Opinionated @ CFE

Utah should decline Medicaid expansion

Jan
24

One of the hot-button issues to be discussed at the upcoming legislative session is whether or not to expand Medicaid as part of the Affordable Care Act. The Act provides 100% funding to begin with, then drops back to 90% (or possibly less) in future years. That big sack of money makes for a pretty tantalizing offer, but I don’t think it’s a good idea to take it. Here’s why.

The obvious problem is that most of the Medicaid expansion money is only available via federal borrowing. It’s pretty easy to rationalize that the money will be spent anyway, so we should get our share. It’s also easy to justify as being a relatively small amount of money compared to the current budget deficit. To be fair, I think this is probably one of the weaker arguments against the expansion, but I do think that, even as a largely symbolic gesture, it’s a good idea to put our money where our mouth is on federal spending.

A deeper problem (and, indeed, the core problem with the ACA) is that a Medicaid expansion is subsidizing an overpriced healthcare system rather than attempting to resolve the cost issues that make even routine procedures unaffordable. True, using a subsidy may alleviate the symptom for some, but there is no mechanism to try and curb costs. This is a long-term recipe for requiring more subsidies to maintain the same levels of care. This turns into a vicious downward spiral where both costs and subsidies for that cost continue to rise. The end result is that more people end up relying on Medicaid and the cycle continues.

Since the Medicaid expansion doesn’t appear to be serious about either controlling costs or providing flexibility in doing so, I see no reason why Utah should get involved with it. There are much better solutions out there, such as targeting hotspots, that can both curb Medicaid spending and provide a much higher level of care while driving down costs across the board. Let’s do something smarter than tossing a multi-billion dollar bandage on the problem.

10 Responses to Utah should decline Medicaid expansion

  1. This article ignores the fact that the Medicaid expansion covers people who are in poverty– which make up about 38 percent of the uninsured. Market forces are not going to drive prices down to where basic healthcare becomes something people in poverty can afford– certainly not within a period of time you or I would consider reasonable if we were the ones going without care.

    It also ignores that Utah is on the hook for most of the costs of the ACA Medicaid changes no matter what. The question before legislators is whether or not they want to pay a bit more, adopt all of the ACA Medicaid changes, and allow $300 million in federal funds to go to Utah healthcare providers like Intermountain Healthcare so they can afford to provide services to about 50,000 more people next year.

    Utah’s healthcare providers are leading the country in finding ways to reduce costs. I don’t understand your skepticism about them.

    • Your first point seems a little silly. Isn’t all Medicaid meant to be for people who can’t afford medical care? You act as if I don’t know that, and it makes me think you want to talk past me rather than to me. That you chose to more-or-less fly right by my arguments to reiterate talking points only speaks to this.

      Your complaint that market solutions won’t work seems spurious at best. The evidence is that identifying and targeting so-called “hotspot” patients has a huge effect on overall medical costs within a few years. The chief problem with the approach is that it puts medical providers out of business because of a lack of demand. It creates a huge opportunity for those enterprises that can be the “last man standing”, but not so much for everyone else.

      Show me any evidence whatsoever that the Medicaid expansion reduces costs instead of subsidizing high costs. Anything else is noise.

      • Your whole argument seems to be based on the assumption that Utah’s healthcare providers are gouging customers and so it is bad to help people pay for their services. Are you one of those people who hates Intermountain Healthcare and does not think they are capable of doing anything right? Do you really think they are going to waste all the money they will get through the Medicaid expansion?

        There is no reason our state can’t simultaneously help people to pay for services they cannot afford and work to reduce unnecessary costs. Those two goals do not conflict with each other at all. A growing industry is not necessarily an inefficient one.

        Right now our state incurs significant costs for allowing people with mental health and substance abuse issues to go without treatment. We also incur significant costs when people without insurance wind up in emergency rooms for issues that would have been treated more cheaply if the person involved could have afforded preventative care.

        Expanding Medicaid would take these costs that currently accumulate in a random way and come up with a systematic way of avoiding some of them and paying for the ones that still need to be paid. That does not make our healthcare system less efficient.

