Should Medicaid be Federalized?

My friend and colleague Peter Ubel thinks so, and he makes some good arguments. I think that he is partly correct. I believe we should consider federalizing the long term care portion of Medicaid, but would favor transitioning acute care Medicaid beneficiaries into private health insurance purchased in exchanges, with full premium support. My view is informed by a mixture of policy concerns and political realities as I understand them.

There is nothing fatally flawed about the structure of Medicaid with respect to providing access to acute care for beneficiaries. The latest study that has everyone buzzing about Medicaid (more: Austin | Pollack |Gardner) showing reduced access to specialists for Medicaid beneficiaries (children) could easily be reversed. Just raise the payment levels and make Medicaid the BEST payer instead of the worst (lower than private insurance and Medicare). That would fix the problem of reduced access for beneficiaries overnight. Of course, that will not happen.

Medicaid serving as the best payer seems far fetched, a fact that shows how disconnected from reality much of the Medicaid debate has become. Because in the the nursing home sector, Medicaid is, if not the best payer in terms of highest rate, the most predictable and predominant payer of such care. The ‘Medicaid debate’ we tend to have is is incomplete and misleading, because most of the ‘debate’ focuses on acute care Medicaid, and doesn’t even acknowledge that the most expensive part of the program is long term care, mainly nursing home care. The figure below, from a presentation by Charles Milligan and Cynthia Woodcock at the recent AcademyHealth meeting on Medicaid drives this reality home:

Medicaid pays for 16.2% of total health expenditures in the U.S., but 40.6% of the national NH expenditures.  While Medicaid is considered a poor payer for acute care services (physician, hospital), it is viewed as a much better payer of nursing home care, as compared to other sources, primarily because there are fewer other sources. There is little private long term care insurance, and very few persons have enough savings to pay for even a few months in a nursing home, so Medicaid ends up paying a large chunk of the bill. If you are in the nursing home business, then unless you are a boutique provider, you are in the Medicaid business, as shown in another slide from Milligan and Woodcock (Note that Medicare only pays for up to 90 days in a skilled nursing facility if the stay is linked to an acute medical event). In total, Medicaid is the primary payer for two-thirds of persons living in a nursing home.

What should we do? To try and get a handle on what next for Medicaid, the first step is to realize that it is really three insurance programs (at least):

• Program 1: covers mainly pregnant women and children for acute services. There are around 45 Million such persons. The ACA would expand this portion of the the program greatly. This is the group that experienced barriers to access in the recent study, and this is where most of the debate is centered. Such beneficiaries are numerous, but are relatively inexpensive on a per capita basis.
• Program 2: covers long term care, most notably nursing home care for Medicare beneficiaries who are also poor and therefore covered by Medicaid. Such persons are know as Dual Eligibles, because they are covered by both Medicare and Medicaid). There are 9 Million duals, around two-thirds of them are eligible for Medicare because of age, the remainder due to permanent disability. This relatively small number of persons are extremely costly to both Medicare and Medicaid.
• Program 3: covers long term care and acute specialized services for persons younger than 65 who are disabled, but not eligible for Medicare; There are 5.9 Million such persons, who are more difficult to describe because of their variety of needs.

I suggest we move to transition Program 1, the largest group of Medicaid beneficiaries, into private insurance purchased in exchanges to be set up in the ACA. This will be more expensive than covering them in Medicaid, certainly initially. However, many conservatives seem to dislike Medicaid intensely because it is a government program, and many liberals are very worried about barriers to access for beneficiaries, which result from low payment rates and/or stigma associated with ‘poor people’s insurance’. Providers don’t like Medicaid because it doesn’t pay as much as private insurance or Medicare. If we are going to try exchanges and more persons buying their own insurance, lets try it. This approach would mainstream low income persons into the private insurance market, would expand (more than double) the potential of competition in the exchanges by adding more consumers to purchase insurance in these markets, and states could directly provide additional assistance navigating care that they decide low income persons needed. This approach assumes moving ahead with the general direction of the ACA.

I suggest we federalize the Medicaid cost of Program 2 noted above; this would primarily mean federalizing the nursing home costs of dual eligibles who are covered now by Medicare and Medicaid. There are numerous problems with the interaction between these two payers that cause problems for dual eligibles, that could best be addressed by having one payer responsible for their care. Two examples of policy reasons that could best be addressed by federalizing the Medicaid portion of dual eligibles.

