Tuesday, February 15, 2011

Is Medicaid a ticking time bomb for states?


Patrick_Landers said...

The most important thing to remember about the fiscal costs that government health care programs impose (Medicaid on states, Medicare on the federal government) is that they are not any higher than those found in the private sector (and Medicaid is actually cheaper). The problem for both programs is that health care costs have been growing rapidly for decades at levels far higher than domestic inflation or, until recently, the growth rates seen by our peers. It would be difficult to control costs further in these programs (immediately anyways, the Affordable Care Act -health care reform/ObamaCare- includes every single cost-control idea put forth by experts in recent decades in some for or another- mostly test projects that will allow us to test them before bringing them fully up to scale across the system). The only way to cut costs significantly in the short-run is to restructure the programs (Ryan's vouchers for Medicare for instance) that would dramatically reduce the value of health care (less benefits) compared to health insurance provided in the private sector. Also, large amounts of cuts would be merely moved off the government books but would be merely transferred to the private sector which would raise costs there, forcing more and more businesses to stop providing health insurance which would mean millions and millions more Americans would lack health insurance not due to a lack of interest, but due to a lack of affordability due to problems across the entire health care sector.

TJE said...

1. The rate of growth of state spending on medicaid is unsustainable.

2. There is great variation by state in cost per enrollee:


3. There is little if any correlation between spending and quality.

IMHO, one size fits all medicaid with millions and millions of new enrollees is a ticking time bomb for states or the federal government or both.

Megan said...

Also, isn't the cheapness of Medicaid a big problem? To my understanding many doctors do not take Medicaid patients because of the low rates. What will adding millions of people to Medicaid do to the availability of care for Medicaid patients? The new health care bill may have done something to address this so please correct me if I'm wrong.

TJE said...

Some worry that Medicare will be the next to be dropped by many doctors.

Patrick_Landers said...

I'll have lots of comments on health care issues once I am back at Calvert and able to spend time responding, but for now (before I forget) I'll note that it is extremely unlikely that Medicare would ever have trouble attracting doctors (like Medicaid does) for two reasons. (The caveat to this statement being: unless Medicare was turned into a second-class health care system like Mediciad is now. Paul Ryan's voucher system might do this. Such a change is politically impossible at this time due to the power of the Grey lobby. While the poor are exposed to a second-class system, the elderly are viewed as deserving and politically powerful enough to protect their interests). Anyways, it is unethical for doctors to not provide care to patients, which is why there is extreme blowback right now by many doctors against those who suggest dropping Medicare patients- many believe it goes to far in violating the profession's code of ethics. Second, Medicare patients compromise too much of the health care system. Many doctors and health care providers would be financially damaged by not providing them care- even if they don't currently make a profit on this care, it's still essential for maintaining operating costs.

You are correct Professor Eismeier that variations in health care costs are not correlated with quality (see Dartmouth Atlas Project research). Costs vary for the entire health sector across states- in both the public and private sectors. Most of the variation we see in government programs' health care costs across states in Medicaid is attributable to how the costs vary for all health care provided in that state. Basically, all health care is cheaper in certain states, so Medicaid programs in those areas are able to capture those reduced costs and have lower per capita health care costs- but not because they are any more efficient.

Much of the reason why costs vary from states to states is because the practice of medicine variers- Much of the Northeast for instance has high health care costs (New Jersey, New York) because health care providers (doctors and hospitals) provide much more intensive care that doens't improve patient outcomes but does cost money, while at the same time not doing as good a job at following evidence-based medical protocols that save lives and money.

The rate of growth in Medicaid is unsustainable- but that wouldn't be so if all health care costs in this country were at the same levels we see in our low-cost states (or that we see in other developed nations). These lower cost regions don't have worse outcomes, just much lower costs so we need to get the entire national system to that efficiency.

One size fits all is problematic for states, but right now the movement you see is not states wanting to reform their health care sectors to create efficiences without sacrificing the amount of people covered by Medicaid or the care they receive- instead many states want to cut millions from Medicaid rolls or limit their access further to health care.

Sorry Megan, I'll get to your point later tonight. For now, I should start the process of returning home.

Patrick_Landers said...

