Launching new series of posts called ‘Simple Solutions to Strengthen Medicaid’

As they say, one is either part of the problem or part of the solution. Regardless of what happens at the national level, Medicaid poses an increasing challenge to fragile state budgets. It is time for leaders to take sensible action to better sustain and strengthen state programs.

Over the past year, through various posts, we have examined how Medicaid works (or doesn’t work) and we have examined the reform efforts of various states. Now it is time for us to recommend some simple solutions (as if anything in Medicaid is simple).

Curiously, nobody has commented on the blog since I moved to the new site but I know a significant amount of expertise is out there. That is because many of you have sent thoughtful emails and the site has a national audience with visits from 45 states to date. 

So, I am issuing a call for solutions. I will post some of my own ideas but I would also like to highlight the thoughts of others. The only criteria is that solutions are simple, feasible, practical, and move states toward higher-value care. 

Solutions can be submitted to my email at bradyafl@gmail.com.  ~BAA

Chicken or the egg? The case of government payment and hospital costs

At President Obama’s recent town hall in Montana, there was a question from the audience that went something like this, “Mr. President, my brother is a hospital administrator and he states that Medicare and Medicaid do not pay the costs of providing care and thus, drive up the costs for the rest of us. Why then, should we consider expanding these or adding additional government programs?” This is a good point that has been raised increasingly over the past few weeks and as of yet, no health reform supporter (including the President) has even remotely answered it.

They probably haven’t answered it because there is no short and simple answer to this question. As usual, in health care, nothing is simple. As I have said before, what we have is a system problem – not a people problem. Our health care system encourages waste and hospitals are part of that system. Health care is the only market I can think of where costs are the significant driver of payment. That is like going to Best Buy, having only one or a few brands to choose from and then be told the price for a new computer is $3000 because that is what the manufacturer says it cost to make. Not much efficiency there.

Yes, it is true that government does not pay the full cost for hospital care in the aggregate. What is less clear is whether hospitals cost-shift to other private-payers to make up the difference or whether high margins from private-payers depress the government margin (hence, the chicken or the egg). To gain a better understanding, one has to ask ‘are the costs reasonable?’ or better yet ‘what is driving the costs?’ I can remember one specific instance last year when a Florida hospital spent $350,000 on a groundbreaking ceremony for a new tower complete with expensive champagne and Waterford crystal flutes at the same time it was cutting the hours and pay of its direct care nurses. This same hospital spent hundreds of thousands of dollars on a re-branding campaign and a marketing officer making $200,000 a year. Again, I ask ‘are the costs reasonable?’

Thankfully, the independent Medicare Payment Advisory Commission addressed this question in its annual report to Congress (which apparently few supposedly knowledgeable people have read). From the report:

Despite appearances, record-breaking hospital construction in 2007 and negative Medicare margins in 2007 are not at odds. We note that a third factor—unusually high private-payer profit margins—can lead to more construction, higher hospital costs, and lower Medicare margins. In 2007, hospitals’ non-Medicare profits and total (all payer) profits were at the highest levels in a decade. The data suggest that, when non-Medicare margins are high, hospitals face less pressure to constrain costs, costs rise, and Medicare margins tend to be low. Of course, not all hospitals had high private-payer profits; those with low levels of profit on their non-Medicare business face pressure to keep their costs down. We found that hospitals facing significant financial challenges in recent years (2004 through 2006) tended to have lower costs and hence higher Medicare margins in 2007.

A key question is whether Medicare payments are adequate to cover the costs of efficient providers. To explore this question, we have examined financial outcomes for a set of hospitals that consistently perform well on cost, mortality, and readmission measures. For these relatively efficient hospitals, we found that Medicare payments, on average, roughly equaled their Medicare costs.

As the graphic above shows, spending on hospital construction has nearly doubled over the past eight years as hospitals and insurers compete in a virtual ‘arms race’ through growth and acquisition. On pages 62-64 of the report, the Commission provides some nice empirical evidence to back up their claims and states, ‘While causation may flow in both directions to a degree, the data suggest that the primary reason Medicare margins are inversely related to private-payer profits is that high private-payer profits are followed by high hospital costs.’

