Is North Carolina Medicaid the Healthcare Industry’s Solyndra?

North Carolina Medicaid recently reported, for the third time, using a third consulting firm, the achievement of massive savings through its patient-centered medical home (PCMH) program, now called Community Care of North Carolina (CCNC). Among other things, CCNC pays the physicians more money in order to encourage and compensate behaviors and processes, including enhanced access to care and case management, to hopefully reduce the need for emergency and inpatient services. (A brief summary of this and past consulting reports appear in the current issue of Modern Health Care. http://www.modernhealthcare.com/article/20120218/MAGAZINE/302189938/1140)

However, the third time is not a charm. Notwithstanding these consultants’ reports — which paradoxically support my contrary conclusions by choosing to ignore the overwhelming data contradicting their own claims – the program is a total failure as far as reductions in cost and inpatient utilization are concerned.

Fact #1: According to the Medicaid and CHIP Payment and Access Commission (MACPAC) report to Congress http://www.macpac.gov/reports, North Carolina is by a significant margin the highest-cost state per capita in its region for adult and for child Medicaid spending. These are the two categories in which the PCMH has been in place the longest. In the “aged” category, in which PCMH had barely been started when the MACPAC data was compiled (and would not affect medical costs noticeably because the state is a “secondary payer” following Medicare, and most Medicaid “aged” spending is custodial anyway), North Carolina is the lowest cost state in the region.

Further, North Carolina is high-cost only for its <65 population covered by Medicaid: according to the Commonwealth Fund, commercial coverage (premium + annual deductible) costs only slightly more than the average for the region. http://www.commonwealthfund.org/Publications/Issue-Briefs/2011/Nov/State-Trends-in-Premiums.aspx

Fact #2: None of the originally projected and subsequently claimed utilization changes are discernable at all in the statewide Medicaid data, let alone on a scale (perhaps 40,000 – 50,000 avoided admissions avoided/year out of 240,000+) required to save the claimed billions. From 2000-2009 (complete calendar 2010 data is not publicly available yet), even as more and more members were enrolled in the PCMH to avoid more and more admissions, the total admission rate for North Carolina was basically unchanged, almost exactly paralleling the experience of low-cost South Carolina, which uses a classic managed care model. South Carolina enjoyed a slightly lower admissions rate in each year, with an even better absolute and relative performance as the decade drew to a close. (Despite the large amount of data for South Carolina, the consultants didn’t use it or any other state as a control for North Carolina.)

Fact #3: Looking at the subcategory of ICD9s comprising the two largest categories of admissions in which the PCMH focused for most of the decade — asthma and diabetes — the same result held true, vs. South Carolina.

Fact #4: Likewise, looking at the subcategory of ICD9s comprising the AHRQ’s list of preventable admissions, the same was true.

Fact #5: “Preventable” is a term of opinion, not science, so that reasonable people may differ on what gets counted in that category. For the purposes of PCMH-preventable (as opposed to wellness program-preventable, for example), let’s define a “preventable” event as (1) a fairly common event (2) that is generally diagnosable and treatable, (3) where early access/intervention makes a major difference, (4) where many of the events are complications of a chronic condition whose management is already being emphasized, (5) where patients don’t have to change their lifestyle but rather just take a pill, and (6) where you don’t need to wait years for results. Perhaps the event most fitting those criteria would be cellulitis. Cellulitis admission rates increased by almost exactly the same percentage over the decade in both states. That was actually a slightly better performance for North Carolina than in the other three comparisons, in that they didn’t do worse than South Carolina.

To summarize the facts, there was no utilization change attributable to the program, and the increased costs of the program apparently cause or at least contribute to North Carolina’s status as the high-cost Medicaid state in the region specifically only for the Medicaid member categories most affected by PCMH.

Yet three well-known and highly taxpayer-compensated teams of consultants arrived at the opposite answer. One might ask, how did the consulting teams refute, address, distinguish or interpret this same data the opposite way, to conclude that billions of dollars were saved over the decade?

Rather than refute the data, all three consulting firms – Mercer, TREO, and Milliman – elected to omit the above data from their reports altogether, without a mention. In other words:

(1) They concluded that North Carolina had reduced its cost substantially without mentioning the federal data showing the relative cost position of the relevant population to be the highest in the region; (2) They concluded that Medicaid inpatient utilization trends had declined substantially without mentioning the federal database of Medicaid inpatient utilization trends showing the opposite.

Because both data sources are in the public domain, readily found and widely used (the AHRQ database from which the utilization statistics are derived is at http://hcupnet.ahrq.gov/HCUPnet.jsp ), one interpretation might be that omitting them implies these consultants know full well their conclusions are unsupportable.

