Reforming Medicaid

By Greg Scandlen

Fully one-half of the supposed newly insured in ObamaCare will be covered by expanded Medicaid – if all goes according to plan.

Now, I will wager my retirement fund that nowhere near the 32 million estimated will ever be covered. In fact, I would be astonished if even one-third of that number get coverage, and it is as likely that ObamaCare will result in fewer people covered, not more.

But since so much is riding on Medicaid, it might have been a good idea to think through whether Medicaid is such a good vehicle for expanding coverage in the first place. There is evidence aplenty that when it comes to health outcomes, it is better to be uninsured than to be on Medicaid.

Still, with or without Obamacare, Medicaid is a gigantic program – bigger than Medicare in numbers of people covered. And it is helping to drive the states into bankruptcy. So an examination of what to do with it is well overdue.

Recently there has been some fine work done on the topic.  One example is a fine paper published by the Texas Public Policy Foundation and authored by state representative Arlene Wohlgemuth, Brittani Miller, and Spencer Harris, “Medicaid Reform: Constructive Alternatives to a Failed Program.”

The authors propose creation of an entirely new approach, TexHealth. They write:

TexHealth would change the dynamic of Medicaid from a defined benefit program to a defined contribution program, allowing individuals to make their own decisions in regards to their health insurance needs.

They explain:

Under a defined contribution plan, TexHealth will provide better access to health care services and be available to potentially 4 million more individuals than currently served, for less money. Initially, the state would spend $22.26 billion per biennium in subsidies to low-income Texans, $12.4 billion on long-term services and support, and $9.22 billion for implementation and administration, totaling 5 percent less than the state spent on Medicaid in the 2008-2009 biennium. TexHealth strives to offer the maximum amount of choice and freedom in health insurance decisions.

The paper is quite comprehensive and includes summaries of the handful of successful Medicaid reforms that have been implemented to date, including Rhode Island’s Global Medicaid Waiver, Indiana’s Healthy Indiana Plan, and Florida’s Cash & Counseling program.

In North Carolina the John Locke Foundation published a short paper by Nicole Fisher and Joseph Coletti on “Repair and Reform Medicaid.” The paper finds that enrollment n North Carolina’s Medicaid program grew from 639,000 people in 1990 to 1,603,000 in 2006. And the benefits are among the most generous in the Southeast with a per-enrollee cost of $5,668. The future is not bright. The paper says:

ObamaCare will make it nearly impossible for states to make economic reductions to Medicaid due to requirements of maintaining high eligibility while imposing new costly provisions beginning in 2014. Secretary of Health and Human Services Kathleen Sebelius has been all but intractable regarding state requests for flexibility of plan design and payments to providers.

The paper calls for restructuring the long term care component, reducing optional services, and applying for block grant funding similar to what Rhode Island did.

In Wisconsin, the new Secretary of Health Services, Dennis Smith, is doing some similar thinking.

An article by Guy Boulton in the Journal Sentinel reports:

Dennis Smith’s first task as secretary of the Department of Health Services is to eliminate a roughly $500 million shortfall in the state budget for the BadgerCare Plus and Medicaid programs. But his ultimate goal is to make the programs more efficient.

The article explains that Governor Scott Walker’s budget actually increases Medicaid spending by $1.3 billion over the next two years to replace lost stimulus money.

Mr. Smith is taking his time to “get input from the stakeholders,” and, “some advocates are wary.” But, “the Legislature also gave the Walker administration more freedom to remake the Medicaid and BadgerCare Plus programs; that was written into the controversial measure that cut collective-bargaining powers for public-sector unions.”

The article continues:

Smith is open to setting up some version of health savings accounts for people in BadgerCare Plus and other programs. And he talks about providing defined benefits and services for specific groups within the programs. “We don’t need more money,” he said. “We need to use the dollars more wisely.” Much of those dollars are spent on a relatively small number of people, nearly all of them elderly or disabled and many covered by both Medicare and Medicaid. Smith noted that 5% of the people covered by Medicaid account for 58% of the cost, a bit more than the national average of 54%. Long-term care is among areas likely to be a focus. He admires what Oregon and Washington have done to provide community-based  are, enabling people to remain in their homes instead of nursing homes while also saving money.