MedPAC closes its analysis by stating: ‘In the end, affordable health care will require incentives for health care providers to reduce their rates of cost growth and volume growth.’ To a naysayer, this statement equals rationing, to a realist, this statement means that we have got to get better value for our dollar. ~BAA

Note: For additional information, Maggie Mahar’s Health Beat blog has two excellent posts on whether government programs underpay hospitals and whether waste and inefficiency is rampant in hospitals.

Time for the Health Wonk Review (8/20/09)

David Williams from the Health Business Blog is the host of this Health Wonk Review. He cuts through all the fluff and misinformation to give everyone just the facts, so to speak. So head on over and take a look at the latest and greatest from the health care blogosphere. ~BAA

Since when did ethics become ‘mushy?’

A few months ago, I included a comment in a post wondering about the ratio of MBAs to clinicians in health care organizations. I was not saying MBAs are always bad and clinicians are always good but in the aggregate, this ratio would give one a relative feel about the values of a company. As you can imagine, I got interesting responses on both sides of the coin.

Well, a recent article in the NY Times and an episode from The Daily Show with John Stewart reminded me to be afraid, very afraid of some of the whiz kids that are graduating from our best business schools.

In response to the culture of greed that had permeated our society leading to the current recession, students at Harvard’s business school developed an “M.B.A. Oath” and shared it with other business schools around the country. The oath is unbinding and unlikely to be anything more than symbolism but the fact that only 20% of graduating Harvard M.B.A. students agreed to take the oath is troubling.

Apparently, the part of the oath that graduating students objected to was, “I will act with utmost integrity and pursue my work in an ethical manner." REALLY? Jon Stewart highlighted this discrepancy in a recent comedic clip on his show (See below – but be warned, the clip includes some language not suitable for children).

The Daily Show With Jon Stewart	Mon - Thurs 11p / 10c
MBA Ethics Oath
http://www.thedailyshow.com/
Daily Show Full Episodes Political Humor Spinal Tap Performance

Just in case you missed it, here are some quotes from the Harvard and MIT M.B.A. students included in the interview: “It's impossible to uphold the oath and still be responsible to your shareholders" or better yet "I feel that ethics is a really fuzzy subject." Again, REALLY? Since when did ethics become a fuzzy subject? Makes you wonder how much whiz kids like these contribute to the escalating costs in health care.

It is good to see business schools realize that we need high ethical standards for business leaders just like other professions (like the Hippocratic Oath for physicians) but as a society, we have to send a message to business leaders that we will hold them accountable to high ethical standards whether they take an oath or not. ~BAA

Seven Course Meal of Links (08/17/2009)

The veritable feast of recent health policy developments is back by popular demand.

For this dinner party, the guests are leaders of a local health care community. Unlike recent town halls, all of these leaders know each other and thus, the talks are respectful and focused on common interests.

While the guests gather, they make small talk concerning the NYT article and subsequent post from Nobel-prize winning economist Paul Krugman questioning Florida’s economic model. Next, the conversation moves on to the opportunity to improve public health in Florida.  Everyone has different ideas as how to get there but the facts are indelible – over 20 percent of the population is uninsured and the cost of employer-provided family coverage has increased more than three and a half times the growth in median earnings.

A few members of the party bring up a recent article in the Orlando Sentinel stating health reform would bankrupt the state but others respond that the article was quickly shown to be false. Someone then brings up a recent article that states Florida’s Medicaid reform pilot reduced or held spending in check during its first two years but another member of the party responds that the jury is still out on Florida’s reform efforts. 

The conversation then moves to Governor Crist’s column touting his health coverage efforts as a model for the nation. Quickly, people in the party respond (here and here) that Cover Florida only moves persons from uninsured to underinsured and that it does not even keep pace with the number of people in the state losing insurance…everyone agrees that the model’s political value far outweighs its practical value.  

Finally, the dinner bell rings and the party moves to the dining room (and the conversation moves to national reform).  

APPETIZER – Everyone discusses the zealous advocacy of the past few weeks and the President’s efforts to refocus reform with his recent town halls and op-ed piece.  One guest mentions the leadership and resource challenges facing CMS and wonders about the implications.

SOUP – The conversation then naturally moves from CMS to the ‘public option.’ One guest cites Tennessee’s TennCare program as an example of why the public option is not a good idea. Another person responds that Vermont is an example why the public option is a good idea. Additionally, she points out that Massachusetts gets a bad rap as stated in a recent report. Another person adds that consumer directed efforts in both Florida and West Virginia are not faring as well as originally advertised. One guest states that the first thing health reform should do is simplify long-term care by moving all long-term care to Medicare. Finally, the group agrees to disagree on the public option and acknowledge that it is probably moot anyway, since the White House dropped their insistence in favor of cooperatives along with health insurance exchanges.