The other interpretation would be that they didn’t know about these databases, though they are well-known to population health outcomes experts, which they held themselves out to be. Also, there had already been a well-publicized presentation by Mathematica on applying this data to North Carolina http://www.ehcca.com/presentations/MedHome20100526/peikes.pdf as well as several other reports saying exactly the same thing, including from the Kaiser Family Foundation http://www.kff.org/medicare/upload/7984.pdf.

What did these consultants do instead? Rather than look at the definitive databases of statewide utilization and cost, they used complex analytic models mostly to find outcomes that any trained observer would immediately conclude to be mathematically and epidemiologically impossible. For instance, Mercer found that the majority of the state’s dollar savings came from infants, a 54% reduction in overall costs in that age category.

This is blatantly wrong four ways, any one of which would be sufficient to reject Mercer’s 54% reduction finding:

(1) A 54% overall reduction in this age bracket would require a mathematically impossible >100% decline in neonatal utilization, since nothing else would be expected to change much;

(2) Mercer never analyzed neonatal utilization to find out whether it even came close to supporting their conclusion;

(3) It didn’t — neonatal utilization in reality was essentially unchanged, according to AHRQ data;

(4) According to the other consultants (Milliman), babies were not enrolled in CCNC in any case, meaning any savings from that category (there were none) would not have been attributable to the program.

Milliman found an overall savings of 15% for adults and children. Since admissions consume no more than half the total cost of adult/child Medicaid spending, and, as Milliman correctly points out, the savings are all in inpatient and ER (ER being a much smaller cost category in which – you guessed it – North Carolina’s utilization still exceeds South Carolina’s), that overall 15% decline would require about a 30% reduction in admissions. Since preventable admissions account for only about 10% of all admissions according to AHRQ, preventable admissions would have needed to decline by 300% (actually a bit less because some people are still not in the CCNC) in order to achieve this 15% overall decline. A 300% decline in anything is mathematically impossible, of course, but preventable admissions didn’t decline at all in any case. Nor did non-preventable admissions.

Two consulting firms, two mathematically impossible answers, two ignored federal databases supporting a contrary conclusion. (The TREO work is omitted for space reasons, but is also unsupportable.) These firms, in the immortal words of the great philosopher Ricky Ricardo, have a lot of ‘splaining to do.

But they’re not. Mercer has never addressed the issue of its impossible findings. Milliman was invited to next Sunday’s presentation of this data at the Thomas Jefferson University conference http://www.populationhealthcolloquium.com/agenda/bookclub.html#miniprecon. They declined, telling Modern Healthcare that they didn’t want to pay the $195 admission.

I then both publicly and privately (and with uncharacteristic grace) offered to finance their travel expenses plus pay them $2000/day to successfully defend their taxpayer-financed study, for which they were already paid more than I make in a year and for which they had access to the state’s data, against my own spare-time observations made without any proprietary state data. They declined again. I guess it wasn’t about the $195 after all.

Finally, how is this program “Medicaid’s Solyndra?” Just like with Solyndra, the federal government is making a “bet” on one project, heavily subsidizing this model, with a 9-to-1 match. The result is the same as Solyndra, except that North Carolina Medicaid will never go bankrupt because it can always get more funds from the state legislature, multiplied by Washington.

Some might cite this example as the poster child for block grants for Medicaid, while others might say in general that consulting firms to evaluate Medicaid outcomes should be hired by the state comptroller’s office rather than the department overseeing Medicaid. If nothing else, this case study suggests that allowing any state agency to hire consulting firms at taxpayer expense to justify its programs creates an inherent conflict of interest, especially when increased program expenses can be passed on to Washington.

One logistical point: The nature of a posting like this is that squeezing in all the exact information is impractical. Therefore I would ask the Usual Suspect THCB commenters who, being beneficiaries of PCMH, intend to defend the consultants’ impossible findings (and defend their choice to omit contradictory data) and, by implication, the lucrative PCMH model, to hear the entire presentation before commenting. Either stream it or show up in person at Thomas Jefferson University’s PCMH conference. Then you can get right on the permanent electronic record with your objections after seeing all the slides. Since the state’s consultants are not, as of this writing, intending to come defend their client on my nickel, you can do it instead on your own.

Al Lewis, widely credited with inventing disease management, is author of the forthcoming Why Nobody Believes the Numbers (John Wiley & Sons, June 2012), the introduction to which may now be downloaded gratis from www.dismgmt.com. He also runs the popular course and certification program for Critical Outcomes Report Analysis http://www.dismgmt.com/certs/cora/self-study and was named the “leading authority on care management outcomes measurement” by the 9th Annual Report on the Disease Management and Wellness Industries (Health Industries Research Co., 2010).