• Bed hold payment. In some states, Medicaid pays for a bed to be ‘held’ for a beneficiary who goes to the hospital. In the case of dual eligibles, hospital care is paid for by Medicare. This creates an incentive for nursing homes to send patients to the hospital, thus shifting their care burden to the hospital and Medicare (and away from states), while still receiving bed hold payments and receiving the patient back after a hospitalization, often for reasons that could have been dealt with in the nursing home setting. Having one payer responsible for all the care of the now dual eligibles is that best way to sort this out.
• Reduced access to hospice benefits. Around 42% of non dual-eligible Medicare decedents received some hospice care prior to death. For dual eligibles (see pp.144-47), many of whom died in nursing homes, the figure is lower (36%), even though their need and potential to benefit from such services would be expected to be higher. The interaction of Medicare and Medicaid rules in some states impose a barrier to the receipt of hospice for dual eligibles. Medicare does not pay for room and board payments when someone receives hospice at a location that is not an inpatient hospice (most beneficiaries receive care at home, and Medicare doesn’t pay rent; if you are not in an inpatient hospice, you are expected to pay your own rent). In some states, if the Medicare hospice benefit is elected, then a patient may lose Medicaid’s payment for room and board, which is the majority of the charges for a stay in a nursing home. This would impose a tremendous cost on poor beneficiaries, that results in their not electing to use Medicare hospice benefits. These perverse rule interactions can reduce care options for very sick, elderly patients and could best be addressed if there was one payer responsible for the care of dual eligibles.

I am not sure what we should do for persons in Program 3, as they are a more complicated group to care for since they are younger than 65, but not eligible for Medicare. They suffer from a variety of physical, mental and intellectual disabilities, are among the most vulnerable members of society, and could need specialized services for years or decades. Medicaid could remain to care for such persons only, or other transitions may be more obvious to persons who know more about the needs of these populations than do I.

The bottom line is that Medicaid is really multiple programs, and this reality tends to be lost in most debates about the program. Most attention is focused on the more numerous (45 Million) low income persons covered for acute care services, missing the long term care aspect of Medicaid. I think we should move toward moving this large group of persons into purchasing private insurance in exchanges. The motivations for this suggestion are mostly political, as they could address key concerns of conservatives and liberals, and could aid in reaching some sort of consensus on how to move ahead in health reform by setting up insurance exchanges. Federalizing the Medicaid portion of the dual eligible’s care is more clearly indicated for a variety of policy and coordination of care issues; I gave only two brief examples, but there are more. I will blog on some of the other long term care realities that must be considered in any reform of the Medicaid program. And of course there will be difficulties and problems with any fix. However, these general directions seem the best course to take from my perspective.

Update: To clarify, three main points. First, the Medicaid debate needs to acknowledge the  ‘three’ programs which it typically doesn’t. Second, federalizing Medicaid for dual eligibles is the best way I see to address some of the inefficiencies that lead to poor quality and higher cost among dual eligibles. Third, transitioning Medicaid into premium support so that low income persons would buy private insurance in exchanges would be a huge change that would face many practical issues that I haven’t addressed; in that sense, what I put forward is an idea or direction in which to move, and not a plan.

 

 

 

N.C. House v Senate Medicaid proposal

I am not opposed to managed care in Medicaid. In fact, in January 2014, I proposed an approach to both expand insurance coverage and reform Medicaid by using private insurance to cover newly eligible persons via Sec 1331 (Basic Health Plan) of the ACA that would have insurance companies and integrated delivery systems compete for the newly eligible beneificiaries. Down the road, the state could opt to place a large proportion of Medicaid beneficiaires into private insurance.

The move toward capitation throughout the health care system and for payers to insist on improved or at least steady quality per cost is inevitable and generally a necessary and good thing. My problem with the Senate Medicaid proposal is that it is too much, too fast. A few points on the two plans (both of which are quite incomplete because they don’t address expanding insurance coverage, and don’t address other things that I did, like the patient safety/medical malpractice situation and scope of practice laws):

Cherry Picking in NY Medicaid; Lessons for North Carolina?

Manged care companies are cherry picking the healthiest disabled senior dual eligible beneficiaries in New York state using a variety of methods, and excluding those needing the most care. The program provides a monthly per capita payment amount ($3,800/month) regardless of how much care is provided. The general theory is that the insurer has an incentive to keep people well, reducing needed care, and therefore their profit. However, there is also an obvious financial incentive to simply sign up those who need less care in the first place. Several points here.