SALAD – Over salad, a doctor changes the subject by noting the mystery that is the human body. He states that to this day, we still do not understand how general anesthesia works and that we just recently found out the function of the spleen. “Ah, the mystery of medicine, something of which bureaucrats know nothing” replies another doctor. He goes on to point out that quality data have little impact on patient behavior and he questions all of the efforts to implement payment incentives and comparative effectiveness. Someone responds that there has to be some accountability as numerous reports question physicians’ profit motive. Another person agrees and points out that waste exists within hospitals [Note: this is a very good post as usual from Maggie Mahar] as well and that payment for performance works as shown by CMS’ successful Premier demonstration. This statement was echoed by others that brought up the recent Reuters report that showed an emphasis on quality reduces deaths in hospitals. Finally, one person added that change was possible as evidenced by the local areas of excellence highlighted in a op-ed by three top health leaders.

PASTA – A family practitioner starts a new conversation by remarking on a recent report from the National Association of State Health Policy titled Building Medical Homes in State Medicaid and CHIP Programs. He notes the report’s positive view and remarks that medical homes rebuild the link between patient and doctor. A disease management executive at the table responds that medical homes are nothing new and unlikely to succeed on their own. She offers up the recent analysis by Al Lewis (here and here) that questions the success of North Carolina’s medical home model. In the end, everyone agrees that medical homes have a chance to be very successful, especially if payment systems encourage proper management, physician offices use management tools like those used by disease management companies, and they are part of an accountable care organization. 

MAIN ENTREE – While everyone else is eating, an information technology executive speaks up and asks, “Does anyone know the difference between an EMR and EHR or between an EHR and a registry?” And finally, with a grin on his face, he finishes “best of all, does anyone know the difference between a cat and a dog?” As everyone looked around confused, he goes to explain the evolving and contentious world of health information technology.

FRUIT & CHEESE – The lawyer in the room speaks up and says “All is fine and good, but current reform efforts are not likely to succeed unless some barriers to teambuilding are removed. Otherwise it is all moot.” She points out the need to reform the Stark Laws and for the first time, everyone at the table nods in agreement.

DESSERT – the group forgoes dessert in support of the Florida public health doc who lost his job for posting signs like “America dies on Dunkin”. A public health executive notes the intentions were consistent with a recent study on obesity but adds that they were a bit reckless, considering one of the county commissioners owns a Dunkin Donuts.  

COFFEE – The business leader then chimes in with a Business Week article linking continual increases in health care costs with job losses. A patient advocate agrees and adds that increases in health care costs also contribute to already record-level income disparities. He also remarks on a future without reform for insurers and providers.

Everyone ponders these and other thoughts as they move to the living room for a digestif, which is definitely needed to help digest the heavy meal and heavy thoughts. 

Finally, the party’s host says “Ladies and gentlemen, I called you together this evening because you are health care leaders in our community. While we can waste our time arguing about things we do not control, I think it would be better for us to take our new found understanding and do the right thing for the people we serve.” At this point, the various members of the party agreed to form a community collaborative, set stretch goals, and over the course of the next few years, improve their system’s efficiency and quality – regardless of the incentives to do otherwise.

Does this sound far-fetched? Well, it shouldn’t. There are brave communities across the country that have shown it can happen. ~BAA

Are states entering the misinformation fray?

Today, an article titled ‘Florida leaders warn health care reform could bankrupt Medicaid’ appeared in 2 of Florida’s largest newspapers. Problem is, this statement is not true for any of the bills currently under consideration in Washington.

From the article:

The analysis, done by the state Agency for Health Care Administration [AHCA], found Florida's already mushrooming Medicaid rolls would grow from 2.6 million people to about 4 million under proposals to overhaul the health-care system.

Legislation pushed by President Barack Obama would help cover Florida's 4 million uninsured by expanding Medicaid eligibility to include higher-income families and new categories of people, such as childless adults.

The total federal-state tab: $4.9 billion a year in Florida. With the federal government picking up two-thirds of Medicaid costs, that would mean a $1.6 billion hit to the state budget, the study showed. That's on top of the more than $5 billion a year the state said in February that Medicaid is costing, a figure that's likely higher today.

