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Tag: Medicaid

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.
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A Promise Made to Be Broken

In last week’s Wall Street Journal, Princeton economist Alan Blinder exposes four myths about the federal deficit. He saves the most important myth for last. After noting that the long term deficit problem does not cut across all areas of spending, he observes that the problem is almost entirely rooted in the need to fund Medicare and Medicaid. If we base future spending projections on past trends, then Blinder is absolutely correct. Spending growth on Medicare and Medicaid nearly always outstrips the growth in tax revenues. The main contributors to spending growth – demographics, labor costs, and, especially, technology – are likely to keep this trend alive indefinitely. Blinder challenges us to focus the debate about the deficit on the key facts, which essentially means that we should focus on Medicare and Medicaid spending. Let me take up his challenge.

Let’s start with the obvious debating points. There is a lot of fat in both programs. CMS just acknowledged that as much as 10 percent of spending in Medicare and Medicaid is “improper.” This does not include spending on defensive medicine, unnecessary services demanded by fully insured patients, unwarranted variations in practice, and all the other usual suspects. Nor does it reckon with all the waste due to poor health behaviors, although eventually the grim reaper will have his say and dying is usually very costly no matter how well you have pampered your body along the way.

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Bring Back the Public Option

The way health care is administered in the United States is unsustainable and in need of fundamental reengineering — right? During the 2008 presidential race, the country appeared to be in agreement on this point. But that all changed somewhere, somewhere after the election of a dark-skinned new president with a foreign-sounding name whom even proud Medicare card-carrying Americans were viscerally driven to deride as a socialist.

This was recently reported in The Hill: “The six largest investor-owned health insurance companies saw a 22 percent increase in combined net income in the third quarter, putting them on pace to break profit records for 2010.” The president was castigated by loud little crowds around the country for championing the overwhelmingly popular idea of a publicly funded, public health insurance alternative to challenge the partly publicly funded, private health insurance companies’ assertion that they simply cannot provide their services any cheaper. Rather than groundbreaking legislation, what we got was the president being caricatured on national television, in effigy, as The Joker — and health insurance executives laughed all the way to the bank.

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Florida’s Problem: Cutting Medicaid May Cost More

Florida is concerned that it spends too much on Medicaid. Unfortunately for policymakers, proposed cuts to Medicaid are likely to be self-defeating according to an Orlando Sentinel article. They may result in more spending as well as boosting the number of people with no coverage – especially children. Components introduced under the guise of personal responsibility –such as charging $10 per month per beneficiary or $100 for non-emergency use of the emergency department– have great intuitive appeal to taxpayers and legislators, yet can backfire in practice.

Experience from Oregon suggests that even modest, sliding scale premiums result in huge drops in coverage. A report from the Health Policy Institute at Georgetown University suggests 82 percent of those who leave coverage would be children, of whom 98 percent would be below the poverty level.

There are clear examples of emergency room overuse, but what’s crystal clear in retrospect is not always evident up front. In any case, hospitals can do their part with effective triage that sends patients to lower acuity settings or back home when patients who shouldn’t be there show up.

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Do Hospitals Cost-Shift?

This blog continues my exploration of the great mysteries of health economics.

Northwestern University is one of Blue Cross of Illinois’ largest customers. Suppose that premiums for all BC plans are expected to increase by 10 percent, but NU is able to force Blue Cross to accept a 5 percent increase. Would you expect Blue Cross stick McDonalds with a 15 percent increase in order to cover the shortfall from NU?

I wouldn’t, for two reasons. First, McDonalds would probably threaten to take its insurance business elsewhere. Second, the scenario I have described is inconsistent with profit maximization by Blue Cross. After all, BC’s ability to stick McDonalds with a 15 percent increase surely does not depend on the price paid by NU. Any negotiator whose willingness to stick it to McDonalds is conditional on the price charged to NU is leaving money on the table and probably would have been fired a long time ago.

We might never expect BC to raise prices to some customers to make up for shortfalls from others, so why do we believe that hospitals do this all the time? It is impossible to discuss Medicare and Medicaid payments without someone invoking the mantra of cost-shifting. The theory of cost-shifting is deeply ingrained in the minds of healthcare decision makers and the policy implications of the theory are profound. Consider that if hospitals cost shift, then the burden of Medicaid cutbacks falls on privately insured patients, not on Medicaid patients and the hospitals that serve them. This calls into question whether the cutbacks will result in any savings for taxpayers and cause any harm to Medicaid beneficiaries. It also makes you wonder why hospitals that serve low income communities struggle to survive. Couldn’t they just cost-shift their way out of financial difficulty? A cost-shifting zealot would conclude that the managers of these hospitals are incompetent.Continue reading…

The Challenge of ICD10 Adoption

On October 1, 2013, the entire US healthcare system will shift from ICD9 to ICD10.   It will be one of the largest, most expensive and riskiest transitions that healthcare CIOs will experience in their careers, affecting every clinical and financial system.

It’s a kind of Y2k for healthcare.

Most large provider and payer organizations, have a ICD10 project budget of $50-100 million, which is interesting because the ICD10 final rule estimated the cost as .03% of revenue.  For BIDMC, that would be about $450,000.   Our project budget estimates are about ten times that.