• North Carolina has announced what I would call aspirational plans to put all Medicaid beneficiaries into private plans, of their choice. The notion is that via competition for patients, quality will rise and costs will drop. However, the New York experience shows the downside. I call the N.C. plan aspirational because there are scant details, but they do say they will ‘risk adjust’ to prevent cherry picking, but this will be hard. (this links to many posts I have written about N.C. Medicaid reform)
• The key is to remember that Medicaid is not one program, but has a variety of types of patients unified by having low income. It is not hard to imagine children and pregnant women and low income adults being placed in managed care; many states have already done so, with better and worse effects. Doing so is no panacea, nor is it the worst thing ever. However, the idea that disabled and elderly Medicaid beneficiaries are going to be put into private plans, and more to the point for N.C., that persons in Nursing Homes who suffer from dementia, etc. are going to be picking plans so as to improve quality and reduce costs is a pretty long walk in the woods as my grandaddy would have said (aka not likely to work). This table shows the per capita spending differences by category of beneficiary in N.C.
• 
• To belabor the point, it is not that the theory of competition cannot work in health care, it is that the groups of Medicaid beneficiaries who comprise the dual eligibles and the long term disabled have so many complicated and expensive acute and long term care health needs that I think private companies will mostly be trying to avoid the most expensive and difficult patients. Put another way, tell me the private, for profit “entity” (to use Gov. McCrory’s language) that will be bidding to care for the dual eligibles on a straight capitated basis so that I can make sure that I don’t own their stock.
• This doesn’t mean we cannot have Medicaid reform in N.C. However, caring for “the least of these” will always be hard and expensive. I still think federalizing the cost of the dual eligibles at least, and allowing states more flexibility in especially the children and low income adult categories is the best policy approach with any hope of a political consensus of any sort. You could also move toward pushing dual eligibles into Special Needs Plans to get the ‘one payer’ coordination impact, but then see the N.Y. experience. Here is a proposal for SPN with opt-out the dual eligibles, but then you just make cherry picking officially ok. [I remain unsure about the care of the long term disabled; such a heterogeneous group of people with vast array of needs, sometimes for decades; will always be hard and expensive]
• Bottom line, we need Medicaid reform in North Carolina. I don’t see how the outline suggested by Gov. McCrory can work if it is to include all Medicaid beneficiaries. Either no one will want to bid if they really must take all comers, or it will simply be cherry picking if there is an opt out.

updated: revised for typos/clarity.

Medicaid is an important issue

It is a shame that the VP debate did not delve into the proposal of Gov. Romney and Rep. Ryan to block grant Medicaid in a way designed to greatly reduce federal spending on the program; this is where the most profound disagreements on health policy can be found in this election. Aaron Carroll and Austin Frakt have a nice graph depicting both the stark difference in proposed spending on Medicaid between the President and Gov. Romney, as well as the stark similarity in their planned Medicare spending over the next 25 years:

On the whole, Gov. Romney has an incredibly vague plan to “replace” Obamacare that amounts to muddled references to current law (HIPPA continuous coverage rules) and a series of inconsequential policies such as selling insurance across state lines that will expand coverage to far fewer than the 30+ Million persons who will be newly insured if Obamacare is implemented. On Medicare, Gov. Romney and Rep. Ryan say that the program is in such terrible trouble that they have now pledged to not cut its rate of spending growth in the next decade while swearing they will do something daring and consequential to control the program’s costs starting two years after they leave office. [911 what is your emergency?: my house is on fire, please come in 10 years!]

But not on Medicaid. Here is where the painful, difficult choices come right away in what Gov. Romney and Rep. Ryan have proposed, as the federal government would say “tag, you’re it” to states who would then have much less money to provide care for our fellow citizens now covered by the program. Just who are they? Really three groups:

• Around 45-50 Million low income persons, now mostly women and children. Obamacare would add around 16 Million to to their ranks. These people are numerous in the program, but relatively inexpensive on a per case basis.
• Around 9 Million so-called dual eligibles, who are covered by Medicare (because they are elderly or disabled) and Medicaid because they have low incomes. The per person cost of this group is huge, and includes acute and long term care like nursing home care.
• Around 5-6 Million persons who have long term disabilities. Their care is very expensive on a per person basis, and their needs vary greatly depending upon the source of their disability.

Block granting Medicaid in a manner designed to greatly reduce federal spending on the program will set up a series of desperate decisions for states that will essentially boil down to a choice of providing health care insurance to the young or long term care services to the elderly and disabled.

I am a supporter of Obamacare, but believe it is not the last step, but the first one, and have written a book length treatment of what I think should come next (including major reform of Medicaid, but after assuring that the most vulnerable beneficiaries–the dual eligibles and long term disabled are protected).

