Tag: Medicaid expansion

Medicaid for all?

November 14th, 2014 by

As More Join Medicaid, Health Systems Feel Strain.” That’s the striking and counterintuitive headline on the front page of the Wall Street Journal. The Affordable Care Act is injecting billions upon billions of dollars to provide Medicaid to previously uninsured people. More money should help healthcare providers’ finances, not hurt them. So what’s going on?

To summarize, Medicaid reimburses for services at only about half the rate of what commercial health plans pay. A doctor in the article receives just $80 to see a Medicaid patient compared to $160 for a commercial patient. That’s typical.

If all providers had the same mix of patients, this wouldn’t be such a problem. Well reimbursed commercial patients would make up for poorly paid Medicaid patients. But in today’s world, that’s not how it works. Some health systems concentrate their resources in wealthy communities with lots of commercial patients. Other providers end up with a much higher share of Medicaid patients and enter a vicious cycle that depresses their earnings, makes it hard for them to compete, and leads eventually to financial distress. To make matters worse, some of these “Medicaid” hospitals receive lower rates from commercial plans than fellow hospitals who avoid Medicaid. This is the scenario we face in Massachusetts (see Healthcare Inequality in Massachusetts: Breaking the Vicious Cycle) and elsewhere.

Still, I don’t accept the Journal’s implicit conclusion that the Medicaid expansion is bad for hospitals and physicians overall. For any given patient, a provider would much rather get reimbursed by Medicaid than try to collect from an uninsured patient. And since the US spends double per person what other rich countries spend on healthcare, even stingy Medicaid budgets should suffice.

It’s notable that the Journal article says next to nothing about solutions to the problem. All of the examples they cite assume a fee-for-service system. The very first example –Medicaid paying for robotic surgery for a patient– reminds me of the US system’s penchant for high-tech interventions that are expensive but not necessarily better.

Solutions are at hand, if we would be bold enough to embrace them:

  • Reduce disparities in reimbursement rates. Is there a defensible rationale for paying different rates for Medicare and Medicaid beneficiaries? For that matter, why should commercial plans pay a different rate?
  • Consider payer mix when setting reimbursement rates. If we’re stuck with differential rates between Medicaid and commercial –which we probably are– we should at least not penalize providers who take care of a lot of Medicaid patients. Their commercial and/or Medicaid rates should be adjusted so they don’t have to turn away Medicaid patients to survive.
  • Shift to risk-based payment models. Fee-for-service is wasteful and provides incentives for volume and high acuity care rather than value. Why not encourage the use of Medicaid Accountable Care Organizations and other risk-bearing approaches that give providers responsibility for costs and quality?

The sooner we have a serious discussion about Medicaid policy in this country the better.

By healthcare business consultant David E. Williams, president of Health Business Group.

Republican dominated states swallowing their pride on Medicaid expansion

September 15th, 2014 by
Time to swallow it, fellas, and expand Medicaid
Time to swallow it, fellas, and expand Medicaid

Pennsylvania and now Utah are joining other Republican-run states that have decided to say yes to the expansion of Medicaid under the Affordable Care Act after all, after obstinately deciding to say no after the Supreme Court effectively made expansion optional more than two years ago.

It makes perfect sense. As I’ve described repeatedly (see Texas cuts off its nose to spite its face… and On Medicaid expansion, poor states are subsidizing rich ones) refusing Medicaid expansion is self-defeating for a state. With elections coming up in November, some Republican leaders have realized it might be self-defeating for them in a very personal sense!

All of this is treated as news, but fact is it was predictable at the time, and in fact it was predicted right here on the Health Business Blog. The only surprise is that it’s taking this long. I discussed the ruling with Dan Mendelson, CEO of Avalere Health on June 29, 2012, the day after the  Supreme Court’s decision. Here’s how the discussion went:

Williams: So does [the ruling] mean that there will be a hodgepodge with some states doing the expansion and some not, or is it more nuanced than that?

Mendelson: I think in reality most states, or I would even venture a guess that all states will be compelled to take the expansion, because remember that the federal government pays for the entire expansion until 2017 and then thereafter the subsidy rate is around 90%, so you’d really have to be a rogue state to refuse that.

Or put slightly differently, if you’re the governor of the state, how are you going to stand up in front of your electorate and say, ‘I’m not going to cover people near poverty because I’m worried about the out-year liability that we might incur, and therefore I’m going to turn down the federal government’s largesse.’ I think it would be very difficult for a state to do that.

Williams: So essentially the Court was saying that a stick should come out of the hands of the federal government, but the fact that the Affordable Care Act includes pretty significant carrots, it means that from a practical standpoint this is not a lot of change?

Mendelson: That’s right, and that’s how we did the Children’s Health Insurance Program back in ’97 and ’98. There was a generous subsidy that was put on the table and the states decided that they wanted to cover children or that they had to cover children and it wasn’t long before 50 states had adopted that expansion.

And I think that in this case as well, it is quite likely that unless someone really wants to make an unabashed political statement that states will go ahead and cover these folks who are near poverty.

So far the South is solid in its rejection of Medicaid expansion, except for Arkansas. Look for that to change in 2015, even if the GOP takes the Senate.

photo credit: hragv via photopin cc

By healthcare business consultant David E. Williams of the Health Business Group