BY GEORGE HALVORSON
When the Affordable Care Act was passed, the politics were so intense and the debates were so filled with rhetoric in all directions that most people actually didn’t understand that there were three major component parts to the strategy and program that function very directly as a package, and should be looked at now in the context of several years of implementation to see how each part of that law is currently doing.
Medicaid was our first priority.
The first component part — and the one that had the highest need for passage when the law was passed because we were doing such a horrible job as a country in providing coverage to our children and to our low-income people — was Medicaid expansion.
We were the only country in the industrialized world that did not have health care available to our low-income children, and that deficiency damaged so many people and was so terrible as a reality that we needed to correct it as soon as we could.
That program is on the right track.
Most states have now used the full Medicaid package and we now have a total of 90 million people enrolled in Medicaid. About 41 million of the members are in the CHIPS program, and a majority of the births in a majority of the states are now Medicaid births.
The states have all used a number of modern care improvement tools to provide and deliver significantly better care than the old Medicaid programs that are far too often delivered to their beneficiaries.
A small number of states have not done the full Medicaid expansion for their own political reasons, but it’s increasingly clear that the voters in most of those states want it to happen and it’s only a matter of time before we see more states going down that path. It makes so much sense for our low-income people and it stabilizes both hospital and community care in many settings, and that’s good for everyone in those settings.
Our second major agenda for the Affordable Care Act was expanded insurance coverage for working adults.
We eliminated pre-existing condition exclusion policies and we removed some underwriting restrictions from the insurance world, and then we functionally set up relatively affordable insurance exchanges in every state to enroll our working people in coverage.
We had 46 million uninsured and uncovered Americans in those categories in 2010, and we are down to about 27 million uninsured adult Americans now. That is far better and it’s a trajectory we will continue to improve. It isn’t a perfect response, but it has done extremely good things for millions of people and we should consider that to be a successful program.
The third major leg of the Affordable Care Act was to become a much better purchaser of Medicare benefits — moving people from the care failures and the far too extensive care delivery deficiencies of fee-for-service Medicare to a capitated Medicare purchasing program that both improves the quality of care and reduces the cost for both the government and the patients.
The law cut the payments to the prior Medicare Advantage plans significantly and it has put in place a very intentional and well-targeted quality and expanded benefits agenda that has now shown the ability to both improve care and to make care more affordable, widely, for growing numbers of Medicare patients. Almost exactly half of our Medicare enrollees have chosen Medicare Advantage plans for their coverage this year.
The most recent JAMA study that looked at both Medicare approaches showed that Medicare Advantage had higher quality than fee-for-service Medicare in all eight quality measures and has much lower costs — with 40 percent fewer people going into the hospital for asthma and congestive heart failures because the care teams and the care approaches are so much better for Medicare Advantage patients.
The purchase and capitation payment model was carefully chosen to give the country a mechanism that significantly improves care and then rewards the care sites when that happens.
The very clear and intentional point of paying capitation rather than just paying fees for care is that the plans can use the capitation money to improve care.
Fee-for-service Medicare buys care badly and ends up with some major care deficiencies for too many of our lowest income people. Fee-for-service Medicare has some of the highest amputation rates in the world for low-income people, and those amputations cost billions of dollars for Medicare today.
The capitated Medicare Advantage plans look at the relevant care processes and they all know the unchallenged basic science that 90 percent of the amputations are caused by foot ulcers — and the plans all know that you can reduce foot ulcers by more than 40 percent with dry feet and clean socks.
Those amputations cost more than $100,000 each — so the capitated plans have people in homes helping people with dry socks, and fee-for -service Medicare doesn’t do that work and has people losing limbs at the highest rate in the world, but billing $100,000 for every cut.
The only major care category in American hospitals that jumped up under Covid in the first months and year of Covid care was a major increase in amputations for fee-for-service Medicare patients.
That’s just wrong.
But it is what it is, and that pattern of care will continue to happen for those patients until we get more people enrolled in Medicare Advantage Special Needs plans for our lowest income and highest health-need patients — and have much better results for those patients.
The Medicare Advantage critics, who shamelessly and repeatedly say explicitly and clearly that the business model of the plans is to distort the diagnosis codes of members to increase revenue for the plans, always forget to mention or talk about the 5 million people who have dual eligibility for Medicare and Medicaid, and who have the highest care needs in Medicare and who are enrolled today with Medicare Advantage special needs plans. The government studied the care for those dual eligible Medicare Advantage plans carefully for a year and concluded that the plans have the lowest death rates and the best care results in government programs today for those high-risk and low-income patients.
The Medicare Advantage critics who say that the business model of plans is enhanced coding approaches very intentionally and inaccurately create a climate of distrust and suspicion about Medicare Advantage with both patients and policy people that keep enrollment lower than it should be in the Medicare Advantage special needs plans.
The upcoding attacks are actually bad and inaccurate distortions of what is really happening with those numbers, because the functional reality is that fee-for-service Medicare is so bad and so expensive that the average cost of care for fee-for-service Medicare in every county already generates far more money than the plans can use today, and there’s no upside to upcoding given the current payment model because the plans already have more money than they can use based on the high average cost of Medicare in every county.
When the plans discount and reduce their capitation levels by 10 to 20 percent in their annual bids in every county in the country today from the high cost of bad care in fee-for-service Medicare today, then the functional and mathematical reality is that there’s absolutely nothing to be gained by the plans from upcoding any numbers even if they choose to do it, and had the tools to achieve that goal, because the capitation opportunities already exceed the payment levels that the plans can use without creating excessive profits under the law.
However — that isn’t what many people believe. The Medicare Advantage critics believe and continue to say with conviction that risk skimming happens and upcoding exists, and they say consistently that the upcoding impact currently costs about 9 percent in the cash flow of Medicare. They say the country can’t count on or celebrate what appear to be major savings from the Medicare Advantage prices, bids, better benefits, and county-by-county surpluses because everything is so distorted by the cloud created by that 9 percent that we can’t trust any numbers about Medicare Advantage.
The fake news and the intentional and deceptive voodoo economics created by those numbers are actually believed by too many people — and the upcoding attackers and attacks change people’s behaviors in some damaging ways. That accusation has a number of strong followers — and that accusation makes the 40 percent difference in the death rates seem somehow irrelevant to too many people, because people think that the plans might be paid wrongly and they believe that payment flaw somehow offsets more than 40 percent fewer deaths.
George Halvorson is Chair and CEO of the Institute for InterGroup Understanding and was CEO of Kaiser Permanente from 2002-14.
Categories: Health Policy
There is no accounting for mergers, acquisitions and new businesses and products…
Outstanding as usual George, albeit a little in the weeds for most toward the end.
I’m in total agreement with your assessment. Curious how you feel about the consistent increase in payor profits over the last 10? Seems like they are taking too much out of the system.
UHG – in Billions
Year Gross Revenues Gross Profit Margin
2021 $287,597 $69,652 24%
2020 $257,141 $67,000 26%
2019 $242,155 $57,598 24%
2018 $226,247 $53,846 24%
2017 $201,159 $47,011 23%
2016 $184,840 $43,386 23%
2015 $157,107 $37,026 24%
2014 $130,474 $33,015 25%
2013 $122,489 $29,939 24%
2012 $110,618 $27,869 25%
2011 $101,862 $25,145 25%
2010 $94,155 $23,198 25%
2009 $87,138 $20,084 23%