Be the Change that you can Abdicate to Others

Not quite the snappiest title like "Be the change that you see in the world" which is both a popular bumper sticker and looks good on the back of graduation T-shirts from social work programs. However, I like the word "abdicate" as much as I like the word "colonoscopy" and it's easier to spell.

The fact that I completely digressed before I even started writing the post is completely impressive, too. I can't even use "But I digress" as a transition. My point is that local governments are running away from making any difficult decisions in designing health care systems. Their lack of boldness is making Wisconsin governor Scott Walker's decision to declare war on organized labor look good because at least he made a decision and stuck to it.

The state of Oregon has provided some very fine recent examples of such abdication with their Medicaid program. Rather than make difficult, thoughtful decisions to guide the program, they throw half baked ideas to health plans and providers. They are:

1. Charge copays for services. The state gave the option to charge a $1 to $3 copay to non-Native American adults for prescription drugs and primary care. This was intended to reduce the amount of money that the state paid for services by passing on the costs to the Medicaid beneficiaries. However, trips to the emergency room were still no cost to the Medicaid beneficiary. In an effort to save money, the state made an incredibly poor benefit design decision and and as a bonus, set up in a way that was difficult to administer. Providers would have to figure out who they could collect $1 to $3 from and what to do if that individual did not have any money (like send them to the Emergency Room rather than give them their $4 generic prescription drugs).

Almost all the carriers decided not to implement this copay scheme and just take less money from the state. This is an example of a bad idea to save money that the state floated to health plans and providers. It went over like a lead zeppelin. This was an opportunity to have a serious discuss about benefit designs and what Medicaid beneficiaries should pay for and what they should not pay for. Incentives could have been developed to guide positive behavior and punish negative behavior. Instead, an administratively unwieldy option was offered to punish positive behavior. The end result was a waste of time.

2. Ask health plans what the reduction in Medicaid costs should be: Oregon is facing a budget shortfall and has stated that it plans to reduce Medicaid spending by 19%. Another option is increase the provider tax in order to get more federal matching funds and face a 10% to 12% reduction. Oregon also has a rule that its Medicaid spending must be actuarial sound. That means if they want to cut costs by 10%, or 12%, or 19%, then the health care services used should also be projected to reduced by that same amount. This also provides yet another example of how actuaries are guaranteed employment forever.

Oregon has proposed some good ideas to redesign their Medicaid system to achieve those savings. However, they don't think that they can achieve the savings this year. They are squandering a perfectly good crisis and asking health plans to come up with their own actuarial sound analysis of the lowest cost to provide health care services for Medicaid beneficiaries. In other words, they are asking health plans what the cut in spending should be. This is a crucial decision in Oregon's Medicaid program and they asking health plans to do their homework for them.

A budget cut is just a loss of services but a budget cut and a health care system redesign is an opportunity. Under health reform, states have more options available to transform their health care system with Xxchanges that will allow them more control over the health insurance market. There are "pay or play" options where carriers must participate in Medicaid or providing guaranteed issue to children or face a financial penalty. This is the opportunity for bold and difficult decisions for states to make that will change the lives of their most vulnerable citizens.

This is not the time to buy a vowel.

Death's Door Bandit; A Sad Tale about the US Health Care System

An elderly gentleman walked into a bank and indicated to the teller that he had a weapon. The teller was convinced enough about the danger or nauseated enough by his ear hair that they considered the threat to be serious. Before anyone handed him the money, the gentleman collapsed into a chair and had a heart attack.

This turned out to be an actual lucky turn of events for our ear haired protagonist because he had robbed the bank to get money to pay for health care. Due to a 1976 US Supreme Court decision, it is considered cruel and unusual punishment for a prison not to provide health care. Since the elderly gentleman was now in the prison system, he got the medical care that he needed.

However, there is a plot twist for the Death's Door bandit (This is a better term than the Ear Haired Bandit. I don't know if he had ear hair or not but if he is over 65, it's safe to assume that he did. The Bleeding Heart bandit is also an option). Readers may be wondering if the Death's Door bandit (DDB) was old enough to qualify for Medicare, the health insurance scheme for senior citizens. Not only was he eligible for Medicare but also Medicaid, the health insurance scheme for the low income! In case anyone is wondering, why I am calling Medicare and Medicaid a scheme, it is because I am imitating the Economist who uses that terminology. If you read it with a British accent, it sounds much more regal.