31 replies »

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  3. If you’re referring to the one I’m looking at, Milliman’s, they haven’t retracted it, but they might as well have. In order to defend their findings upon request by the American Journal of Managed Care, they ended up directly contradicting their own report (as well as contradicting JAMA).

    THe AJMC article should be posted to their site 8/20.

    CCNC, by the way, is/are a very well-meaning group of folks with a fine program as far as patients are concerned. if I were in Medicaid and could choose any state’s program, I would choose theirs. BUt that doesn’t mean it saves money,

  4. Would be interested to hear your comments on the recent study posted to Community Care’s website that looks at utilization patterns between those enrolled with Community Care and those not enrolled. Thanks!

  5. I am so in line with many of these posts and do agree that the fraud and waste in Medicaid spending is way out of control but being in the health insurance industry for over a decade in NC, I meet people weekly that are hungry, not taking meds that health conditions require for a quality of life and the drive home is very sad.

    I focus on the senior market and many of my clients don’t qualify for Medicaid by a few dollars in monthly income but can’t afford the things we need daily. What is the answer to help these people who really need it and control the fraud and miss use of our tax dollars? Many NC counties have programs that help with medical expenses and medications for people who don’t qualify for Medicaid. These programs aren’t paid by Medicaid funds and really do help people in need.

    If you know anyone who may be in this situation and they would like to learn more I would be glad to help anyone who needs help and doesn’t qualify for Medicaid benefits. I truly feel for such people and don’t have all the answers but would be willing to share information or help in any way. You can find more information about my agency as well as contact info at http://www.defusoinsurance.com.

    Geoff DeWitt

  6. Once again, I would strongly urge you to buy the book — there is 25 pages on this topic. NC does cover more patients, but the whole analysis was done PMPM so that would wash out. And the cellulitis was what we woud refer to as a “plausibility indicator,” one of many confirming analyses in support of the main argument that the savings were made up. And even if the two states both did an excellent job (they didn’t — admissions went up), SC did an excellent job at a far lower cost.

    Another of the observations is that they never bothered to disclose the baseline or benchmark against which the savings are measured. Was the baseline a year? Another state? They never said. In life, quite literally every time someone says they saved money is vs. something, like a retail price, an asking price, the last sale, whatever. You can’t save money without knowing what you saved money versus what you woud have spent. They never said. I don’t think you coud find a study in the literature where savings are claimed without some clear comparison group or baseline period.

    They made so many obvious errors that In my seminar someone asked me whether I thought the consutants were dishonest or just incompetent. My view was that they had to be dishonest because no one could have made all these mistakes that all went in the “right” direction by accident.

  7. Thank you for the reply.
    I apologize on what might seem to be splitting hairs on a dog. Until implemntation of ICD10 and extensive use of EMR (which would rely on the MDs judgement for underlying cause) there isn’t a way to tie cause of admission for cellulitis to progressive T2 diabetes (T2D) using diagnostic coding. So admission rate for cellulitis could also be attributed to increase (or lack of treatment) of PAD rather than T2D in the given population. T2D is also growing in both state service medicaid populations but NC covers more lives. That might be evidence that both states are managing T2D populations relatively well but NC having the larger challenge of more patients to cover which costs more. My statistics professors said on the first day “Statistics lie and I have the numbers to prove it.” The take away point was to get agreement on how to measure results before implementing the analysis. I recognize that this example was only part evidence supporting the claim that CCNC results do not present all relevant data.
    The article posits CCNC is a political payout and there are parties colluding in order to gain political power or some financial incentive contrary to the wishes of tax payers. There is little disageement that if the mandated to provide healthcare for any population holds (and it doesn’t look like either Medicaid or Medicare are going away) then the future costs will grow to an unreasonable percentage of the state’s budget. It seems there is just disagreement on how and what data to use to analyze outsomes with the devil being in the details of determining avoidable costs.
    In your opinion what would be the best model to reduce healthcare costs under the Medicaid mandate and recent PPACA ruling?
    I do appreciate the discussion.

  8. Hi, Wookie,

    Actuallly, this one was a layup to assess. The full monte is in my book, available on Amazon, called Why Nobody Believes the Numbers. Specific answers to your questions:

    (1) PCMH does not address hospital contracting so IP cost is irrelevant to this analysis. The idea was to keep people out of the hospital, which they failed miserably at.