Also, one more point before I forget. Their is huge variation in costs for different types of Medicaid recipients- basically children cost next to nothing while the elderly (double enrolled in Medicare and Mediciad because Medicaid pays for certain things including almost the country's entire nursing home market) and disabled Medicaid participants have high costs (because they represent an extremely selective pool of patients with lots of conditions that requires lots of treatment, regardless of whether they are in Medicaid or if they were privately insured). It's possible that the aggregate per enrollee costs we are seeing here are impacted by the composition of a given state's Medicaid pool (i.e. a state with many child Medicaid recipients but not many elderly or disabled recipients could appear to have lower costs per person costs than a state with mostly elderly Mediciad recipients, even if the elderly Medicaid state was actually more efficient in controlling costs for their elderly patients. The cheap child recipients would make it an apple vs. organge comparison, because the mostly child-state would have lower average across all enrollee costs, even though their elderly actually cost more) Let me know if this last point's explanation isn't clear
Basically, I'm pointing out how there are many ways in which per enrollee cost variations might not (and probably aren't) explained by the way different states structure their programs in terms of any type of cost-controls, let alone ones that don't sacrifice quality

TJE said...

The ghost of medicare future?


Patrick_Landers said...

Ok, Medicaid's low payment rates are a problem right now in that many doctors won't take Mediciad patients, so in some areas it can be hard for Medicaid patients to receive quality (or any) care. However, right now those problems are manageable (in that the system isn't awful- though it would be nice if the system wasn't second-class to private health insurance or Medicare).
As you note Megan, the Affordable Care Act does expand the Medicaid rolls dramatically. However, it lessens the initial cost by providing a special, higher matching funds rate for the first few years (as you know, states and the federal government currently spilt the costs of the Medicaid program. Using fake numbers cause I'm too lazy to look up the real ones- and I think they actually vary by state- states might pay 50% while the federal government would get the rest). Under the ACA (assuming my understanding of this is correct, which I'm reasonably certain of), the federal government might pick up 70% of the costs of these newly eligible Medicaid enrollees, while the states would have to cover the remaining 30%. Thus the additional cost of each new Mediciad enrollee under ACA is subsidized by the federal govt. and less than the costs incurred by states for current enrollees. However, ACA's expansion of Medicaid will still add costs to state governments.

In the long-run, ACA's expansion of Medicaid under current cost projections will be problematic for states. However ACA's cost-control provisions (and the new ideas generated in the next few years) will hopefully generate significant costs savings across the entire health care system- improving government finances and the competitiveness of our economy.

Patrick_Landers said...

So the Medicare doc-fix (the 21% cut the cnn.money article refers to) is renewed each year, so cuts of this nature are unlikely (very tough politics on the issue).
This article is correct in pointing out that some doctors in small or individual practices don't accept some or all Medicare patients. However, that is a very small phenomenon which is only feasible in certain geographic regions in certain specialties because for whatever reason they don't need Medicare patients to maintain their practice. Large providers (aka hospitals) would find it much more difficult to maintain their bottom line while cutting Medicare patients. This is an important factor to note, because some of the economics of the health care sector (and many provisions in ACA)are trending towards increasing coordination (and consolidation) of care into larger medical collectives which would find it much harder to cut Medicare patients. Also, if doctors en masse began cutting Medicare patients, their would be such a political furor that radical change would be demanded and implemented very quickly- and the honest truth is that conservative, what we consider radical pro-market solutions applied to our health care sector are unknown quantities which may or may not work (due to the uniqueness of medical/health care as a good, and do to the structure of the current market). On the other hand, more "socialistic" reforms like a public option or single payer (which, btw, I'm someone who feels like a public option WILL inevitably lead to a single-payer) system is almost garunteed to massively cut costs. We see this in ALL of developed nation peers, they have greater government intervention in health care and see lower costs as a result.
Now I'm not seeing an increase in public intervention is a good idea- personally I'd like to see if our hybrid post-ACA model can do better by finding a balance between private sector innovation and public sector key interventions to restructure the currently fragmented health care provision of services (providers actually usually lose money when they improve patient outcomes due to their structuring preventing from recapturing some of those cost savings from quality enhancements) and cost-addative layer of a wasteful insurance, third-party payment system. But a massive cut in Medicare payments (which I could only see be instigated by Republican obstiancy over health care costs because they refuse to accept the facts that Medicaid and Medicare don't cost more than comparable private sector alternatives) has an excellent chance of instigating further government intervention in health care. Be careful what you wish for...

TJE said...