DDB is getting his health care paid for by the prison system but could also get his health care paid for by Medicare and Medicaid. He will no longer need to rob banks for health care so this story appears to have a happy ending. But wait, this scheme has a plot twist!

Heart attacks and medical care for senior citizens whose physical and mental status has decompensated to the point that they don't even realize that they qualify for basic government programs is not cheap. It's costly enough that administrators for the prison health system and Medicare and Medicaid started to pay attention. Both administrators took the high road and began to maneuver to try and stick the other one with DDB's medical bill. Medicare and Medicaid administrators want DDB to stay in jail so the prison will pay for his health care while the prison administrators wants to release DDB so Medicare and Medicaid will pay for his health care. The justice system is caught in the middle.

Only in America. Our health system must rank number one in something for this scenario.

Full disclosure: This is a true story. Names and details would have been changed to protect the innocent, except there are no innocent in this story.
Full disclaimer: I don't know the difference between disclosure or disclaimer.

Ryan's Field of Dreams while Oregon is not just waiting for them to come after Building It

Last week, representative Paul Ryan released a budget proposal that was called everything from "interesting" by Ezra Klein to "bold" and "game-changing" by Fox news. The popular sports analogy was how Ryan changed the playing field on the health reform debate with his hail merry. My mixed sports analogy would be that Ryan punted to the Field of Dreams where he thinks that if he builds it, they will come.

Ryan's proposal specifically "would provide Medicare beneficiaries with lump-sum vouchers to buy private insurance and turn Medicaid into a block-grant system." States would get $11,00 per Medicaid beneficiary and the federal government could cap its exposure to health care costs. In other words, the federal government is turning its health care programs from a defined benefit to a defined contribution program and getting out of the health insurance business.

I used to think that block grants were a good thing because the word block has positive connotations. It makes me think of a block party or playing with blocks. The idea that the government gives you a block of money and a lot of freedom also sounds appealing. However, I have realized that block grants should really be called blockhead grants because they are generally used for programs that the granter doesn't like. That's why block grants won't cover the actual costs of the programs. Calling the programs, "Hey blockhead, how much money do I have to give you to go away? That's it? Great!" would be too honest and the acronym would be too long.

Ryan's idea of vouchers and block grants for Medicare and Medicaid is nothing new. Democratic and Republican politicians have proposed these ideas since 1981. What would make this proposal interesting is if Ryan attempted to design a market that would create an incentive to participate in these programs and provide care. That is the challenging part and why this is just another example of Republicans punting on actually coming up with a solution for the health care system. It will shift costs to employers who will become a main source of health insurance for older workers or beneficiaries who won't be able to cover their health care costs. It does nothing to change a fee for service system that will respond to lower payments with higher volume and more invasive treatments that get higher reimbursement.

The state of Oregon is seeking federal waivers for its Medicare and Medicaid funding in order to design a real system of health care. Waivers doesn't have the same warm and fuzzy feel as block grants. However, it's better because with waivers you actually get the same amount of money as before. Oregon is taking the ball and running with it by designing a care delivery system to support it called Coordinated Care Organizations (CCO's). They are similar to the federal governments Accountable Care Organizations (ACO) with 2 key differences. Patients select their CCO in advance and have a relationship with the providers while patients are assigned to an ACO retrospectively and don't have the same provider relationship. The other difference is that one starts with C and the other stars with A. I really wish Oregon could come up with a BCO acronym since they skipped that letter but the only one that I could think of was Boring Care Organization.

The relationship aspect of the CCO gives the organizations an opportunity to attract patients to join. The CCO's will start by serving the growing Medicaid population (which will become 30% of Oregon's under 65 insurance market in 2015) but will have business steadily funneled to it by the state government bodies like the Oregon Healthcare Authority. For example, the state has indicated that they may only contract with CCO's for the lucrative public employees insurance. That is how the system creates incentives to participate in providing care to difficult populations like Medicaid and Medicare. This is very different from Ryan's plan to have these beneficiaries fend for themselves with a 50% off coupon.

This Oregon proposal is something that I would call bold and game changing.

