When it comes to reducing or controlling rising health care costs, we face a problem called “the fierce urgency of NOW.”
We have learned from the Medicare and Medicaid budget proposals by Rep. Paul Ryan, R-Wis., that Republicans have no substantive ideas on how to address these costs beyond shifting the bill to consumers and states. We also know that Democrats embedded a lot of promising ideas to generate savings into the health law — concepts ranging from medical homes and accountable care organizations to payment bundling and value-based insurance design. But these ideas will take time before we know if and how well they work.
But time is something we don’t have.
The federal government, states, employers and consumers are all struggling under the pressure of rising health care costs. For them, solutions can’t come soon enough.
State governments are facing a “Medicaid desert” between the end this year of the stimulus package’s enhanced federal matching rate and the 2014 implementation of the health overhaul’s Medicaid expansions. Some worry the sorry choices to address the funding shortfall will come down to cutting benefits, shrinking provider payments, hiking cost sharing and shredding eligibility. Proposals to control spending within Medicare have put that program equally in peril.Continue reading…
I hear more and more of my progressive friends arguing, in the context of deficit reduction, that we should be raising taxes before getting aggressive about reducing the cost of Medicare and Medicaid — as well as Social Security.
To a point, I agree.
This country is in such a hole that it is senseless to deny that at least some new taxes will be needed to pay for all of the nation’s bailouts and accumulated debts.
For instance, progressives would like to end the $1 trillion cost over ten years of the Bush tax cuts for those making more than $250,000 a year.
I also believe that ending those tax cuts is necessary.
Everyone agrees that controlling health care costs is the key to bringing long-term federal budget deficits under control. Government spending on Medicare for seniors and Medicaid for the poor has grown nearly twice as fast as the rest of the economy for decades and is by far the largest component of future projected deficits.
But government funded health care programs aren’t unique in that regard. Employer-based coverage for the working population, which is provided through private insurance companies, has grown just as fast. The problem in a nutshell is the cost of health care, not its funding source.
That’s why it’s important to consider how the two separate sides of our health care system – public plans and private plans – will interact should the Medicare privatization plan that Rep. Paul Ryan, R-Wis., touted on Fox News Sunday become law. The House Budget Committee chairman’s alternative budget would turn Medicare over to private insurers for anyone who retired after 2021. Future retirees would receive a capped payment to buy insurance (he called it “premium support,” not a voucher). Medicaid would be turned into a capped block grant – which translates as a fixed sum awarded to states.
Capping expenditures is central to cost-control in the Ryan plan, which is essentially the same plan that he co-authored with former Congressional Budget Office director Alice Rivlin during the fiscal commission deliberations. The plan limits the annual growth in the amount earmarked for either premium support or block grants to one percentage point more than gross domestic product (call it GDP+1).
That’s about half of the actual health care cost outlays in most years. According to Congressional Budget Office projections released in January, federal spending on Medicare and Medicaid is expected to nearly double to $1.6 trillion by 2021, about a 7 percent annual increase. If the primary goal is holding down taxes and spending, capping that rise at GDP+1 provides the upside. With a wave of the legislative wand, government spending on health care for the old and poor would be reduced to more manageable proportions – between 3.5 and 4.5 percent a year depending on how fast the economy grows. Taxpayers could rejoice.Continue reading…
As we move thru 2011, many states are eagerly progressing with implementation of the Affordable Care Act (ACA). We have many Early Innovators that are leaders in setting up the state based exchanges. These states are Kansas, Maryland, New York, Oklahoma, Oregon, Wisconsin and a multi-state entity led by the University of Massachusetts Medical School that consists of Connecticut, Maine, Massachusetts, Rhode Island, and Vermont. Furthermore, Vermont is poised to pass the country’s first state-wide single payer system.
As expected, it is the poor and sick that continue to suffer the most. The current assault occurring in Florida is on Medicaid. Medicaid currently covers close to 3 million Floridians (nearly 15% of the population) at a cost of nearly $19 billion dollars. The cost of each state Medicaid program is a burden shared jointly by the states and the federal government.