Gov. Romney in many ways is a health policy hero. He brought about near universal coverage in his home state. Especially because of this history, I find his health policy proposals for the nation as a whole to be wanting. What bothers me the most about his plans are that the first groups he is asking to bear the brunt of painful choices and cuts are the the most vulnerable 5% of our fellow citizens, most of whom are elderly. That is just not right. The country should be talking about this.

Medicaid is key part of reform discussions and it is not one program

NPR has a story today on the continued discussion of Medicaid, that focused on some of Gov. Romney’s statements about wanting to block grant the program to states as a way to expand health insurance coverage, presumably as part of a “replace” plan for the ACA.

Most of this debate misses a fundamental point about the program–it is not really one program at all in terms of the patients it covers and their needs, but 3.

Program 1: covers mainly pregnant women and children for acute services. There are around 45 Million such persons. The ACA would expand this portion of the the program greatly. This is the group that experienced barriers to access in the recent study, and this is where most of the debate is centered. Such beneficiaries are numerous, but are relatively inexpensive on a per capita basis.

Program 2: covers long term care, most notably nursing home care for Medicare beneficiaries who are also poor and therefore covered by Medicaid. Such persons are know as Dual Eligibles, because they are covered by both Medicare and Medicaid). There are 9 Million duals, around two-thirds of them are eligible for Medicare because of age, the remainder due to permanent disability. This relatively small number of persons are extremely costly to both Medicare and Medicaid.

Program 3: covers long term care and acute specialized services for persons younger than 65 who are disabled, but not eligible for Medicare; There are 5.9 Million such persons, who are more difficult to describe because of their variety of needs.

As I said back in June

If you block grant Medicaid and grow the block granted amount slower than health care inflation, it will be very hard (impossible) to provide similar services to the existing beneficiaries. With block granting, you either can’t expand coverage or you have to cut benefits and services, and most of the cuts will have to fall on the elderly and disabled. Most folks forget that Medicaid is at least 3 programs.

Block granting Medicaid is not a strategy to expand insurance coverage, unless it is combined with a plan to severely reduce long term care spending paid for by Medicaid for the elderly and disabled, or you are planning to spend more money via a block granted approach than is currently projected for Medicaid.

I have called for federalizing the long term care and disabled portions of Medicaid, with a goal of moving low income beneficiaries into private insurance purchased in health exchanges. My book elaborates at length on both the political and policy reasons for such a move.

Rebalancing Medicaid financed long term care

Continuing upon my post last week making the point that Medicaid is really 3 distinct programs:

• Program 1: covers mainly pregnant women and children for acute services. There are around 45 Million such persons. The ACA would expand this portion of the the program greatly. This is the group that experienced barriers to access in the recent study, and this is where most of the debate is centered. Such beneficiaries are numerous, but are relatively inexpensive on a per capita basis.
• Program 2: covers long term care, most notably nursing home care for Medicare beneficiaries who are also poor and therefore covered by Medicaid. Such persons are know as Dual Eligibles, because they are covered by both Medicare and Medicaid). There are 9 Million duals, around two-thirds of them are eligible for Medicare because of age, the remainder due to permanent disability. This relatively small number of persons are extremely costly to both Medicare and Medicaid.
• Program 3: covers long term care and acute specialized services for persons younger than 65 who are disabled, but not eligible for Medicare; There are 5.9 Million such persons, who are more difficult to describe because of their variety of needs.

Most policy attention is paid to the reform of Program 1 above. This post focuses on reform of the most expensive aspect of the Medicaid program—long term care—which is the primary concern of Program 2 (dual eligibles) and Program 3 (disabled persons younger than 65 not eligible for Medicare) above. A key policy question is where should services be provided to elderly and disabled Medicaid beneficiaries? Charles Milligan and Cynthia Woodcock addressed this issue during their presentation “Rebalancing Long-Term Services and Supports: Progress to Date and a Research Agenda for the Future” at AcademyHealth’s Annual Meeting Long Term Care Colloquium last week in Seattle.

Around 75 LTC researchers and policy makers attended this 3-hour session (presentation of paper, discussants and general discussion) that focused on the desirability of “rebalancing” LTC services away from institutions (esp Nursing Homes) and toward home and community based services (HCBS). Milligan and Woodcock show evidence from Medicaid waiver programs in the State of Maryland documenting reductions in per member, per month Medicaid costs when moving persons from institutions to community-based settings via waiver programs that typically allow for the provision of non-standard benefits for persons covered by Medicaid.