CMS and HHS have significant reasons for wanting to move forward with ICD10 including

1) easier detection of fraud and abuse given the granularity of ICD10 i.e. having 3 comminuted distal radius fractures of your right arm within 3 weeks would be unlikely
2) more detailed quality reporting
3) administrative data will contain more clinical detail enabling more refined reimbursement

Large healthcare organizations have already been working hard on ICD10, so they have sunk costs and a fixed run rate for their project management office.   At this point, any extension of the deadline would cost them more.

Most small to medium healthcare organizations are desperate. They are consumed with meaningful use, 5010, e-prescribing, healthcare reform, and compliance.   They have no bandwidth or resources to execute a massive ICD10 project over the next 2 years.

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How Obama Hits Health Providers in Deficit Plan

President Obama’s populist message on taxes was replicated on the health savings side of his deficit-reduction plan, which would cut spending on Medicare and Medicaid by $320 billion over the next decade and $1 trillion in the following decade.

The bulk of the savings would come from companies that provide goods and services to the programs. Payments to drug companies would be slashed by $135 billion by offering seniors in Medicare the same discounts currently mandated for poor people in Medicaid. An additional $42 billion in program savings would be achieved by reducing payments to nursing homes and home health care agencies.

And those are just the major hits taken by health-care providers in the plan, which is already drawing fierce opposition from lobbyists for industries that get whacked. Rural hospitals, big city teaching hospitals, biotechnology firms, and durable equipment manufacturers also would be in for payment cuts under the Obama blueprint.

Major trade associations representing provider groups immediately blasted the proposal, playing the same jobs card the president is using. The Pharmaceutical Research and Manufacturers Association “opposes implementing Medicaid’s failed price controls in Medicare Part D,” the group said in a prepared statement. “Such policies would fundamentally alter the competitive nature of the program, undermine its success, and potentially cost hundreds of thousands of American jobs.”

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When Health Insurance is Free

Did you know that an estimated one of every three uninsured people in this country is eligible for a government program (mainly Medicaid or a state children’s health insurance plan), but has not signed up?

Either they haven’t bothered to sign up or they did bother and found the task too daunting. It’s probably some combination of the two, and if that doesn’t knock your socks off, you must not have been paying attention to the health policy debate over the past year or so.

Put aside everything you’ve heard about ObamaCare and focus on this bottom line point: going all the way back to the Democratic presidential primary, ObamaCare was always first and foremost about insuring the uninsured. Yet at the end of the day, the new health law is only going to insure about 32 million more people out of more than 50 million uninsured. Half that goal will be achieved by new enrollment in Medicaid. But if you believe the Census Bureau surveys, we could enroll just as many people in Medicaid by merely signing up those who are already eligible!

What brought this to mind was a series of editorials by Paul Krugman and Robert Reichand blog posts by their acolytes (at the Health Affairs blog and at my blog) asserting that government is so much more efficient than private insurers. Can you imagine Aetna or UnitedHealth Care leaving one-third of its customers without a sale, just because they couldn’t fill out the paperwork properly? Well that’s what Medicaid does, day in and day out.

Put differently, half of everything ObamaCare is trying to do is necessary only because the Medicaid bureaucracy does such a poor job — not of selling insurance, but of giving it away for free!

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Healthcare Spend at Historic Low

In a rare bit of good news for the Obama administration and budget policymakers,  health care costs increased last year at their slowest pace since the advent of Medicare and Medicaid in the mid 1960s.

The new analysis, released on July 25 by officials at the Centers for Medicare and Medicaid Services, the agency that administers the two programs, showed health care spending grew last year at a “historic” low  3.9 percent rate, which is slightly below 2009’s record-setting low of 4.0 percent. Health care spending as a share of the economy remained stuck at 17.6 percent, a welcome change from most years when it increases its share of total economic activity.

At a time when the White House and congressional leaders are worried about rampant long term growth of the government’s major health care  insurance programs for seniors and the poor, the new data will allow government actuaries to project growth in  Medicare and Medicaid over the next decade will be less than previously feared. This could potentially ease the task of the Obama administration and congressional leaders somewhat when they finally negotiate an agreement for slowing the growth of entitlement programs to help reduce the deficit.

Moreover, CMS actuaries are now saying the cost of insuring 30 million previously uninsured Americans under the president’s signature health care reform bill will add only a sliver to overall spending, and that increase is about half the projected growth rate of a year ago.Continue reading…

Don’t Forget Medicaid

As we wait for the white smoke to emerge from the “grand bargain” negotiations at the White House, most Americans are already aware of the Republicans’ plan to dismantle and privatize Medicare and Social Security. But what many people may not realize is just how dangerous it would be to slash funding for a program that 60 million Americans rely on for their basic health care needs: Medicaid.

While it seems that just about every major industry or interest group has teams of lobbyists in Washington looking out for them, some of our most vulnerable citizens simply don’t have a voice in a town where unfortunately, money still talks the loudest.

Why? Medicaid covers only the impoverished and disabled, so it lacks a traditional advocacy base. This may be news to Republicans — but most poor people I know are spending all their time trying to find a job and put food on the table. Lobbying Congress just isn’t on these folks’ to-do list right now. Unfortunately, this means that my colleagues aren’t going to spend a lot of time over the next 30 days sticking up for the 60 million Americans who rely on Medicaid to pay their medical bills. That’s unfortunate, because if the Republicans are successful in turning the program into a block grant program that greatly diminishes funding to states, three awful things are going to happen — people are going to die, more jobs are going to be lost, and health care costs and taxes will actually increase.

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