For every $1 spent by the state, the federal government matches $1.84. Florida Medicaid already has some of the most restrictive eligibility criteria in the country, such that the only people who can qualify for Florida Medicaid are: 1) low-income infants, toddlers, preschool-age children, and pregnant women; 2) extremely low-income school-age children, seniors, people with disabilities; and 3) parents of children in deep poverty. 60% of FL Medicaid recipients are children.Continue reading…
National Review and Forbes writer Avik Roy believes that Medicaid is a “humanitarian catastrophe” which is actually worse than no insurance at all. Now Scott Gottlieb has taken up the argument in the Wall Street Journal. I’ve noted before that this is a bad argument. Medicaid should certainly provide better coverage. I’d also like to see the new exchanges provide poor people with better options outside of Medicaid. Yet the claim that people would actually be better off uninsured than they would be with Medicaid—this strains credulity.
Many of the factors Harold raises as flaws of the study are actually flaws of Medicaid. It’s Medicaid that restricts access to the best hospitals and the best doctors and the best treatments. It’s Medicaid, i.e., welfare dependency, that leads to family breakdown and social disrepair. (For those who seek a more extensive discussion of this problem, read Charles Murray’s landmark book, Losing Ground: American Social Policy 1950-1980.)
I took umbrage at that, as indicated below. Roy then took umbrage at my umbrage, writing:
One aspect of Harold’s post is wholly unjustified, and a bit of a cheap shot: his assertion that I am “disrespectful” and “disparaging” to welfare recipients, because I’ve highlighted the corrosive effects of welfare dependency (something Harold dismisses as a “bromide”). We’ll never have a constructive debate on Medicaid policy if we can’t get past this kind of nonsense. The entire point of my series of posts on Medicaid is that Medicaid beneficiaries are the victims of an uncaring and bureaucratic system, and also the victims of those who, for ideological reasons, ignore the very real problems that Medicaid has.Continue reading…
Austin Frakt has penned a reply to a recent piece I wrote on Medicaid for my health-policy blog on Forbes,The Apothecary. Austin is a guy who takes the time to address opposing points of view, to his credit, and I’ve enjoyed my back-and-forth with him over time. But while I’m grateful for Austin’s attention to an issue of high import—the degree to which Medicaid harms the poor—he didn’t respond to the core concerns I raised in my post.
For those who haven’t been following the debate on Medicaid outcomes from the beginning, let me offer a brief summary.
How Medicaid Harms the Poor: The Debate (So Far)
Last summer, on my old blog, I put up a series of posts highlighting the findings of a study published in Annals of Surgery by a group of surgeons at the University of Virginia, entitled “Primary Payer Status Affects Mortality for Major Surgical Operations.” The study evaluated 893,658 major surgical operations occurring between 2003 and 2007, stratified by primary payer status, on three outcomes endpoints: in-hospital mortality, length of stay, and total costs incurred.
Despite the fact that the authors controlled for age, gender, income, geographic region, operation, and 30 comorbid conditions, Medicaid fared poorly compared to those with private insurance, Medicare, and even the uninsured. Relative to those with private insurance, Medicare, uninsured, and Medicaid patients were 45%, 74%, and 97% more likely to die in the hospital post-operatively. The average length of stay for private, Medicare, uninsured, and Medicaid patients was 7.38, 8.77, 7.01, and 10.49 days, respectively. Total costs per patient were $63,057, $69,408, $65.667, and $79,140 respectively.
Despite Austin’s initial criticism that this was merely one study, and therefore not representative, the poor performance of Medicaid beneficiaries is well-established in a very large body of medical literature. What was striking about the UVa study was its large sample size; that it controlled for a highly validated set of background health and social factors; and its finding that Medicaid beneficiaries not only underperformed those with private insurance (and dramatically so), but also those who lacked insurance.
Given that a core feature of PPACA is its large expansion of Medicaid to those with higher incomes than current beneficiaries, I argued that it was far from clear that this expansion would improve health outcomes, and in fact was likely to harm them by crowding out the more-efficacious private sector. Furthermore, I argued for the clinical benefits of migrating Medicaid over to a premium-support or cash-assistance model, which would allow Medicaid recipients to benefit from the superior quality of care delivered by private insurance. As I’ve said all along, “There is, doubtless, a level of poverty at which Medcaid is better than nothing at all. But most people can afford to take on more responsibility for their own care, and indeed would be far better off doing so.”
Avik’s post is long, but you can save yourself some trouble by skipping the gratuitous attack on economists in general, and Jon Gruber in particular, as well as the troubled description of instrumental variables (IV).* About halfway down is his actual review of the papers; look for the bold text.
The point I want to drive home in this post is why an IV approach is necessary in studying Medicaid outcomes. People enrolling in Medicaid differ from those who don’t. They differ for reasons we can observe and for those we can’t. An ideal study would be a randomized controlled trial (RTC) that randomizes people into Medicaid and uninsured status. Thats neither practical nor ethical. So we’re stuck, unless we can be more clever.