    (2) Many comparisons of admissions for various diagnoses were made, both to NC historically and to SC compariatively, and are described in my book — acute admissions for the two conditions they focused hardest on (asthma and diabetes) showed no change. SC did a tad better.

    (3) Cellulitis is an excellent example. It is often an acute complication of diabetes, one for which (for many reasons) hospitalizations should be avoidable, but NC and SC tracked exactly the same.

    There are also many other things which I found after this article that are in my book. For instance, they claimed savings in chidren’s admissions far in excess of the amount spent on children’s admissions…and the children’s admission rate basically didn’t budge anyway. So that claim — Milliman’s major claim — was impossible two different ways.

  9. I understand the limits of space to divulge the data used to support conclusions. Please elaborate. The article compared NC and SC rates of admission and absolute utilization of resources as basis. Rate of admission can be neutral and still have cost savings if the cost of treatment of is lower. Was this addressed? Is there data comparing NC to SC of cost to treat?
    As stated in the article, cost avoidance is difficult to assess. Sited cellulitus example refelcts an acute hospital admission. Typically PCMH focuses on managing chonic diseases (e.g. type 2 diabetes, asthma, etc.) Acute inpatient admissons are not charactereized by chronic disease but by acute episodes resulting from disease (e.g. hypoglycemia, respiratory distress, etc.). Can you clarify the example please?

  10. I knew it would only be a matter of time before I got attacked personally by one of hte state’s shillls. (Welcome to the Blog, by the way.)

    First, Amerigroup didn’t pay me a penny to write this — I do this type of analysis to provide examples for my course (and book) in Critical Outcomes Report Analysis, and to offer to members of my organization. Amerigroup — along with many other states and health plans and large employers — joined my orgnazaition many years ago to learn about valid metrics. No surprise: North Carolina Medicaid didn’t. And while the leading consulting firms (Bain, BCG and McKinsey) take full advntage of my services and resoruces, the third-tier consulting firms don’t.

    Second, I guess you believe that Millian, which curiously overlooked the many “smoking guns” to the contrary when teasing out their “findings” to justify their high taxpayer-finaced fee, did not have a conflict of interest and that the state would have been perfectly happy with the correct finding that they’ve wasted their money on high provider fees at taxpayer expense.

    And finally, I just proved that the consulting firms’ conclusions are false. Let me explain to you the way a proof works: It settles an issue uless it contains a mistake. Math is not a “he-said — she said” discipline. It’s a proof-based discipline.

    Therefore my proof ends this discussion unlss you can find some combintation of ICD9s or DRGs where these 70,000 admissions were avoided. Iroincally (again0, the best way to learn how to do that is by taking my course, which no one connected with this project ever has.

  11. Two points from a person who lives in NC.

    First, as someone who has advocated for poor people on many issues including the NC state budget for a long time, every state budget I’ve dealt with since at least ’05 or so has contained a substantial cut to NC’s Medicaid program relying on savings from CCNC. That’s just a fact – NC budget writers have built actual CCNC savings in the millions of dollars into the actual NC state budget for years.

    Second, Mr. Lewis’s company receives money from companies like Amerigroup. See http://www.dismgmt.com/sample-full-members.
    Last year I watched Amerigroup actively solicit the NC General Assembly to take poor people getting Medicaid out of CCNC and pay Amerigroup to manage their care. So, it’s a bit much for Mr. Lewis, with financial support from a competitor, to criticize CCNC.

  12. Always thought-provoking. I appreciate your perspective and willingness to bring interesting and often-times controversial issues to light. Thanks for the post.

  13. Good questions. First, it’s Obama because the Dems are the ones who are subsidizing it now. Solyndra also existed before Obama came along. (I’m a Democrat, by the way. But that doesn’t mean the President can do no wrong.)

    Second, I’m not sure the consultants are actually lying. First, for Mercer, mathematical impossibility is just a speed bump. They found savings for Georgia Medicaid in disease management that equated to about a 500% reduction in avoidable events for the portion of a population that typically engages with DM. Impossible enough, but then a federal investigation revealed that the vendor in question hadn’t actually done anything and had to return its fees. And, by the way, avoidable admissions ticked down by only about 2% over the period.

    Milliman, I’m not so sure. As experts in the field, they obviously knew about the databases in question (or else as non-experts they should have been charging much less or doing this pro bono to learn the business). And any google search would have revealed multiple hits on Mercer’s failure to use this database for its NC report.

