face declining
revenues. In Massachusetts, the state is not only cutting Medicaid
payments prospectively – it’s cutting Medicaid payments for some
providers retrospectively – simply choosing not to make payments to
them they had planned on and expected.

I must say, each time this happens, I can’t help but wonder if the
hospital operators and physician leaders who think a single-payer like
Medicare For All is a good idea ever stop to think about how these
agencies deal with their financial problems.  When they have a problem,
they unilaterally whack their provider community hard – in ways private
sector payers would never consider.

And then those same providers who think Medicare For All is a great
idea turn to the private health plans they do business with and say,
“Hey – you need to help solve my Medicare/Medicaid deficit – which just
got worse.”

Sheesh. All I can say is, “be careful what you wish for.”

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16 replies »

  1. Treating the poor fairly
    Selling out of the Poor? What would Elmo say?
    Full Name: Wayne Berman Title: Vice-Chair; Finance Co-Chair; Adviser
    Over the course of three years, Berman’s lobbying firm was paid $660,000 to lobby on behalf of UnitedHealth subsidiary Americhoice, a managed care HMO providing health insurance to Medicaid, Medicare, and SCHIP recipients. Specifically, according to the lobbying report, they lobbied on Medicaid issues in the Deficit Reduction Act of 2005.[Americhoice Lobbying Reports 2004 – 2007; Americhoice.com ] Berman Also Lobbied For “Absurdly Low” Rates for Medicaid Managed Care Companies to Pay Out of Network Hospitals. Also included in the DRA, and mentioned as a lobbying issue on Berman’s Americhoice lobbying report, was a provision setting rates managed care companies must pay to out-of-network providers — mainly hospital emergency rooms — for care received by Medicaid beneficiaries. Rather than forcing managed care companies to reimburse out-of-network hospitals an amount comparable to network providers, the legislation set the default amount to the state’s “fee-for-service rate,” which often is “absurdly low.” The provision thereby shifted financial responsibility for services to Medicaid beneficiaries from the managed care companies to the hospitals themselves, permitting managed care companies to rake in huge profits, while hospitals incurred added losses.[Modern Healthcare, 1/29/07; Text of S. 1932] To Save Money, Bill Cut Services to Medicaid Beneficiaries, But Left Managed Care Providers Untouched. Under the final budget package, substantial Medicaid spending cuts were achieved by imposing new premiums and increased co-payments on Medicaid beneficiaries; some costs were also shifted to the states, who in return were awarded new powers to drop coverage or reduce benefits to certain beneficiaries. In a letter to Senate Majority Leader Bill Frist, the AARP CEO decried the final bill, saying it “protects the pharmaceutical industry, the managed-care industry and other providers at the expense of low-income Medicaid beneficiaries.”[Inside CMS, 12/29/05; Los Angeles Times, 12/22/05; World Markets Analysis, 12/21/05; The Hill, 12/20/05]
    The Players and whats up for grabs. Profits United Health Group 2010 $4.293 billion
    Here are some other 2010 budget numbers: Wonder what it cost CMS ( Can’t Manage Sxxx) to operate each year.$453 billion Medicare///$290 billion Medicaid ///$78.7 billion Department of Health and Human Services/// UnitedHealth Group Awarded TRICARE Managed Care Support Contract … Jul 13, 2009 … UnitedHealth Group Awarded TRICARE Managed Care Support Contract for more than $20.3 billion. BILLIONS awarded and still to be awarded United’s AmeriChoice unit is the largest government contractor administering state Medicaid programs for the poor and federally sponsored plans for children. AmeriChoice’s revenue rose 34% last year, to $6 billion. United Health Group and its subsidiarys must be exhausted from signing Corporate Integrity agreements each and every year and as reward for their violations well what happens? they are awarded more contracts and more money and maybe even an ambassadorship here and there and if anybody should question what the heck is going on, then send them a Elmo doll.(Americhoice sponsors Sesame Street) Up side, Billions to be made, down side pay some fines (cost of doing business) move on and nobody goes to jail or gets excluded from the game. Get up the next day put on your Elmo costume and its back to work as usual. WOW, even in the Casino world or Mob world this would be a no no, suprised Hollywood has not done a movie on this or maybe even great TV.
    The Government created this monster and now they don’t know what to do about it, like shooting yourself in your own foot etc.Tons of money to advance their national growth, its market positions, tons of money for political donations, tons of money to send 75 millon back to its home office from New York state alone, tons of money to suppot National TV shows, tons of money to pay hugh State fines, tons of money to hire the very best law firms, tons of money to pay for bribes and kickbacks, tons of money for hugh salarys and bonuses, all done on the back of the American taxpayor, you see this company receives all its money from the Federal State governments. Should your tax dollars it be held to a higher standard? Should the government agencys responsible for there review be held to that same standard? Should the IRS audit their corruption? Why has this company not been charged? How long can the buck be passed here in more ways then one?