What is missing from this assessment is the outcome, or quality of services provided. The need to better link different service models with outcomes was roundly noted as a tremendous research and policy need. However, from a preference perspective, patients are far more favorable to community based, as compared to institutional settings, which is no surprise.

There has been steady movement from institutional toward HCBS in Medicaid over the past decade and a half. In 1997, around 75% of total Medicaid long term care expenditures were for institutional care (mostly nursing homes), while it had dropped to around 66% in 2009; the remainder of the LTC was delivered in HCBS. The are very large state differences in how Medicaid programs have spent long term care dollars, which would make clearer linkages with outcomes even more potentially informative. For example, New Mexico is now spending around 7 in 10 Medicaid LTC dollars spent on dual eligible and disabled persons on HCBS; at the other end of the spectrum, Rhode Island and Tennessee are spending less than 1 in 10 Medicaid LTC dollars on HCBS.

The most interesting aspect of the discussion following Milligan and Woodcock’s excellent presentation and the formal discussant remarks was the degree of pushback from the audience against the notion that it is self evident that rebalancing away from institutional toward HCBS is always the best policy. There was a general refrain of ‘it depends, we need to know more.’

In particular, there were concerns that we do not know as much as we should about the relative outcomes of particular sites/types of care provided to disabled Medicaid beneficiaries, be they dual eligibles or persons included in “program 3” noted above. This information is needed in a clearer fashion to be able to determine the correct mixture of institutional versus HCBS in Medicaid-financed LTC. The need to determine the appropriate setting for long term care services (institutional v. home and community based) will intensify, as the movement of the baby boomers into retirement years and the fact that the national nursing facility occupancy rate is around 85% (according to the commissioned paper by Milligan and Woodcock that is not yet publicly available). The figures shown above include dual eligibles (program 2 above) and disabled persons who were not also eligible for Medicare (program 3).

A few thoughts about Medicaid reform in light of this conference and discussion:

• A classic Medicaid worry around developing community-based services (not Nursing homes) is the wood work effect, meaning that persons will be more likely to seek eligibility and to use services if they do not have to reside in a nursing home to do so. Such an effect could offset the reduced per capita cost of non institutional settings. Whether there were a net increase or decrease in overall costs is ambiguous, and would depend upon the degree of woodwork effect and per capita savings as compared to placement in a nursing home.
• A further Medicaid worry is back fill in nursing homes, meaning as you transition patients out of nursing homes to HCBS, will other patients simply end up in nursing homes, on the route to spend down to Medicaid eligibility?
• The potential woodwork effect would seem to be a bigger issue with program 3 above, in part because the population at risk and in need of services is harder to define. We don’t know how many people need such services, while the number of Medicare beneficiaries who are spent down to Medicaid is clearer. Another way to describe an increase in covered persons that may be termed woodwork effect is the provision of care to those in need. An increase in beneficiaries covered by Medicaid who fall into Program 3 is consistent with both narratives.
• For program 2, the dual eligibles, the wood work effect could still exist from Medicaid’s perspective, but not from Medicare’s. Medicare is on the hook for the acute care cost of the dual eligibles no matter what, and poor quality long term care could be expected to increase those costs. Likewise, there are incentives of providers who bill Medicaid for the care of dual eligibles (like Nursing homes and bed hold payments) and the states to send patients to hospitals for non-productive care in times of high patient acuity that results in a shifting of cost from the states to the federal government. Small changes in such nursing home admissions could be expected to improve quality of life for patients in a way that held net costs constant or reduced them (on a per capita basis).

Federalizing the Medicaid/LTC costs of the dual eligibles (program 2 above) and making Medicare responsible for all of the care of the dual eligibles seem to be more clearly warranted than federalizing the care of disabled Medicaid beneficiaries who are not eligible for Medicare (Program 3 above). Making Medicare responsible for all of the care of the dual eligibles seems to provide the best hope of getting the appropriate level of care for elderly, disabled persons, many of whom are living in nursing homes. And since Medicare is already responsible for acute care services for these patients, federalizing Medicaid for dual eligibles would remove the issue of cost shifting from states to the federal government under the current situation which is almost certainly not associated with the best care for patients.