These state efforts are getting a boost from Congress. The Wall Street Journal reports:

House Republicans are preparing to propose a major shake-up of the Medicaid health-care program for the poor, a first step in their drive to overhaul federal entitlements, according to a member of the House Budget Committee.

Entitlement reform will be part of the 2012 budget proposal that Paul Ryan will be unveiling in April, but there is some talk about beginning with the remaining FY 2011 budget.  Block grants to the states are a popular idea. That would enable the states maximum flexibility to design a wholly new approach to covering the poor. Of course, they had that flexibility with the SCHIP program and didn’t do much with it.

At a minimum, the states should separate out the three programs that constitute Medicaid – long term care for the elderly, health coverage for the disabled, and health coverage for low-income families. These three components have little in common and having them merged makes it difficult to even talk about how much Medicaid costs. Total program costs are meaningless when looking at reform.

But the states need to do much more, including voucherizing Medicaid for most eligible families. A recent study in Health Affairs found that such families are constantly moving in and out of Medicaid eligibility, even at a 133% of poverty cut off point. This is disruptive and confusing for such families. It would be far better if they could apply Medicaid funds to the cost of private coverage they could keep as circumstances change.

At the same time, some significant portion of the population is incapable of managing any form of insurance program. They may be illiterate, drug addicted, mentally ill, or otherwise too dysfunctional to make appointments, fill prescriptions, and follow treatment plans. These people need the direct delivery of services.

Getting Medicaid right is not easy, but the stakes are enormous. We need to get serious about it.

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Medicaid Mess

By Greg Scandlen

The states are trying to figure out what to do with the Medicaid responsibilities of ObamaCare, especially since Judge Vinson in the Florida decision squelched any hope they might have had that it would be tossed out in court.

The issue goes well beyond the expansion to 133% of poverty for all adults. Most of that (90%) will be paid for by the Feds, although that still leaves a lot of benefits and administrative expenses for the states to pick up. The bigger issue is with the people who are currently eligible but not enrolled. Some 11 million of the uninsured are currently eligible for Medicaid or SCHIP. The new law divides the state/federal match for these people at the same place it has been for some time.

 

States Slashing Medicaid

Also of concern is the “maintenance of effort” requirement in the new law. Arizona, for one, expanded Medicaid eligibility to single adults some years ago, to the point of being one of the most generous states in the country. Now, with state finances in the toilet, they would like to cut back on the eligibility levels, but will probably not be allowed to.  Kaiser Health News reports that Arizona’s “Medicaid spending has gone from 17 percent of its general fund in 2007 to nearly 30 percent this year.”

It isn’t just Arizona. The New York Times reports that California’s Jerry Brown wants to cut Medicaid by $1.7 billion, and New York’s Andrew Cuomo wants at least $2 billion in cuts. The Times notes that part of the stimulus package in 2009 included $90 billion to offset rising Medicaid costs, and Congress appropriated another $15 billion last August, but even with that help, “deficits were so deep that 39 states cut Medicaid payments to providers in 2010, and 20 states pared benefits.” Now that money is running out –

On July 1, the enhanced federal aid will disappear, causing an overnight increase of between one-fourth and one-third in each state’s share of Medicaid’s costs. But because of the federal eligibility restrictions, the options for states are largely limited to cutting benefits that are not federally required; reducing payments to doctors, hospitals and nursing homes; and raising taxes on those providers.

 

States Think About Withdrawing from Medicaid

The Wall Street Journal reports that, “At least a half-dozen states have publicly discussed withdrawing from the Medicaid program altogether because of its expense.” For example –

Texas estimates that it will cost an additional $9.1 billion to retain its current Medicaid service levels through 2013. If it tried to plug that gap by cutting health-care provider rates, it would have to reduce them by 48%— and that might drive care providers to stop accepting Medicaid patients, according to the governors’ letter. Texas Gov. Rick Perry, a Republican, has threatened to pull out of Medicaid.