My Predictions for the Health Care Industry in 2011

It's the holiday season which means it's time for holiday parties, left over money in the company budget is blown on work parties, lots of food, plenty of excuses to drink alcohol, and lots of nostalgia. For bloggers, this means guaranteed blog topics either in a form of 1) a review of the year that was or 2) predictions for the next year. I have a tradition of making conservative predictions. Last year there was a trend for bloggers to dismiss predictions as so last year and boldly proclaim that no one can predict the future. Really? Is that the best that you can do? Are you going to tell me that bears poop in the woods (and wipe their butts on the the rabbits) and "refudiate" isn't really a word?

With that introductions, my non-refudiable 2011 health industry predictions are:

1. Hospital Executives will be the next set of CEO's to be hauled in front of Congress: and struggle to take their inquisitors seriously. I mean it's probably tough not to laugh at the histrionics of some of the members of Congress, let alone not stare at Henry Waxman since he's so funny-looking. Or want to ask Dennis Kucinich if he wants to sit on your lap and tell you what he wants for Christmas.

However, hospital executives will have to practice refraining their giggles as recent articles have pointed out how some hospitals are so dominant that they can paid above market rates by insurance companies. Another article pointed out that California inpatients hospital costs have increased 150% (or 11% annually) since 2000. The best defense that hospital executives could muster in response to these articles was "the data must be flawed." That's not much better than a response of "So's your face." Hospital costs (and accompanying specialists) make up at least half the health care dollar and are growing too fast not to be identified as key driver of runaway health care costs. While the insurance companies have received the most public scrutiny this year, next year it will be on like Donkey Kong for hospitals.

2. Despite state budget woes, Medicaid will continue to grows: I wanted to pick a word that rhymed with woes and couldn't figure out how to use toes. Since 2007, the number of Medicaid recipients has grown 16% nation-wide to 50 million. In Oregon, it's grown 25% in the last year. This growth doesn't even include the projected 16 million new Medicaid enrollees in 2014. This isn't going to change in 2011 since the states are getting larger matching funds from the federal government. Every $1 the state spends brings $1.60 from the federal government. Medicaid is still one of the best ways to arouse, er no, stimulate a state economy.

3. Everyone gets more comfortable with Medicare Advantage: Despite becoming the ginger-headed step child of government programs, a lot of reform provisions are borrowed from Medicare Advantage. Risk adjustment based on health conditions in the Exchanges is from Medicare Advantage. Open Enrollment periods are being used for individual insurance for those under 19 years of age. Currently, seniors are in the middle of the November 15th-December 31st Annual Election Period for Medicare Advantage. One of the crankier bloggers who doesn't like health reform (or much of anything) sees open enrollments as good replacement for an individual mandate that will likely be challenged in the Supreme Court. The senior citizen model for health insurance is quickly becoming the market norm under health reform only with slightly better shoes and a mobile phone app.

4. Health Care Costs will actually decline: Earlier in the year, there was discussion of reduction in the Pentagon budget. What they really mean was not an actual budget cut but the budget just wouldn't increase as much as it typically did. Rather than an increase of 3% in the budget, the increase would only be 1%. Until Robert Gates took a dump in the punch bowl and announced that there would be an actual budget cut complete with negative numbers.

This situation was pretty similar to health care costs where the holy grail was an increase that merely matched inflation. This may be the year that we see an actual cut. The money that insurance companies are inhaling from businesses like a frat guy sucks on a bong is about to get bogarted. The canary in the West Virginia coal mine was the Connecticut's Insurance division rejection of Anthem's 20% rate increase for individual plans and a counter offer of 0%. The rejection of rate increases is likely to become more common. Providers are likely to get similar treatment if the "budget" or health insurance revenues are frozen like a Siberian winter.

For the record, Senator Lieberman expressed disappointment at the Connecticut Insurance Division's decision because he saw a great opportunity to be a dick wad.

5. There will be more consolidation in the health care industry. This prediction is to absolutely guarantee that I get one of these right. Predicting consolidation is as safe as predicting that your human resource department will do something aggravating. There has been annual consolidation in every industry from health insurance to Thai food carts since the 12 tribes of ancient Israel were consolidated in 10. Even ancient Hebrews understood economies of scale and market power.

My Society of Insurance Research Presentation: The Business Opportunity that Health Reform Created

Some eager followers of Roll Away the Dew may remember that 2 weeks ago, I presented at the 40th Annual Society of Insurance Research (SIR) Conference in Jacksonville, FL. Other eager followers may still be recovering from Thanksgiving and that pumpkin cheese cake so everyone's mileage varies. Linked below for everyone's powerpoint pleasure is my presentation on the business opportunity that health reform created for Medicaid. I'm trying to figure out a catchier slogan that have the acronym of "SIR GALAHAD" or "TRON" but am having trouble.