How to best reform program 3, the disabled, non-dual eligible Medicaid eligible patients is trickier, and it remains unclear to me of the best way forward to care for such persons, many of whom will need specialized care for years or even decades. I am not opposed to federalizing this portion of Medicaid, I just need to know more. I think that moving ahead to federalize Medicaid for the dual eligibles makes sense. In any event, more information is needed on the benefits, quality and cost of care provided across different LTC settings for both of these ‘programs’. Moving to federalize Medicaid for the dual eligibles would likely help produce such information since one would payer would be responsible and have a clear incentive to find the answers.

 

 

What Will Republicans do w ACA if they Clean Sweep?

Andrew Sprung asks wonks to weigh in on some questions regarding what Republicans will do with the ACA if they win the White House and both houses of Congress in 2016. He assumes that outright repeal then would be too disruptive, so wonders about many changes to sabotage the ACA. I have long been writing that both sides need a health reform deal, at least in part because some day Republicans will have all branches of government again, even if not in 2016. Brief answers to the questions Andrew poses:

Back to my reporting project: let me make it open source here. Wonks, politicos, and other interested parties: what do you think of the feasibility and likely effects of possible future Republican drives to, for example

1) repeal the individual mandate.

They could repeal the individual mandate and replace it with the auto-enroll procedures envisioned by Paul Ryan’s Patients’ Choice Act, which was originally released May 20, 2009, about one month before the first version of HR3200 was passed out of the Commerce Committee. In fact, in 2011 I was wondering whether auto-enroll procedures might be a better risk pooling mechanism than the existing mandate, making this an obvious place for a deal if we ever got back to the policy.

2) Deregulate the exchanges , e.g., perhaps by a) abolishing the 3-to-1 age rating cap;

Sure they could get rid of 3-to-1. But, which way would they go? In my Duke provided insurance there is straight community rating and I don’t hear people complaining about it; 28 year old Assistant Professor pays same premium as a 64 year old. They could let the age rating go up, say to 5-to-1. It is possible that the 3-to-1 is not optimal, but it is unclear to me the preferred change. But keep in mind that 165 Million have employer sponsored insurance that is typically straight community rated.

b) repealing the ban on lifetime and annual caps;

This is imaginable, but with all the rhetoric of preferring more catastrophic coverage (more exposure up front), then it doesn’t really follow to then truncate the back end. Of course, the traditional Medicare program has benefit limits and caps, and no cap of out of pocket expenditures. I would be interested in seeing the relative impact of no lifetime limits, no pre-existing conditions/guaranteed renewal, benefit mandates, etc on premiums. I suspect this change will be judged as not worth it by Republicans and the insurance industry when the time comes for Republicans to drive the train.

c) allowing exclusions for services such as mental health or childbirth;

I could imagine a move toward providing catastrophic insurance that focused on defining the financial size of the deductible before insurance kicked in, and essentially bypassing the question of benefits by covering everything that was not experimental, for example. My guess is that this would sound better to my Republican friends the more theoretical it was, and that prenatal care and childbirth would end up being preferenced before a deductible was met once they had to pass legislation (update: or issue rule changes). Back to my employer sponsored plan at Duke: the benefits are the same for everyone, so plenty of people “who can’t have a baby” are cross subsidizing those who plan to do so. And not to belabor the obvious that seems to be lost in lots of discussions of this issue, but it takes two to make a baby (we professors can figure out these complicated things). Maybe men could take out fertility liability insurance if Republicans decided that all maternity/labor costs should be assigned to the woman having the baby?

d) allowing sales across state lines (in concert with eliminating or drastically reducing federal coverage guidelines); or by other means.

I think if you live in Manhattan and call up Blue Cross Blue Shield of Arkansas, they will be fine selling you a policy, so long as you come to Arkansas to use health care. Premiums are determined by benefits, contracts to provide care and the health risk of the insured. This is a much better applause line at a political rally than a policy, which will become clear once someone tries to write the legislation necessary to bring this about.

3) Foster adverse selection within the exchanges by deregulating plans sold outside them, e.g., repealing the requirement that insurers put all customers within a given state in one risk pool.

I have written positively about the Patients’ Choice Act, and think that it is the most comprehensive Republican plan put forth. Its biggest flaw (they could change this) is allowing tax credits to flow in and outside of exchanges, but altering pre-existing conditions inside them only. This won’t work and will lead to death spiral. Again, committing to the details, passing it through the Commerce Committee, CBO weighing in, etc. will likely be quite a shock for Republicans. They just don’t have experience in doing this. It is hard.

4) Reduce subsidies (“we can’t afford them”…).