 

Medicaid Panel Crashes

Meanwhile, a new federal commission tasked with recommending better information systems for state Medicaid programs has hit a brick wall, according to an article by Brett Coughlin in Politico.

The story says,

… the Medicaid and Chip Payment and Access Commission (MACPAC) hit the reset button Friday when faced with the complexity and cost of the effort.”

One panel member called for a “do over” and others suggested the panel was poised to hit Congress “in the face” with a big new request for funds. A new survey to Medicaid and Children’s Health Insurance Program beneficiaries, for instance, is estimated to cost $45 million.

So, maybe not so much.

Who Pays?

By Ross Schriftman, RHU, LUTCF, ACBC, MSAA

Horsham, PA

Tel. 215-682-7075

Rfs270@aol.com

 

The argument that everyone must have health insurance so that we who are insured don’t end up paying the medical bills for those who aren’t insured has been repeated by so many people so many times that it has become an irrefutable truth. That is why Obamacare’s linchpin provision requires all of us to have health insurance by 2014. In fact we will be mandated to purchase only the kind of coverage designed by the Secretary of Health and Human Services in Washington.

Interestingly, the fact is that uncompensated care, although a serious problem, is a small part of our overall healthcare costs.  In 2008 it represented an estimated $43 billion of our $2 trillion healthcare bill or about 2%.  I have not seen a study that shows how much of uncompensated care is for health care services received by people who already have insurance but refuse to pay a deductible or copayment or for services excluded by the insurance plan and not paid by the individual who received them.

When did it become one individual’s responsibility to pay for someone else’s expenses? If someone doesn’t have life insurance and dies does everyone who has life insurance have to pay for his funeral and support his family?  If someone doesn’t have disability income insurance and becomes sick do the rest of us get stuck paying his mortgage and utility bills?  Of course not.

So why would it be any different with health insurance.  Whether or not we have health insurance we ultimately are personally responsible for our medical bills being paid.  Over the years the share of out of pocket expenses people pay for health care in our nation has gone from 10.5% in 1970 to only 4.3% in 2009 according to a recent report by the Centers for Medicare and Medicaid Services.  When did we begin to think that our health insurance is supposed to pay for all of our healthcare needs?

Last week a second federal judge ruled that mandating that everyone purchase health insurance is unconstitutional and he voided the entire new law using the government’s own argument that the mandate was a key provision of the legislation and not severable from the rest of the law.

Eventually our highest court will render a decision as the government has appealed the judge’s ruling. If the individual mandate is ruled constitutional by the Supreme Court then why wouldn’t the next step be that everyone is required to purchase long term care insurance?  Using the Obama Administration’s same logic of “public good” could then be applied to this kind of insurance. After all right now the taxpayers get stuck for more than 50% of the cost of long term care services through the Medicaid program.  The vast majority of people receiving benefits under this program failed to purchase private long term care insurance.  The Medicaid program is helping to bankrupt the states and drive the Federal government into deeper debt.

Then take into account that only about 20% of American workers have any kind of disability income insurance and then realize that about 60 million adult Americans have no life insurance.  An individual mandate on health insurance is just the first step of our government mandating that we purchase all kinds of goods and services that could be determined to be “Necessary and Proper” for the public good.  If this first step is successful than the whole concept of our democracy in which free people make their own decisions and are personally responsible for those decisions is gone.  We will no longer be the nation of freedom that we were founded upon

 

Helping the Medically Needy, Part One

By Greg Scandlen

In an earlier posting I said that health reform needs to be broken out into several discrete topics, with each one debated on its own. I listed them as –

— Medicare payment reform
— Insurance regulation
— Assistance to the needy
— Management technology upgrades
— Workforce initiatives
— Quality improvement initiatives
— Professional liability reform

These are just top of the head. There are certainly other topics that need discussion. But these are a pretty good beginning. It was nonsensical for the Democrats in Congress to lump them all together in a single package, and think there could be any rational understanding or even discussion of the proposal. As I said, ObamaCare was simply too big to ever succeed.

