Tag: Medicaid

The Promise of Medicine

Jun 25, 2010• 14

By EDWARD D. MILLER, MD

Dr. Miller is the Dean and CEO of The Johns Hopkins University Medical School. These remarks were made at the National Press Club, June 21, 2010.

I. The Promise of Medicine

Let me start with a short story: It was the summer of 1971. I had just finished my training in anesthesia at the Peter Bent Brigham Hospital and was about to embark on a two-year fellowship in physiology at Harvard. I was asked if I wanted to be “the” anesthesiologist for the month of August on Martha’s Vineyard. It was to be part vacation and part work, and I needed the money.

Shortly after arriving, a young woman (who now runs a well-known tavern in that community), needed a surgical procedure. She had no insurance but was able to pay the medical bills out of pocket. She, however, could not afford the normal three-day stay in the hospital. She pleaded with me to have the minimal amount of medicine so she could be discharged the same day. To this day, I vividly recall helping her out to her car so that she could recover at home. You see, at the time, there was really no such thing as outpatient surgery.

Thanks to a revolution in anesthetics, outpatient surgery is a very common norm today. In fact, at Johns Hopkins Medicine facilities, we performed twenty-four hundred such procedures just last month.Continue reading…

Health Reform Could Harm Medicaid Patients

Mar 7, 2010• 40

By EDWARD MILLER, MD

Dr. Miller is the Dean and CEO of The Johns Hopkins University Medical School.

Both the House and Senate health-care reform bills call for a large increase in Medicaid—about 18 million more people will begin enrolling in Medicaid under the House bill starting in 2013, Centers for Medicare and Medicaid Services (CMS) Actuary Richard Foster estimates.

We at Johns Hopkins Medicine (JHM) endorse efforts to improve the quality and reduce the cost of health care. But we also understand all too well the impact a dramatic expansion of Medicaid will have on us and our state—and likely the country as a whole.

A flood of new patients will be seeking health services, many of whom have never seen a doctor on more than a sporadic basis. Some will also have multiple and costly chronic conditions. And almost all of them will come from poor or disadvantaged backgrounds.Continue reading…

There Be Dragons: The Fiscal Risk Of Premium Subsidies In Health Reform

Dec 14, 2009• 14

By JEFF GOLDSMITH

Last week, the Congressional Budget Office weighed in on the biggest economic imponderable in the health care debate: how private health insurance premiums will behave under health reform. Building on its December 2008 CBO health insurance market analysis, CBO forecast largely benign effects from health reform’s private market reforms and subsidies on the vast majority of the presently insured (e.g. voting public).

According to CBO, only 17% of Americans in the so-called non-group market–largely individuals–would see premium increases in 2016 (the CBO reference year), because they would be required to purchase fatter benefits with less economic risk. CBO believes that the other 83% of the presently insured will see little or no change.

Analysis of how the health insurance market will behave under health reform has become ferociously politicized. After the infamous PriceWaterhouseCoopers study sponsored by health insurers suggested possible large premium increases, the CBO report might provide cover for members of Congress who are contemplating irreversibly tying the federal budget to a volatile “private” insurance market. I think the fiscal risks of a partially federalized private health benefit are significantly greater than CBO has suggested.

This Just In

Nov 20, 2009• 4

By ARON BOROS

Yesterday, but the U.S. Treatment Services Task Force announced that leeches aren’t a particularly good treatment for most ailments. While noting that leeches might still be useful for certain specific circulation disorders, the USTSTF recommended against their use in other situations, like treating fever and abdominal pains.

Although the Task Force has no power to make anyone do anything, Rep. Dave Camp (R-Mich) was heard on NPR’s Morning Edition saying, “Some people discounted the idea that the government would actually put people to death … this actually is really showing how the insidious encroachment of government between the patient and their doctor plays out.” Camp neglected to address the facts: (1) overuse of leeches is expensive, and science-based recommendations about appropriate use would save the government money without harming patients, and (2) bloodletting can lead to negative side effects, such as upsetting the body’s natural humoral balance.

The Best Health Care Idea All Year

Nov 11, 2009• 23

By ROBERT LASZEWSKI

Out of almost nowhere has come momentum for a proposal to create a bipartisan entitlement and tax commission to draft proposals to control the long-term costs of Social Security, Medicare, and Medicaid. The idea would require the Congress to quickly vote the recommendations up or down via a super majority vote.