The next best thing we can do is look for natural experiments. That’s what IV exploits. In this case, the studies I examined use the state-level variation in Medicaid eligibility (and related programs). That variation obviously affects enrollment into Medicaid (you can’t enroll unless you’re eligible), though it is not determinative. Importantly, state-level variation in Medicaid eligibility rules does not itself affect individual-level health. Other than figuratively, do you suddenly take ill when a law is passed or a regulation is changed? Do you see how Medicaid eligibility rules are somewhat like the randomization that governs an RTC, affecting “treatment” (Medicaid enrollment) but not outcomes directly? (If this is unclear, go here.)Continue reading…
Who will be hurt the most by the health reform legislation Congress passed last year?
Answer: The most vulnerable segments of society: the poor, the elderly and the disabled. That’s right. Virtually everyone in Congress who is left-of-center voted for a law that will significantly decrease access to care for the people they claim to care most about.
Why isn’t anyone writing about this?
Answer: Because almost all the people who write about health care know almost nothing about economics.
Basically, there are two ways to reform health care. One way is top down. The other is bottom up. The latter is based on the economic way of thinking. The former rejects that way of thinking. The latter gets the economic incentives right for all the individual actors, leaving the social result largely unpredictable. The former starts with a social goal and tries to impose it from above, leaving individuals with perverse incentives to undermine it. The latter depends for its success on people acting in their self-interest. The former depends for its success on preventing people from acting in their self-interest.
I think I can probably count on the fingers of two hands the number of people in health policy who accept the economic way of thinking. All the rest — 99.9% of the total, including a lot of people with “Ph.D., economist” after their names — reject it in spades.
As a physician who works at Grady Memorial Hospital, I am regularly reminded of the implications of poor access to health care.
One of my regular patients had been suffering from diabetes and hypertension for five years. She was a single, dedicated mother who had been working long hours at a local grocery store to provide for her 15-year-old daughter. She understood that good health meant that she could perform better at work, and the earnings she received from her work would help her provide a stable home for her daughter. Therefore, she did whatever it took to keep herself healthy — monitored her diet, took her medicines diligently and visited the physician regularly.
Things changed one day when during one of her visits to my clinic she said, “Doc, I just lost my job. I don’t have insurance anymore. Medicaid denied me coverage even though they said it was OK for my daughter to have insurance. I can’t pay my co-pays to see you anymore. I may not see you next time.” I was horrified.
A mother who wanted nothing more than to be as healthy as possible for her child should be able to receive care. The health care system in our country that should be serving patients exactly like this one is preventing patients from receiving the care they need and deserve.
In many cases, access to health care coverage is not within the control of patients nor their physicians, resulting in significant consequences. That is, if they don’t obtain coverage, many of our patients will succumb to their (many preventable) illnesses if they don’t have access to their physicians or cannot pay for their medications. My patient’s future could be a testimony to this.
What further confounded me was that Medicaid denied my patient.
If you study previous attempts to reform healthcare delivery through the private sector, there is one common thread. These attempts all failed because of an absence of proper management information systems. We need integrated electronic health records. And not just to improve medical decision making. We need EHR that can be used for management decision making – for contracting, measuring costs, measuring and rewarding quality; I could go on and on. We are trying to solve management problems in a $2 trillion industry using management information systems that would be an embarrassment in nearly any other sector of the economy.
Of course, the industry has been pushing EHR for decades and there are places where EHR is really first rate. Kaiser is a great example but also a special case because of its thorough vertical integration and long history. And even Kaiser has been unable to replicate itself outside of its core markets. The sad fact is that most providers have little incentive to adopt EHR, and even when they do, they have little incentive to be compatible with other providers. Unfortunately, the network externalities benefit purchasers and consumers a lot more than they benefit providers, so don’t expect the compatibility problem to solve itself.
My proposal is simple. Assemble a panel consisting of medical professionals, managers, and insurers. “Lock them in a room” for 72 hours and tell them to choose from among the many fine existing EHR systems. Tell them they can combine the best features of each if they wish. Once we have settled on an EHR system, give every provider one year to adopt it. If they refuse, deny them Medicare and Medicaid payments. Combine the stick with a carrot – subsidies to providers who have limited financial resources. I believe the total one-time subsidies would be less than $50 billion, a drop in the bucket compared with the size of the system.