SIR Medicaid Opportunity Presentation

View more presentations from dongrunt.

For those who may not plan to peruse all 13 dense slides, the cliff notes are as follows:

• Medicaid is going to become a larger insurance market. By 2016, almost 1 in 5 Americans will have Medicaid compared to 1 in 10 with individual commercial insurance or 1 in 8 with insurance through a small business.
• Market impact varies by state much like the Thanksgiving stuffing.
  
• States that are complaining about budget impact are not talking about how the federal government will pay for 100% of the new Medicaid eligibles from 2014-2016 and 90% of the cost for 10 more years.
• These post 2014 Medicaid eligibles will be very different than the current Medicaid eligibles. New eligibles from reform will be mostly adults, be working poor, and have successful experience managing their own health. The main difference between this new pool of Medicaid eligibles and a blue collar service union group is the union membership.
• Provider partnerships and financial arrangements will have to be different and no longer rely on the number of physician visits as the vehicle for payment. Reimbursement needs to focus on care teams, long-term partnerships, and reward medical management. Federally Qualified Health Centers (FQHC) provide an excellent opportunity.

At the end of my presentation, I had convinced a very Liberatarian crowd who had this view of government to give Medicaid a different look. My next step is convincing my employer to invest in these ideas.

As far as the rest of the Society of Insurance Research conference, it was a very interesting event with compelling speakers that had some great analysis of the segments of people who buy property and casualty insurance. Plus, at what other conference do you find yourself exclaiming how those property and casualty folks really know how to party?

Providing Care in a MediCAID for Everyone World

For all who dream about a single payer US health care system, I continue to tell them the calories in that punch bowl by declaring that a US single payer system will look like Medicaid. I don't turn their dreams into a nightmares or urinate in that punch bowl. It's more like finding out that the girl of your dream has man hands.

In all likelihood, a national health care system will resemble Medicaid, the health plan that stretches dollars to the previously uninsured with tightly managed care and low provider reimbursement. According to Ingenix, in 2016, the number of Medicaid beneficiaries will grow by 30% while the numbers who have better paying commercial insurance will remain flat. Medicaid will be the fastest growing insurance market so providing care will become increasingly important. Here's how I think that it will play out:

1. Who are these new Medicaid beneficiaries? Some feel that the health care utilization of Medicaid beneficiaries is unique while some see the only difference between a Medicaid beneficiary and someone with a blue collar health insurance plan is union dues and 5% of the Federal Poverty Line. What we do know is that they will mostly be adults but what we don't know is how much pent up demand they have for health care services and what kind of services they want. What will probably happen is that their health care utilization will decrease over time as they can regularly access care as opposed to gorge on the newly opened health care buffet.

The significance is that for those who participate in the Medicaid world especially with dollars at risk in a capitated environment will have some rough early years. However, the health utilization will stabilize over time and there will be opportunities to be profitable in the future.

2. Nurse case management will be key: The type of care that current Medicaid beneficiaries receives is often related to their chronic disease state or difficult socioeconomic environment. Those types of problems don't require a doctor to tell a diabetic to eat more vegetables and not leave their guns on the kitchen table. Nurses or social workers are the best option. However, currently only doctors get paid for the visit while these types of providers do not. A change in the payment system can address the revenue side of the equation while greater use of mid-level providers (I think that's the right term for nurses or social workers. I wouldn't want to call them lower mid-level providers) instead of doctors will help the expense side.

3. The Medical Home will save the day! The Medical Home model is the idea that someone should get all of their medical services in one place and it should be coordinated. It is also a friendly place where a patient likes to go. Definitions vary wildly but it is the latest trend in health care delivery. The flip side of a medical home involving throwing random bits of health care in settings where no one knows your name isn't appealing so the Medical Home model should stick. Especially since there is more money for available in the form of Centers for Medicare and Medicaid demonstration projects or large employer groups who are so desperate to reduce health care costs that their alternative plan involves sacrificing a goat. Since there are so many organizations willing to pay for the research and development, the medical home model will be tested and ready for that influx of Medicaid beneficiaries.