The idea isn’t new–proposals for a such a commission have been around for a longtime.

What is new is the bipartisan enthusiasm that is growing–particularly in the Senate. Coming out of the Budget Committee, and Chairman Kent Conrad and Ranking Republican Judd Gregg, the idea is picking up bipartisan steam with, among others, Republican Senate Minority Leader Mitch McConnell expressing general support for the idea.

A number of Senators have threatened to tie their votes to raise the deficit ceiling to establishing such a commission.

If the recent Democratic health care bills have made one thing crystal clear it is that the Congress is wholly incapable of dealing with cost containment under present circumstances.

Robert Laszweski has been a fixture in Washington health policy circles for the better part of three decades. He currently serves as the president of Health Policy and Strategy Associates of Alexandria,
Virginia. Before forming HPSA in 1992, Robert served as the COO, Group Markets, for the Liberty Mutual Insurance Company. You can read more of his thoughtful analysis of healthcare industry trends at The Health Policy and Marketplace Blog, where this post first appeared.

Good News for Uninsured Children Should Jumpstart Health Reform

Sep 17, 2009• 3

By JOCELYN GUYER

In 2008, the number of uninsured children in the United States hit the lowest level in two decades. If Congress weren’t in the middle of a fierce debate on health reform, there would be time for everyone to celebrate a remarkable achievement and maybe even pause to reflect on how it was accomplished. To paraphrase David Byrne of the Talking Heads: “We might ask ourselves, how did we get here?” We got here with federal fiscal support, leadership, state ingenuity and a willingness to make a sustained effort to address the issue of uninsured children. The states deserve a lot of credit. It’s been impressive to see how state policymakers from across the political spectrum have rallied to support children’s coverage, despite facing tough economic obstacles in recent years. Even in the midst of terrible fiscal problems, the vast majority of states have maintained children’s coverage in Medicaid and CHIP. This year so far, a whopping twenty-three states found a way to expand or improve children’s coverage, proving what can be accomplished when the federal government is a strong fiscal partner.

The Chairman’s Mark – Good Ideas, Potentially Fatal Flaws

Sep 16, 2009• 4

By Roger Collier

So, at long last, Senator Max Baucus has released his Chairman’s Mark draft health care reform bill for discussion by the full Senate Finance Committee. The 223-page draft bill is generally consistent with the “Framework for a Plan” document that Senator Baucus issued last week. So, no big surprises. But can it make coverage more accessible and affordable? Can it put the brakes on skyrocketing health care costs? Is it likely to help or hurt the economic recovery?

Accessibility and affordability are the main thrusts of the draft. As with the other Senate and House bills, an individual mandate would be imposed and the insurance market would be reformed to assure coverage on a guaranteed issue basis. Also as with the other bills, Medicaid would be expanded to cover anyone below 133 percent of FPL (but with the federal government picking up more of the tab), while subsidies would be available to other lower-income individuals who buy coverage through an insurance exchange. Additionally, benefit standards would be set for the individual and small group markets, with limits on cost-sharing.

Time for a Closer Look (and Lower Costs)

Sep 1, 2009• 3

By ROGER COLLIER

One of the effects of the exaggerations, misinterpretations, distortions, and downright lies about Congressional health care reform proposals—mostly from far-right politicians and their hangers-on—has been to deter more objective analysis.

In fact, two key features of the current Senate and House bills—the insurance exchange structure, and the controversial public plan option—need much closer examination, and possibly considerable revision.

FIRST, the insurance exchange structure. It’s a reasonable concept: if insurers were to compete via an exchange for individual and small group business, they would offer highly competitive rates to attract as much business as possible.

Unfortunately, as a Health Affairs blog piece by the former managers of the PacAdvantage exchange makes clear, it isn’t as simple as that. PacAdvantage, which served some 150,000 California small business employees, ultimately collapsed and closed its doors in 2006, a victim of adverse selection. As the PacAdvantage managers explain, having insurers also marketing directly to small groups allowed them to cherry pick the best risks, leaving the less-good risks in the exchange. As adverse selection continued its work, the exchange went into a death spiral with worsening exchange risk leading to higher rates, leading to the least-bad risks leaving the exchange, leading to even higher exchange rates, and so on.