        • Well… they are and it is. The core problem with any subsidy is that they will invariably drive pricing up in the long term. We’ve seen it happen to great effect in higher education. The current economic situation, where interests rates can no longer be lowered to artificially grease the wheels, is the inevitable conclusion. I know it’s really REALLY tempting to take the easy way out and cut some checks to solve what is ultimately a pricing problem. Unfortunately, it almost always comes with a promise to do something about the costs later… and no subsequent follow-up.

          It would be a lot smarter and more effective to show hospitals the cost savings of identifying their problem patients and assigning someone to help manage their chronic conditions. Heck, throw in some kind of tax break for donating services or something if you have to. That would free up existing funding to serve more patients without spending an extra dime. Showing the medical community how charity care is in their financial self interest is the only smart approach.

  2. facebook_Judi Hilman.1200071908

    Targeting over-use hotspots isn’t a ‘market solution’–it’s identifying leaks in the system. It’s common sense. A market solution would be having several hotspots compete to reduce their usage–and cutting those that don’t, and rewarding those that do.
    But one way that the Affordable Care Act does use market-based solutions is through the IPAB (also called the “death panel”). The IPAB identifies best care practices in specific locations and encourage providers everywhere to follow them with carrots and sticks. It’s the same principal that consulting firms like McKinsey and Bain use in advising Fortune 500 companies.
    Plus, continuing Utah’s innovations with Accountable Care will reduce the subsidizing of the overpriced medical system that is driving all costs skyward. Accountable care compensates providers for doing smart things–like keeping patients healthy–instead of providing more tests, scans, and procedures. If a Medicaid patient gets sick from a hospital-acquired infection, the hospital must eat that cost. Of course, we need more Accountable Care in all insurance–both private and public. And private insurance is probably where it will have the most impact in cutting costs.

    As for Medicaid being the most efficient and best option for covering the uninsured too poor to qualify for the ACA premium subsidies–don’t take my word. Take the CBO’s word–and the Kaiser Family Foundation’s. The administrative costs and per-enrollee costs of Medicaid are much less than both Medicare, and private insurance. That’s why the CBO recommended that the ACA include the Medicaid expansion to cover the population under 133% of FPL. It’s the best approach to take.
    Check out the details in this article from Health Affairs:
    http://healthaffairs.org/blog/2011/09/20/medicare-is-more-efficient-than-private-insurance/
    Finally, even Atul Gawande favors Medicaid Expansion:
    http://www.newyorker.com/online/blogs/comment/2012/06/something-wicked-this-way-comes.html

    • You did nothing to address the key point: a huge bag of federal subsidy money doesn’t reduce costs. You did, however, point out a number of completely unrelated things that do. Why not focus on those instead of throwing more money at the problem?

      The first source you cite explicitly states that the high growth in private insurance rates is largely due to a lack of competition. I fail to see how providing additional subsidies to these monopolists solves that problem, nor do you provide any evidence that it does.

      Also, citing an opinion piece that spends several paragraphs using appeals to emotion isn’t exactly hard-hitting data.

      At the end of the day, you’re claim that if we just go with a quick fix to do something now, we’ll tackle the real problems later. Unfortunately, that approach has been tried for several decades without results. Let’s stop taking the easy way out, stop kicking the can down the road, and do something that works. More federal crack isn’t it.

  3. 20% of all health care is uncompensated care costs, Do you have any idea how much administrative costs if behind all of that?

    Everything from bill collectors, to complexities in tax filings for writing off loses, and the cost to the government in lost revenue.

    The medicaid expansion isn’t chump change, for Utah’s increase in costs of around $100 million dollars, Utah will receive $2.4 billion dollars in federal money, Per year. *at final match rate of 90% in the year 2020.

    That cost doesn’t consider the collateral effects of the expansion. The lower uncompensated care write off rate will increase government revenue, the exchanges will compound this effect.