    I suppose it is possible that Milliman outsourced this project to their Beijing branch, that didn’t have access to Google 🙂

    Also, they did just tell another fib to Modern Healthcare in which they said they weren’t coming to Sunday’s session because they needed to pay, and then when I offered to pay them $2000 for the day plus travel, they still declined, thus directly contradicting their convenient excuse from 24 hours earlier.

  14. Yes, the NC CCNC is a boondoggle, but what does it have to do with Obama (it was launched in 2001)?

  15. It’s worse than Solyndra because it appears that there is actual lying going on. Obama is lucky that the Republican candidates aren’t reading this posting and that their constituents (present company excluded) would have too short an attention span and too low an IQ to understand it anyway.

  16. “Who the hell are some of you doctors really advocating for anyway?”

    If you read my posts, you would see that I said nothing advocating for either the ACA or the NC PCMH program.

    My not-so-subtle point is that these are two very different entities, and to lump them together as you did, either to criticize or praise them, is inaccurate and not useful.

  17. Nate, a clarification. I don’t want to overstate the case. As Oscar Wilde said, no need to cheat when you hold the winning cards. The 9:1 is not for all of Medicaid, just for the extra expenses in the PCMH itself.

    not to disparage your point but just to keep the data straight.

    And, yes, misdirected federal spending with no market check-and-balance is worse than no spending. The USSR spent a ton investing in its industries — a much higher % of GDP than the US — but lacking a market mechanism they were the wrong industries

  18. Wow, dismissing someone just because you either don’t see a correlation, or, you don’t want others to realize a correlation makes you higher and mightier. Like, a page right from Current Occupant of the White House play book, eh?

    Do as they say, not as they do. Doesn’t anyone who is concerned with the spiral downwards that health care is taking want to take a stand?

    Who the hell are some of you doctors really advocating for anyway?!

  19. “Umm, isn’t PPACA modeled to a sizeable degree after Medicare and Medicaid?”


    “And isn’t North Carolina one of his (Obama’s) favorite states to crow about championing his causes?”

    No. This disastrous reworking of North Carolina’s Medicaid program started years before the PPACA was passed.

    Your posts make no sense at all.

  20. Umm, isn’t PPACA modeled to a sizeable degree after Medicare and Medicaid? And isn’t North Carolina one of his (Obama’s) favorite states to crow about championing his causes?

  21. “Finally, how is this program “Medicaid’s Solyndra?” Just like with Solyndra, the federal government is making a “bet” on one project, heavily subsidizing this model, with a 9-to-1 match.”

    9 for 1 return, I’m calling my representatives right now asking why we aren’t getting a deal like that. I would think under any tax structure(Income or Sales) the state would have to come out ahead in this.

    Healthcare spending tends to stay local due to high labor cost. Any dollar spent on healthcare compared to say foreign oil or TV multiples GDP 10-15 times. 9 Federal dollars turned over 10 times is 90 for 1 State GDP growth.

    Almost makes one think federal spending could potentially have adverse affects.

  22. What does this have to do with the PPACA?

    This is about the disastrous PCMH scam, which primary care docs voluntarily inflicted on themselves, and subsequently sold to insurers and government agencies.

  23. Really, and all the PPACA supporters want the populace to believe the legislation is sound and wonderful based on their choir boys and girls who are paid to say so. When does the Selfishness, Arrogance, and Denial show what it is, just plain SAD?
    My only agenda is helping others help themselves to better and sustained good health, I gain nothing personally or financially in fighting the implementation of this law. Well, I do gain back my autonomy, but who wouldn’t want that?

  24. As a thirty year ED doc in NC I can tell you there is nothing but waste in all Medicaid spending. The benificiary has no skin in the game, so they gorge at the trough. These are not poor starving people. These are people playing the good-hearted tax payors for suckers.

    But they all vote.

  25. The Federal subsidization plays a strong role in masking the tax-payer outlay, therefore no one in NC ‘wants’ to hear anything other than how successful this is. If true, certainly these consultants are no different than S&P etc. telling the world what a good bet mortgage backed securities were. Assuming that these consultants are paid with State funds allows investigation by the NC Atty Gen’l IF they have the political guts. Won;t hold my breath for that though.

  26. The really sad part is that this tax-payer financed farce has gone on so long – and is now being touted as a solution for other states. I am sure that NC residents and government officials have other priorities for their tax dollars — and would choose to fund those priorities over the most expensive (per capita) Mediciad system in the country.

  27. I use that AHRQ database in my analyses too, in my case to determine trends in commercial utilization (and I am a “follower” of Al Lewis and got the idea from him). If there is a problem with it that makes it so bad that consultants won’t use it, or even cite it, they need to tell us what the problem is, here and now!