The obvious way to avoid this problem in national reform is to require that ALL individuals and ALL small group employees be included in each regional exchange. Unfortunately, health reforming politicians have adopted “you’ll be able to retain your existing coverage” as part of their reform pitch. It’s understandable, since forcing groups to switch to an exchange is not going to help the prospects of legislation that’s already in trouble, but it instantly opens the door to cherry-picking by insurers, with the prospect of failure of every exchange.

Is there a solution? Rather than imposing an additional mandate on businesses, current bills could be modified to require that all insurers participate in the exchange, and that their exchange rates be no higher than those offered directly to any insured group, thereby forcing insurers to treat exchange and non-exchange insureds as part of the same pool and avoiding the adverse selection effect.

SECOND, the public plan option. So far, the political controversy has focused on the obvious arguments for and against the public plan: it would force insurers to offer better rates, but it could push millions of Americans out of private coverage into a government program.

A close look at data from Medicare Advantage, in which private plans compete with the traditional government option, indicates that both arguments are questionable.

MA’s private coverage alternative is indeed more costly than traditional Medicare, by some 13 percent—more than $11 billion in 2009. However, most of the difference is due to the additional benefits offered. The private plans’ 2009 base bids to CMS—excluding the cost of additional benefits—averaged 102 percent of FFS rates, with HMO and PPO bids averaging just 99 percent of FFS.

These base bid rates include profit and administrative costs, in contrast to the FFS rates which exclude both administration and financing costs. Even the most conservative estimate of these additional costs would put fully-loaded FFS rates above those of the average private plan.

The comparison of Medicare FFS and MA plans is further skewed by the MA bid process. Not only do the ridiculously high “county benchmarks” used in payment setting favor high bids, but the payment formula (which discounts the difference between the base bid and the benchmark, but not the base bid itself) encourages excessive loading of profit and administration into the base bid. In other words, in a more rationally designed competitive environment, average private plan costs should be significantly below those of traditional Medicare.

In terms of the current Senate Health and House bills, with proposed payment rates higher than Medicare, the public plan looks even less competitive. While there would undoubtedly be some who would opt for a government program over a private plan, the vast majority are likely to choose the lower cost option, with the public plan more likely to increase health care costs than decrease them.

Are there compromises that might satisfy liberal politicians’ desires for a public plan? One possibility is to build a “trigger” into the bills that would allow creation of public plans only where private plans fail to meet cost control benchmarks.

Another possibility is to build on the existing public plan for the non-elderly: Medicaid. Congressional committees are already proposing Medicaid expansions, while simultaneously proposing subsidies to make exchange participation more affordable for non-Medicaid eligibles, leading to an anomalous situation in which one family may receive free Medicaid coverage, while a second family whose income is only a few dollars greater is forced to pay a significant part of the exchange premium in order to comply with an individual coverage mandate.

A less costly and unfair approach might be to allow individuals to buy-in to Medicaid. Since average per capita Medicaid costs are approximately $2000, compared with estimated subsidy costs of close to $4000 (based on CBO estimates, in 2009 dollars), this would eliminate both the anomaly and the need for subsidies, with a potential dramatic reduction in the ten-year cost of reform of some $770 billion.

Roger Collier was formerly CEO of a national health care consulting firm. His experience includes the design and implementation of innovative health care programs for HMOs, health insurers, and state and federal agencies. He is editor of Health Care Reform Update .

More on health care reform by this author:

The Health Care Cost Shifting Myth

Aug 31, 2009• 58

By AUSTIN FRAKT

There is a pervasive notion that providers of health care can make up for lower payments received from one set of payers (e.g. Medicare, Medicaid, uncompensated care) by increasing prices charged to other payers (e.g. private insurance companies). To the extent it occurs cost shifting offsets attempts to control overall health care costs through reduced fees paid by public insurers. It makes “bending the cost curve” harder.

However, it is a myth that providers can fully shift costs. That they could do so violates, in most cases, principles of economics. Moreover, empirical evidence suggests cost shifting, where it occurs, is done so a minimal level: only a small fraction of decreased payments by public payers shows up as an increase in charges to private payers. Losses associated with one payer are largely not recouped from another.