Maybe so. But, then premium shock. There definitely could be some changing of the subsidy level to try and smooth out the impact of the existing subsidy structure on marginal labor income tax rates. Of course doing this will increase the cost of the bill. The goldilocks principle “its juuuuuust right” is elusive. Again, it is hard to get this correct.

5) Reduce federal reimbursement for Medicaid expansion; block-grant Medicaid.

The biggest block to a block grant that is simply designed to limit federal costs and say “tag, you’re it” to states will be all 50 Governors, regardless of party. There are some more nuanced policies that focus on the different “parts” of the Medicaid program that I would actually support over the long run (more state responsibility for acute care insurance for states, federalizing the cost of the dual eligibles). I suggest this as a long term strategy in North Carolina. The focus of health reform is now in the States, and I suspect that will continue.

update: I fixed some typos and clarified a few things.

Health Reform Ideas for North Carolina

I am releasing a white paper with some health reform ideas for North Carolina (pdf Don Taylor NC Health Reform Proposal 1 14 14). The North Carolina Medicaid Advisory Commission is discussing options that will culminate in their recommendation from the North Carolina Dept of Health and Human Services to the General Assembly on March 17, 2014.

I propose three main ideas:

• Expand health insurance coverage while reforming Medicaid by seeking both a Medicaid waiver and developing a Basic Health Plan option under section 1331 of the ACA
• Reform the State’s Medical Malpractice system while addressing patient safety, using Medicaid and the Basic Health Plan as a pilot population; I think the “Michigan Model” holds the most promise
• Increase the Supply of Health Care Providers by Safely Reduction Regulation; essentially expanding the practice scope of non-physician providers to increase the effective care delivery supply

In the longer run, I suggest North Carolina consider

• Seeking a more comprehensive waiver that would allow the full cost of the dual eligible population to be federalized, with State savings put towards insurance coverage expansions
• Seek permission to pilot a competitive bidding demonstration in Medicare Advantage plans sold in North Carolina, two to three years after a Basic Health Plan is up and running in a North Carolina run health insurance exchange

I will spend time over the next few weeks blogging about these and other ideas that emerge (the N.C. Medicaid Advisory Commission meets tomorrow, 9am-4:30pm at the State Library, 109 Jones St., Raleigh, NC). Note that the white paper is a pdf that has hyperlinks to sources (mostly blog posts) in lieu of more traditional citations.

Why both Liberals and Conservatives need a health reform deal

On December 16, 2010 I wrote a post that began:

While the rhetoric around health reform has been incendiary from day one, in policy terms, a compromise between Democrats and Republicans using the outline of the Affordable Care Act (ACA) has always been available. The two primary problems with the health care system are costs and lack of coverage. The ACA does pretty well on the second, and is a start on the first, but much more is needed. It will be very hard to get a handle on health care costs, and we will likely only succeed in doing this if both parties are on board.

I then proposed the outlines of a deal:

• Federally guaranteed catastrophic coverage implemented via Medicare
• Private insurance sold in state-based exchanges for gap amounts if individuals desired more coverage, with income based subsidies
• Federalizing the dual eligible Medicaid costs, and moving over time to buy low income persons into subsidized private gap insurance, thus transitioning the low income portion of Medicaid over time
• ending the tax preference of employer paid health insurance; make all subsidies explicit

I refined these ideas in an e-book called Balancing the Budget is a Progressive Priority in August, 2011, and revised it after the failure of the Super Committee to replace the sequester in a version published by Springer in April, 2012. The book claimed that we didn’t need short term cuts in discretionary spending for a sustainable long run budget, but instead needed the next (and the next and so on) steps on health reform, and an increase in taxes collected as a percent of GDP to at least 21% given the movement of the Baby boomers into Medicare, Medicaid and Social Security.

There are many ‘yeah buts’ about the above-outlined deal. I am unsure what the ideal health system would be, because what I think what we most need is a political deal so that we can move ahead with the policy, focusing on the goals of expanding coverage and addressing costs. We will never do the hardest work asking whether health spending is ‘worth it?’ without both sides bearing responsibility for it.

So why do both sides need a deal?