  2. Peter, I would tend to agree, and I know from my own current personal professional situation (which is about to change) that inequalities create oversupplies in the affluent areas … I am currently not working at capacity (but still paid well) because I am in an affluent area where my MSG wants to expand, even though there is high demand for my specialty in other areas of the state …
    … but we should working getting the bottom up and neglect what the rich are doing because that is less important. If doctors get paid fairly when treating the poor (NOT medicaid rates), a lot of them will choose to do meaningful work (i.e. healing sick people and not be a concierge doc. If it turns out that there is a shortage because all doctors are battling to treat the wealthy (I highly doubt that), society should react to that. But the first step is to care for everyone, incl. those on the bottom and in the middle.

  3. rbar, in Canada the weathly/connected are also able to get better/faster care – but that’s doing the system work-around, not because there is a special system for them. I agree that making sure they contribute their share (whatever that ends up being) will provide funding to the rest, but they will drain resources that could be shared more evenly. Here in the U.S. we could use more of the European mentallity of shared community. We are also not talking about care for the poor, but for the middle income sector as well. Watch how fast in this country Medicare for all will turn into Medicaid for all – while the “rich” get better and better care and resources under the disguise of “choice” and, “I pay my share of health taxes”. I don’t care if the wealthy set up their private cosmetic dermatology clinics as I don’t see that as healthcare, but I don’t think they should be able to set up their own concierge cancer treatment hosptials as well.

  4. Peter, I used to work in Germany which is fairly egalitarian, at least in HC matters. If you have a rich and/or famous person in your hospital/office, or just a patient of somewhat higher socioeconomic status, they almost always got slightly preferential treatment, even if the payor was the same. At times, they received more tests than necessary, which is the downside. This has to do with people of higher socioeconomic status being better able to claim their rights (succesfully complain if necessary), the narcicissm of treating and pleasing the more powerful, and also the fact that many (but not all) have private insurance which does pay better. There is always a degree of that. But in germany, everyone had reasonable coverage.
    In the US with, if I recall correctly, hundred thousands of millionaires and hundreds if not thousands of billionaires, there will be considerable inequality for the foreseeable future. But as long as the poor get reasonable care for serious illness, I don’t care that the rich are waiting (up to 5 minutes) in carefully designed rooms for their cosmetic dermatology. As long as they are progressively taxed for the basic supply.

  5. rbar, I think you’re too optimistic about a 2 tier system working in the U.S. It’ll end up being Medicaid for most. I’m not in favor of controlling the rich, but I won’t set up a special system for them that will bleed the rest of us of good care.

  6. I wrote a post on my own blog – which was actually picked up by this blog – called “Health Care and the Presidential Campaign” in which I outlined the three or four things on which I thought political and policy common ground could be found in 2009 and beyond. I think that post – which was designed to capture some of the common themes I’ve heard rattling around in the reform arena – is consistent with a number of the comments listed here today.
    I won’t repeat what I said in that post except to say that I believe BIG reform is very difficult to do, and virtually impossible to do well, and that focused, but important reforms in existing programs and operations can make a really big difference. And as several people noted, I also think we have to get serious about collecting and publishing data on health care cost and quality – another topic I’ve talked about for a long, long time.

  7. Please ignore the parenthetical remark “(removal of payer profits).” The 3-10% reduction relates to removal of admin costs from our current, uncoordinated multi-payer system while the the 1% reduction refers just to the net income of private payers (for-profit and not-for-profit). I would go through the calculations again, but those who know the system well understand where they come from.

  8. I think the misunderstanding extends to advocates outside healthcare as well. They often are convinced that payer profits and administrative costs are the bulk of our cost differential with universal health care systems, so that once we get single payer that almost by itself will align our costs and reduce expenses by 30% or more. As you know, the reality is nowhere near this number. Improvements in administrative efficiency (the removal of payer profits) can bring a reduction in total health care costs of somewhere between 3% and 10%, while the elimination of private payer profits will remove about 1% of cost from the system.
    The real savings from universal health care systems comes from the discipline imposed by global budgets financed by tax dollars (as ironic as that may sound given recent American history). This is a point Matt has made many times. And as you point out, Charlie, the bulk of the savings is going to come directly from the operating revenue of hospitals and other provider organizations. It simply has to. That, by the way, is true whether we have a single-payer system or a multi-payer system and our goal is to “normalize” our costs to approach those of other national systems.

  9. Charlie – I missed your “about” link on your page, so I didn’t know that about your career.
    I appreciate that some of these programs are dysfunctional – but they’re designed that way. Your example of coordination (or not) between Medicare and Medicaid is troubling, but also begs the question of my comments – why do we have two programs in the first place?
    You seem to be saying that problem is fundamentally political, and therefore more or less intractable. But most of everybody who advocates for single-payer or universal care thinks it will take a massive political effort. It’s not at all clear why you think such a massive change wouldn’t be able to address some of the problems you’re pointing to.