Some take price discrimination as evidence of cost shifting. However, price differentials are not necessarily the recouping of losses from one payer by overcharging another. As described in the 2001 Health Affairs paper by Richard Frank “Prescription Drug Prices: Why Do Some Pay More Than Others Do?” price discrimination can be due to unequal bargaining power across classes of purchasers. In other words, in maximizing profits, providers charge different prices to different market segments. In such cases, by definition, profits cannot be further increased by cost shifting.

It’s true that cost shifting could theoretically occur under specific conditions. One case is when a provider has monopoly power that it has not fully exploited, for instance charging private insurers less than it could. More fully exploiting its monopoly power with respect to those payers, such a provider can recoup losses. Still, there is a limit to how much of the lost revenue can be recouped. The monopoly profit-maximizing price level imposes a ceiling.

Another instance in which cost shifting could occur is in a more competitive market in which all providers have roughly the same level of undercompensated care. All competitors in such a market might choose to increase charges to private insurers by the same amount, maintaining their relative competitive positions. However, if one competitor elects to reduce costs or reduce its burden of undercompensated care, it might be able to charge private insurers less then others, thereby increasing its market share. So, cost shifting may not be a stable equilibrium.

The literature provides estimates of the extent of cost shifting in cases where it is theoretically possible. The March 2009 MedPAC Report to Congress: Medicare Payment Policy (Chapter 2A) includes a summary of such evidence. It concludes that the dominant dynamic in the market is that hospitals with strong market power have abundant financial resources. In turn they have a high cost structure (perhaps due to provision of relatively higher quality care) that causes lower or negative Medicare margins. In contrast, hospitals that are forced to run efficiently are adequately funded by Medicare payments. That is, Medicare payments are sufficient to cover costs but some hospitals run inefficiently and make it appear otherwise. Therefore, MedPAC has concluded that increased Medicare payments to hospitals would not reduce rates charged to private insurers. The primary effect would be to induce lower cost operations.

The MedPAC report cites mixed evidence from the literature on the level of cost shifting, as does the December 2008 CBO report Key Issues in Analyzing Major Health Insurance Proposals. A few studies from the 1980s found evidence of cost shifting at a rate of up to fifty cents on the dollar. However, conditions in the 1990s were less conducive to cost shifting and the rates were found to be on the order of a 0.4 to 1.7 percent increase in private payments in response to a 10 percent reduction in Medicare and Medicaid fees. In a 2005 study of geographic variation in health costs of the Federal Employees Health Benefits Program, the GAO concluded that the considerable variation it found was not due to variations in payments from other payers.

In conclusion, cost shifting is not as large and widespread a phenomenon as some would believe. Under some market conditions it is inconsistent with economic theory. And, while it can occur under other market conditions it is far from a dollar-for-dollar shift in costs. The most recent studies of the phenomenon find little evidence of cost shifting or very low levels of it. Claims that reductions in public payments for health care will necessarily show up as commensurate increases in private payments are unfounded.

Austin Frakt blogs at The Incidental Economist and is a health economist and principal investigator with the Department of Veterans Affairs’ Health Services Research and Development Service and assistant professor with the Boston University School of Public Health, Department of Health Policy and Management. The views expressed in this post are his alone and do not necessarily reflect the positions of Boston University or the Department of Veterans Affairs.

Will Hospital Stocks’ Rally Continue?

Aug 15, 2009• 5

By DON JOHNSON

Since early July, most hospital companies’ stocks have been rallying in anticipation of relief from uncompensated care costs under proposed health insurance reform bills. On Wednesday, however, profit taking hit the stocks in a small way.

The rally got an added boost in the last week from positive earnings reports and guidance by Community Health Systems (CYH) and Universal Health Services (UHS).

Tenet Health Care (THC) Tuesday reported a small loss on increased revenues. Lifepoint Hospitals (LPNT) reported Friday. (After this post was originally published.)

In its conference call with securities analysts, Tenet said the health care reform bills before Congress would relieve it of the cost of uncompensated care of the uninsured and of the cost of charity care. Tenet didn’t say any more about the health insurance reform debate and how the legislation would affect the company.