Florida leaders say the extra cost would be crushing, especially with the state facing a major financial jolt in 2011 when federal stimulus money runs out. Though Gov. Charlie Crist has not taken a position on the expansion, Republican legislators are worried.

"Our Medicaid program is bordering on unsustainable as it is," said House Majority Leader Adam Hasner, R-Boca Raton. "If you add this component, you are going to break the back of Florida and every other state."

Problem with AHCA’s analysis is that it assumes the expansion of Medicaid up to either 133 (House Tri-Committee) or 150 (Senate HELP Committee) percent of poverty would be financed using the normal convention known as the FMAP. Under the FMAP, the state ponies up all of the money to fund Medicaid and the Federal government reimburses them for at least half. [In Florida, the FMAP for 2009 was 55.4 percent pre-stimulus and 67.6 percent post-stimulus]

But neither of the bills currently under consideration expect states to pay their portion for the expansion (at least, not initially). To verify this, one can either read each of the 1000 page bills or they can view the nice side-by-side comparison of the bills produced by the Kaiser Family Foundation (see page 2). Both bills clearly state that the Federal government will pay 100% of the Medicaid expansion costs at least through 2014. Let me say that again, both bills clearly state that the Federal government will pay 100% of the Medicaid expansion costs at least through 2014.

Now after that, things get murky. In the Senate HELP bill, states will receive a Federal match of 100 percent until 2015 for Medicaid expansion and then in 2015, this percentage will phase down to the normal FMAP by 2020 [this info is missing from the side-by-side].

In the original House Tri-Committee bill, states will receive a Federal match of 100 percent with no end date. Two of the three committees that jointly developed the Tri-Committee bill passed it out of their respective committees without amending this provision. But, the other committee adopted an amendment where states will receive a Federal match of 100 percent until 2015 for Medicaid expansion, and then 90 percent thereafter. Clear as mud, right?

The most important thing right now is to ensure an open, honest, and thoughtful dialogue. Though the article is probably an honest oversight, it is essential right now that all information regarding the potential effects of health reform is properly vetted and placed in its proper context. As we have seen all too often this month, “once it’s out there, it’s out there” – accurate or not. ~BAA

Leaving a Legacy: Eunice Kennedy Shriver

I am at a bit of a loss today about the passing of Eunice Kennedy Shriver. Ms. Shriver was a courageous woman who fought tirelessly for the dignity of persons with disabilities. 

She truly transcended politics for the common good (President Reagan gave her the Presidential Medal of Freedom) and achieved more good for more people than just about any political or business leader over the last 50 years. [AP photo / Washington Post]

As a rule, I try not to get personal in my posts but her efforts touched me personally and I would be remiss if I did not tell this story. While I was at the Naval Academy as a brash 18 year old, I got in trouble for some infraction or another and was sentenced to the “yard” (which was basically marching in a square for hours at a time). In lieu of the traditional punishment, I was given the choice of coaching a Special Olympian during a local meet and happily agreed.

On the day of the Olympics, I went down to the event happy that I had gotten out of punishment and wanting to fulfill my obligation so that I could get back to my life. Little did I know what awaited me…a young girl named Sarah who had a soul as bright as the Sun. Sarah was a wonderful athlete and won almost every match and it was a joy just to see her compete.  As she was getting in the car to head home, she poked her head out the window and said “I love you” in a way that reminded me about what is really important in the world. I have never forgotten her and I never will.

Ms. Shriver, thank you for making a difference in my life.

Outside of that, any further words I can write about her are inadequate. To read more about her legacy, one can find some wonderful pieces on her by J.Y Smith at the Washington Post, Harold Pollack at the New Republic, and Jack McCallum from Sports Illustrated. ~BAA

Why is the business lobby silent? (UPDATED)

Maybe it is just me but I find the recent silence from the National Federation of Independent Business, the Chamber of Commerce, and the Business Roundtable interesting. Why?

Because the non-health part of the private sector has been at the forefront of efforts to increase the value of care delivered in the U.S. and rightly so, they have as much to gain from better value as anybody. I still remember the clarion call of Intel’s former CEO, Andrew Grove, in his New England Journal of Medicine piece over 4 years ago.