  10. I think a two tiered system would be fine as long as everyone pays into medicare, and that madicare can guarantee a reasonable standard of care … the very wealthy always get some degree of extra attention and treatment (at times to their disadvantage), and thus will stay that way.
    There is no doubt that medicare needs reform, and that we have to address overtreatment and practice variation. A strong nationwide system interested in effective care (not profit) of its members is the best way to handle this.
    It is funny that the free market advocates and the McCain campaign advocate: with our plan, no one will between he doctor and the patient. And this after we all know how HMOs and insurance companies work, with preaapproval, denial of services, exclusion of preexisting conditions, complicated drug copay lists etc.
    Charlie seems to be critical of medicare and medicaid playing stronger roles … but I don’t feel he has any suggestions on how to fix the current mess (if so, I would be curious to hear/read them).
    Tinker with the medicare fee schedule, namely slightly enhancing primary care and greatly (but in a stepwise fashion) taking away from proceduralists … and educate both the medical community and the population about overtreatment and practice variation … and make sure that doctors don’t feel that they have to order every possible test to cover their behinds (malpractice reform). I think that would work. And under ideal political conditions, one would: Stop medicaid, offer medicare for all instead.

  11. Charlie, are you just concerned for the docs or is your privider cuts comment also for device makers, supply companies and drug companies? If you are speaking about unilateral cuts to docs then I agree with you, but the, “avoid paying for the full cost of their own beneficiaries” comment seems to imply that docs are the only ones that know what their service should be valued at – the way they’ve advocted for years in their quest for imposition of guild rule. In Canada reimbursements to docs are negotiated with an eye on budgets (tax money), and there, there is a realization that healthcare is not just another product on the shelf for sale to the highest bidder. If we are to avoid financial meltdown for healthcare then a new mindset needs to happen. Docs are going to have to come to the table with a more universal view of healthcare for all -with constraints imposed by budgets. The proof of single pay (or variations of it) is in other world systems where it is still a struggle, but a better managed one.

  12. DX – And in response to your first point about the LA Times article, I would point out – again – that the markets in which disputes between payors and providers run hottest tend to be ones in which health plans have consolidated. As a result – and I’m paraphrasing the authors here – providers (and probably employers and members) don’t feel like they have a lot of options to choose from when disputes over what’s covered and what’s not arise. I wonder if this isn’t exactly the scenario that would play out under a single payor.
    As someone who has also served in MA state government as Secretary of Health and Human Services and as Secretary of Administration and Finance (sort of like OMB), I am well aware of the shortcomings of Medicaid and Medicare, but I don’t blame it all on our unwillingness to step up financially for disadvantaged populations.
    Some of the problem – maybe a lot of it – is due more to the political difficulties associated with making forward looking changes in either of these programs. Look at the terrible job Medicare and Medicaid do of jointly serving (NOT) low income seniors who qualify for both programs. This uncoordinated, unmanaged, wildy expensive free for all has been a source of acute embarrassment to policymakers at both the state and federal levels for years, but nothing has been done to deal with it.
    In the end, physicians and hospitals may decide that the public sector option is the best of a set of bad choices – but if they expect public payors to suddenly alter years and years of poor decision making and bad behavior, I think they’ll be very disappointed.

  13. Charlie – I’m again going to point to the LA Times article about private payors not paying bills, but I’m aware that you responded on your own blog.
    That said, I think you’re being a little insensitive to your patients. I realize you’re writing mostly to fellow docs – but this isn’t about not paying doctor’s bills, it’s about not paying for poor people’s care. Our society – and our leaders – always find it easier to skimp on poor people. That’s why Medicaid is such a shambles in most places – when there’s a budget crunch, the poorest (and sickest) are easy targets. You’re right to complain that Medicaid payments are being cut, but I think wrong to generalize it to a single-payor system (much less a more modest system of universal care).

  14. Peter – I’m not suggesting that everything, and everyone, in the private sector is grand. I’m simply stating that public entities like Medicare and Medicaid use the presence of private payors to avoid paying for the full cost of their own beneficiaries, which should give providers some concerns about what life in a Medicare For All world might be like.
    Second, if the problem is over-utilization (and I agree that that is a big part of the problem), why do we/they think that Medicare – the ultimate Fee For Service / Drive the Volume / Pay for Technology but not for Time Payor – is the best answer? In fact, many of the most bizarre incentives to over-treat with some technologies and under-treat with others in today’s system are a direct result of Medicare payment policy.
    I’m hardly a defender of the status quo – but I think the Medicare For All crowd is latching onto a simple solution that comes with a huge number of very real and unanticipated negative consequences.

  15. “…in ways private sector payers would never consider.”
    Cutting provider payments is also the method used by the private sector. For years the big three auto companies have enforced reductions to their provider prices. I know, because I was at command performance supplier meetings where GM would impose a 10% cut to anyone still wanting to do business with them. The private sector also cuts their labor providers through staff cuts, early retirement, bonus cuts and out-sourcing. I don’t agree with this approach to healthcare in this politically monied “system/non-system”, but how else do you force efficencies from providers, how else do you rein in cost increases of 6% -10% per year? Single-pay for all is still the best way to provide healthcare at controllable costs, and providers will have to get used to actually reducing costs instead of adding them on. This is why a two tier health system will not work, because the money will increasingly flow away from the public budget cutting system to the better profit private system. It always comes out in this blog that one of the biggest cost drivers we have is over-utilization, so I guess these cuts will somehow find the right utilization.