MediCAID for Everyone

The title of the post really is Medicaid for all not Medicare for all. The excitement level for all single payer advocates should drop a little bit. For the rest of the population who is trying to remember the difference between Medicaid and Medicare, Medicare is for seniors, pays doctors a little bit better, and is the non-stigmatized government health insurance. Medicaid is the ginger-headed step child that has to sleep in the boiler room when it comes to government programs.

I tracked an interesting set of comments from the Archimedes group list serve, an Oregon-based advocacy group started by former Oregon governor John Kitzhaber. It was a debate on whether Medicare or Medicaid should be the health insurance plan that should be turned in to the single payer system. There were some participants who had both insurances. Ultimately, they admitted that they didn't like Medicaid because it was less widely accept by providers but primarily due to the stigma associated with it. Not surprisingly, Medicaid for Everyone has a branding problem.

From a plan design perspective, Medicare for Everyone makes little sense. It's designed for seniors and thus covers a screening for aortic aneurysms but no annual check ups. It covers eye glasses that one gets following cataract surgery but no routine vision exams. It covers 3 pints of blood for transfusion but not maternity services. It's benefit design fits the non-senior population as well as Glee's Rachel Berry's skirts and general wardrobe fits her. Finally, the benefit design basically covers 80% of all services with no limit to out of pocket costs. That leaves the beneficiary with 20% of all medical costs that are covered with no cap.

From a care delivery perspective, Medicare is a fragmented payment fee for service system that had the least successful experience with disease management in US health care history. Lifemasters, a disease management company, went bankrupt trying to work with Medicare.

Medicaid typically operates in a capitated managed care environment. The benefit design focuses on preventive care, mental health services that most of its beneficiaries need, and even dental. It focuses on fixed copays and limited out of pocket exposure. A primary care provider is given the budget and control of the beneficiaries health care dollars to use appropriately. Most of the currently uninsured have more in common with your average Medicaid beneficiary than your average senior citizen. Thus, Medicaid is the most appropriate federal health plan design to use for a single payer system.

I touched upon the provider payment issue with Medicaid which is the main current barrier to a Medicaid for All campaign. It's more difficult to find providers to work with Medicaid beneficiaries because it pays so little. The capitated payments that it provides don't cover a lot of health care services so delivery systems usually lose money on Medicaid. However, with any business that is losing money, there are always 2 levers. The revenue lever and expense lever. Health care has focused on growing revenue for a long-time which is why it increases at the twice the rate of inflation.

Health Reform will shrink revenue for health care organizations. Medicare's physician payment needs to be cut 21% according to current laws and commercial insurance revenue is not going to grow at present rates. Medicaid payments for primary care actually are supposed to increase. The biggest factor is that number of people with Medicaid is forecasted by McKinsey Consulting to grow by 25% through 2016. Employer insurance is forecasted to remain flat or the same levels at 2010. Health care organizations that can thrive under a Medicaid level payment structure will thrive in a post-reform world. It will grow more than any other insurance market and refusing to accept its patients because the payment is too low is not going to be an option.

Instead health care organizations will have to learn to adjust their cost structure in order to be able to make money under a Medicaid level of revenue. That includes deciding where to invest money and where not to. The care delivery system to be built around the Medicaid patient does not have to be expensive since the primary care provider is king (or queen). Networks can be narrow and special partners and hospitals can be required to be on the same electronic record system, use the same disease registries, and follow other protocols as a requirement for payment from the capitated pool.

Providers and hospitals have been in an expensive war for commercial insured patients. However, the competition for the Medicaid market can be a much cheaper fight and can be most lucrative in a post health reform world.