Earlier this year, the Business Roundtable released its Health Care Value Comparability study, which shows that health care costs put U.S. workers and businesses at a competitive disadvantage with global competitors. Additionally, it showed that this disparity is increasing. 

    

If one looks at the Roundtable’s principles for reform, one can see that they clearly advocate “10. All Americans should be made aware of end-of-life care options.” In fact, the organization’s principles are sound and similar to the reform bills currently under consideration. Yes, the details may differ, but they are thoughtful, reasonable and in the negotiable ballpark. 

Same thing with the National Federation of Independent Business. What they want out of healthcare reform is also reasonable and within negotiable distance.

Which brings me to the U.S. Chamber of Commerce. Their motto is “fighting for your business” and that seems to typify their approach to health care reform. From their website, it appears their ardent support for their clients is at cross-purposes with the current climate of compromise. As reported by the AP today, the Chamber started running 30-second spots in about 20 states criticizing the Democratic proposal to offer optional government health coverage.

All this leads me to why I wrote this post in the first place. Why, during the tumultuous last week and all the misinformation swirling around, are these organizations silent? Why are we left to see interviews with leaders of various “astroturf” organizations. Especially when business organizations have such a large leadership role and, in large part, share principles with current reform efforts.

There are various possible explanations for this vacuum. Their leadership may be slow to respond due to organizational inertia. They may not want to cash in their chips and thus, have taken the easier “wait and see” approach. They may be slowed by internal divisions (health care interests are a large part of their membership). And finally, it may be that they are concerned about the balance of power in Congress and don’t mind Democrats (and unions) getting bruised up a bit.

Regardless of the reason, we need our business community to lead and their absence concerns me. Leaders work together to address the most pressing issue of the day and true leaders sacrifice short-term goals for long-term gain. By either of these standards, our business community is currently lacking. ~BAA

Health Wonk Review – August Recess Edition (08/06/09)

The August Recess edition of the Health Wonk Review is posted over at one of my favorite blogs – the Disease Management Care blog. For those who may not know, the HWR is a collection of the best and brightest blog posts over the last few weeks and this week, our editor and host is the venerable Dr. Jaan Sidorov. Enjoy. ~BAA

[Note: I can’t help but look at the graphic and try to imagine which blogger fits each character.]

A new way to pay…for Reform

Over the past few months I have been musing about how to pay for reform in a way that as effective and fair as possible given our messy world. The one option that kept coming up in my mind was extending the employee portion of the Medicare Part A payroll tax to non-wage income like capital gains.

In other words, why don’t we make sure everyone helps pay for Medicare…including those who primarily make a living off of capital gains? Well, I thought this idea was novel, since it was not covered in the CBO’s list of 115 health care reform options, but Merrill Goozner got the drop on me today with his post A Tale of Two Taxes. According to Mr. Goozner, this option would raise $500 billion over the next ten years.

This money could be used to not only shore up the Part A trust fund, which is now running at a deficit, but it would allow general revenue earmarked for Medicare to go toward other uses, like covering the uninsured, expanding Medicaid, and investing in an Independent Medicare Advisory Committee. In essence, this amount, coupled with other Medicare cuts, would pay for the reform efforts currently under consideration.

The economist in me is wary of new taxes but there is definitely a case that can be made that individuals who get more of a share of their income from investments should pay their fair share. Remember, as of the 90s, the Medicare payroll tax was uncapped so that it applies to all wage income – why not non-wage income as well?

Conversely, two arguments are often made to keep capital gains taxes low. The first is the issue of double-taxation, which has almost a birther following. This argument states that since corporations pay taxes, that by taxing the proceeds from investments, individuals are, in essence, paying a double-tax. Well, that is true and it is not true. Corporations don’t really pay taxes, they just build them into their model and pass the costs down to employees and customers.

The other argument, which has a lot more traction with me, is that an increase in the capital gains tax may negatively affect total tax revenue (see graphic). That is true, to a point. That is why this expansion in the Medicare payroll tax to non-wage income should only include the 1.45 percent employee contribution, which would leave the rate of 16.45 still significantly less than the rate that existed during our best two periods of capital gains revenue. 

Personally, we have got to find a way to front the money needed for reform. I can think of no better way to do this than extending the employee portion of the Medicare payroll tax to non-wage income. It is relatively simple, it increases the fairness of the tax system, and most importantly, it would fund necessary investments in our health delivery system.  ~BAA