4. Go Federal, Federally Qualified Health Center (FQHC), that is: There will be $11 billion available nationally to double the patients served by FQHC's or Community Health Centers. FQHC's receive federal grant funding are are reimbursed at their costs for Medicaid visits. They are well equipped and knowledgeable about providing care for the uninsured and Medicaid. They also get paid more than private providers due to the fact that they get reimbursed at cost for Medicaid patients. The application process for becoming an FQHC is not a simple one. However, with limited provider access and low Medicaid reimbursements for non-FQHC clinics, the benefits are well worth investigating the application process.

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.

Let S/he Who Has Not Sinned Decide who are the Deserving Poor

I recently read a blog post from one of the few libertarian bloggers, Milena, that doesn't cause me to sputter like Daffy Duck at my computer screen. It was about one of this country's favorite topics which is, who are the deserving poor and who are the undeserving poor? Whenever there is talk of expanding a safety net benefit like unemployment insurance, food stamps, or something really crazy like health insurance expansion, the following proclamations are issued:

• These people live a lifestyle of luxury on $400/month! When you give people just enough money to not starve or be homeless, they have no incentive to ever get a job!
  
• I know an obese person on food stamps who eats junk food all day! They should only let people on food stamps eat vegetables and drink skim milk!
• I have a job with health insurance! Why should people without jobs have health insurance! They clearly must f#cked something up if they don't have a job with health insurance!

Milena's blog post connects the food stamp program with artists and uses that angle to examine the government support/subsidization of art. The idea of using safety net programs for a specific field is an interesting concept. However, the idea of asking who deserves access to these programs is not as interesting.

One of the few things that I learned in social work school is that the country's safety net programs were set up very differently if the recipients were thought to be deserving poor compared to undeserving poor. Medicare and Social Security were for the deserving poor, or elderly who had spent their lives contributing to society and needed a retirement program that didn't involve being broke and slowly dying in a hospital. The enrollment process is very easy. Turn 65 or 62 and the government signs you up automatically.

Thanks to the National Kidney Lobby, if you have End Stage Renal Disease, you are also deserving poor. You automatically get signed up for Medicare health insurance if are diagnosed with the disease no matter how old you are. However, if you have tuberculosis and can't work, it's too bad so sad.

If you need cash assistance from the state or want to qualify for Medicaid health insurance, the enrollment process alone makes it very clear that these are for the undeserving poor. It requires extensive documentation to overcome the assumption that you are not spending extensive amounts of time and effort to cheat the government out of approximately $400-$600/month. If someone was skillful enough to defraud a government assistance program, they would use those talents on a much higher scale and defraud the private sector of millions.

What about Ronald Regan's welfare queen who had "eighty names and 12 social security cards" to defraud safety net and government assistance programs of $150,000/year? She was never proven to exist. There was a story about a woman who managed to defraud welfare programs for $8,000 with 4 aliases before being arrested. As I had said before, it's really hard to defraud government assistance programs for a large amount of money without getting caught. If Regan's welfare queen was as good as he claimed, she would find more lucrative opportunities.

As a result of dividing the poor into deserving or undeserving, we create extremely inefficient safety net programs. Programs spend money on more administrative aspects, create additional bureaucracy, probably deny assistance to beneficiaries who should receive it, and operate a program based on the exception rather than the norm.

If I were president and could force Congress- no, that's not realistic. The president can't even force Congress to be polite during his speeches. If I had enough weapons and bombs and barricaded Congress in a building, here are the 2 choices that I would give them to reform our safety net and assistance programs:

1. Create a program that follows 90% of behavior and assume that all poor are deserving: If someone's income or disease state prevents them from supporting themselves, simply allow access to entitlement programs. Being on these programs is not a life of luxury so 90% of all applicants are not trying to defraud the system but simply need help. There will probably be enough savings from removing the extensive application and review process to expand programs somewhat.

2. Assume all poor are not deserving and end the programs: Let the exceptions rule and just end assistance programs that are a charade or promise of assistance. For those who don't want to subsidize health insurance, then let's end the Emergency Medical Treatment and Active Labor Act (EMTALA), also known as not letting hospital emergency rooms deny treatment based on ability to pay. Why start paying for services when someone collapses on an emergency room floor from a very treatable chronic disease but refuse to pay for the doctor office visit to prevent it? That is completely economically inefficient and still fairly heartless. For the libertarians, let's just be heartless but at least be fiscally consistent.