• For Liberals and Progressives, universal coverage is the holy grail, not just of health policy, but of all public policy. Conservatives don’t have a similarly focused top health policy interest, and that makes finding a deal more difficult (lengthy debate between myself and Jim Capretta touching on this). We need a deal because the continued Republican opposition to the ACA, which is made more effective by the Supreme Court’s decision making the Medicaid expansion voluntary, thwarts achievement of our goal of universal coverage (that I also believe to be a precursor to having a hope of addressing costs/wasteful spending).
• Conservatives need a deal because they have no politically viable health reform plan embraced by elected Republicans, and without one they have no hope of what they claim to be their pre-eminent policy objective of smaller government, because the biggest long run spending side issue is health care costs. Keep in mind that Gov Romney ran on a platform of doing nothing to Medicare for 10 years (rescind House Budget cuts that mirrored the ACA; premium support starting in a decade). Further, the Republicans have controlled the House of Representatives for 28 months now, and have voted to repeal Obamacare numerous times, but never seem to get around to the replace part.  Last month they couldn’t even muster the votes for a modest risk pool plan.

I obviously thought we needed a deal a long time ago, and my proposal to move away from Medicaid’s current structure has been the part of the ‘deal’ that has gotten me the most heat from my friends (here is a less grand deal). However, the discussion of the recent Medicaid study has reinforced my belief that the political warring over health reform crowds out our ability to make policy based on evidence. Every study is now just another salvo in a never ending political war around Obamacare, without the offer of a credible alternative. I am a strong supporter of the ACA which expands Medicaid, and would be happy to implement and revisit it when we know more. The passage of the ACA has put the entire health care system into play, and whatever final result we land on, its passage will have been the first step.

However, it is clear to me that both sides would benefit from a political deal to allow us to take the next steps with at least some of the heat removed from the conversation.

Senator Hatch’s health policy proposal

Senator Hatch has released a set of 5 health policy proposals that I want to acknowledge. I have been pretty harsh on Republicans for not offering clear legislative details of what they are for in health reform/policy. This list doesn’t even mention Obamacare and focuses instead on Medicare and Medicaid; all these ideas could all work alongside the ACA, and the ideas range from pretty good to bad, but at least he identified something that he is for. A brief rundown of 5 policy ideas:

• Bad. Raise the Medicare age. A bad policy that I have written is virtually inevitable because it sounds consequential.
• Not so good. Limit what private Medigap plans can cover. Essentially he is saying that many Medicare beneficiaries have too much private insurance, and he doesn’t want people to  have first dollar cover for anything. Here is a brief report on out of pocket Medicare spending; this is not a particularly consequential policy, as the real costs are after deductibles and co-pays are met, and the problem with this approach is that it doesn’t distinguish good from bad spending.
• Good. Simplify Medicare cost sharing across Parts (A, B, D) and implement a catatstrophic out of pocket maximum. This is an excellent idea, and the deductible and co-pay structure across the hospital, physician and pharmaceutical “parts” of Medicare should be simplified. This seems to work a bit against item #2. I’d focus my efforts on idea #3.
• Good if part of a deal to move ahead on ACA. Competitive bidding in Medicare. This is the part where a Republican says Obamacare exchanges are terrible, but if we had them in Medicare it would be great! In fairness, there are some Dems who say the opposite. The obvious deal is as follows: for any state doing the Medicaid expansion/setting up an exchange, then we do true competitive bidding starting 2 years later and move to learn from/unify the exchanges. I have written how this might go even further if we got started down this path. And if we need this, we don’t need to wait 10 years to start (the least brave proposal ever).
• Need more information; withholding fire. Per capita caps/modified block granting of Medicaid. The details of this are the most important. In my book I propose federalizing the dual eligibles, and moving over time to buy low income Medicaid beneficiaries into private insurance bought on exchanges. I am opposed to the type of block granting contained in the House 2012 budget which is essentially saying to the states “tag, you’re it” but I can imagine supporting an approach that does Medicaid very differently from how we now do it. The key is understanding that Medicaid is essentially 3 programs, and then moving ahead in that policy reality, understanding that the 9.5 Million dual eligibles and the 5.5 Million long term disabled Medicaid beneficiaries are some of the most vulnerable citizens in our nation.

The most interesting thing to me is that Sen. Hatch’s proposal includes nothing on medical malpractice reform. Here is a letter to Sen. Hatch in October, 2009 from CBO on medmal reform outlining 10 year deficit reduction of $54 Billion (~$41 billion in direct cost reduction, mostly medmal premiums; $13 billion in higher tax receipts as private premiums reduce slightly). As ranking member of finance and someone who tended to pay attention to health policy, this used to be standard fare for him to always bring medmal up as the fix all panacea. Now he leaves out a proposal he asked CBO to score in 2009. That talking point seems to have disappeared from the Conservatives/Republican play book on health reform. When was the last time anyone heard a Republican talking about medmal reform?

update: Sen Hatch is ranking member of the Finance committee; he was chair of Judiciary in the past.