    Medicaids administrative cost overhead will go down, as the expansion ends medicaid means testing and instead is entirely based on gross income.

    Utah will enjoy increases in income tax revenue from the health care workers employed by the expansion, And the group covered by this expansion is the working poor, not the unworking poor. Utah will enjoy increased revenue from increased working productivity as these people obtain access to care.

    Also I will note, None of Obama care is paid for with debt, The medicare FICA taxes where raised by 2.9% and made to apply to unearned income, Hospital compensation rates where negotiated lower on medicare, Medicare advantage has a new formula for compensation rates to bring it in line with standard medicare($258 billion from this alone).

    Note Obamacare lowers the deficit by around a $100 billion dollars, while extending the medicare trust fund another 7 years, tell around 2027, hopefully giving enough time for the drug industry to come to terms with the eventuality of nationally negotiated rates.

    Obama care is a great first step, between provisions of effectiveness research, investments in electronic documentation systems, guarantee issue, and greatly reduced uncompensated care impacts; Generally speaking should lead to better price transparency.

    • You’re operating on the false premise that this is “free money”. It’s not. We have to figure out how to pay at least 10% within 7 years. I’d bet it goes much higher within a few years after that. You’re taking a dangerous short view of the situation from a budgetary standpoint. Do you have a solution as to how the state pays its portion when the time comes? If not, you’d better think of one real quick-like.

      Let’s also lay to rest the idea that the ACA does anything to reduce the deficit. The CBO does good work, but savvy politicos across the board have figured out how to carefully craft their questions to get the answer they want. It also falsely assumes that we have two options: the ACA or what we’re doing now. I think both approaches are fiscally unsound and don’t do anything to address costs.

      And speaking of costs… you’ve said absolutely nothing about how any of this addresses costs within the medical system at large. Not one thing. Nobody on this thread has. That says all that needs to be said. It’s wishful thinking that maybe possibly somehow down the road we’ll save money with no specific ways to do so if we’ll just spend some money now.

  4. Also, Obama care implements the concept of ACO’s(affordable care organization).

    ACO is an alternative to pay for service billing model setup for medicare. Basically rather then paying per service, it pays per medical event. Such as say heart surgery, isn’t a single service but several, Under the ACO model the average cost for those services is calculated and the provider is payed that amount no matter the number of services rendered.

    This encourages hospitals to not **** up basically, if they can keep staph infections from occurring, and provide good enough care that the extra infusion of blood isn’t needed, or provides better nursing care such that emergency care isn’t needed after the fact.

    This is also known as a health care warranty.

    Hopefully, future legislation will implement more of these type of things in medicare to help push alternative payment models and get away from fee for service and its gross administrative overhead.

  5. We are already paying, lost tax revenue from written off uncompensated care loses, lost productivity, extra administrative costs from pursuing non payment of emergency care.

    The number one cost in the system is administrative overhead, by far bounds leaps ahead of any other cost.

    The State isn’t saving a $100 million dollars by opting out, they are just continuing to lose it though a system of the least transparency possible.

    “Not one thing.”

    Yes I did, reducing uncompensated care reduces administrative overhead, electronic record keeping reduces administrative overhead, guarantee issue and community rating reduces administrative overhead, ending medicaid means testing reduces administrative overhead.

    There are a lot of cost saving measures that can be implemented in the future as well, but we need the other measures of the PPACA in effect first before they can be pursued.

    The greatest problem to any reform effort in health care, is the fact that the market functions in a atypical fashion, that is supply and demand works completely differently from a normal market. The rate of demand being set by the disease and accident rate and not by the cost metrics or availability.

    “The CBO does good work, but savvy politicos across the board have figured out how to carefully craft their questions to get the answer they want.”

    I have seen enough of the numbers to find that the claim is very credible.

    “It also falsely assumes that we have two options: the ACA or what we’re doing now. “

    Certainly, A single payer health care system is the only real way to tackle the costs, possibly an all payer system, but the uniquely corrupt nature of US corps likely makes that unfeasible(the French system is all payer and #1 in the world).

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