Now that we’ve spent some time on the last item on the list, professional liability, let’s introduce a new topic – assistance to the needy.

In my opinion, by far the most elegant idea was developed by John Goodman and written about in many places but perhaps most comprehensively ten years ago in Characteristics Of An Ideal Health Care System.

I call it elegant because it is simple to understand, can be applied universally with a minimum of administration, and will actually get the job done.

The two basic ideas are these:

  1. People should be insured if at all possible, but they cannot really be required  (“mandated”) to do so. All that can be done is fine them if they fail to do it. Let’s assume the fine is $2,000 per person. Fining non-compliers $2,000 is precisely the same as rewarding compliers $2,000. So giving a voucher in the amount of $2,000 for every person who has health insurance is exactly the same as placing a $2,000 fine on those who fail to have it. In either case, non-compliers are $2,000 worse off than compliers.
  2. We already know how much our society values health coverage. We know that by how much our society spends to provide care to the uninsured. This isn’t part of John’s argument, but I would add we also know by how much we currently subsidize those with employer-based coverage. Curiously that number is about the same in both cases. In 2007, the Congress’s Joint Committee on Taxation reported that the value of the exclusion for employer-based coverage was $143.3 billion in foregone income taxes and $100.7 billion in foregone payroll taxes, or $244 billion in that year alone. Assuming 160 million people receiving employer-sponsored benefits, that is $1,525 per person in 2007. Goodman estimated that in Texas in 2001, each uninsured person received about $1,000 in free care. So, our ballpark estimate of $2,000 per person today is probably not far off the mark.

So, John’s proposal is to provide a voucher of $2,000 (or so) to every person who buys health insurance. Those who do not choose to buy it would have their voucher deposited in a safety net program. This would be financed by eliminating the employer exclusion, as well as other existing free-care programs for the uninsured.

Before we get into the politics (winners and losers) of this idea, let’s supplement it with some additional thoughts.

  1. It is clear (at least to me) that some not-small number of people cannot handle coping with any kind of insurance program. They may be mentally ill, drug addicted, illiterate, or in some other way dysfunctional. There are people with poor impulse control who are simply unable to plan ahead even for a few weeks. They don’t keep appointments, don’t fill prescriptions, don’t understand the difference between an optometrist and an ophthalmologist. It is simplistic to think that sticking an insurance card in their wallet will do anything positive for them. It will not. These folks need the direct provision of services, not insurance of any kind. The Goodman proposal is the only idea out there that accounts for their needs.
  2. Very low-income people’s needs could be supplemented with state funds, especially if this idea supplanted Medicaid – and it should. Medicaid is a very poor insurance program that looks great on paper but pays so poorly that many enrollees can’t find a doctor to see them. Hence, about one-third of the uninsured are already eligible but haven’t bothered to enroll. Rather than corralling people into a Medicaid ghetto, this proposal would enable them to have real insurance, just like their neighbors. It also accounts for frequent changes in eligibility, as people get and lose jobs.
  3. Similarly for SCHIP. It has never made sense to divorce children from their parents to obtain health insurance. One policy is hard enough to understand without having several different programs for different family members. It would also be more affordable for children to be covered as dependents on their parents policy than to farm them out to a state program. I mean, ObamaCare is allowing independent “children” to age 26 to stay on their parents’ policies. Why in the world should an 8-year old be treated differently?
  4. The current punitive approach in ObamaCare is so full of holes that it will never actually work. Most of the uninsured are too poor to pay taxes, so a tax penalty will have absolutely no effect on them. Goodman’s approach rewards everyone equally, regardless of their income level.

I’m going to leave it there for now, but there will be much more to say about all this in future postings.