Wednesday, July 22, 2009

The ignored elephant in the room. What's missing from the health care reform discussion.

What do most of the health care reform bills have in common? Amongst other things, they use Medicaid as a tool for expansion of coverage. And this could be their fatal flaw, which if enacted, will cause the reformed system to come crashing down.

Don't get me wrong, I'm all for expanding coverage. Especially for the poor. Nothing frustrates me more when I have a patient in the ER who would benefit from an outpatient treatment but won't get it because they don't have money and/or insurance coverage.

First, a little history. Medicaid was passed in 1965 along with Medicare. However, Medicaid was set up in line with welfare, where there were income eligibility requirements determined by the states. Also, the federal government matched the states outlays to Medicaid as part of the funding process, leading to many of the budgetary problems the states face today.

The program was voluntary, and since states had to pay money to receive money, the poorer states had the most stringent requirements, making only the poorest of the poor eligible and leaving many poor without coverage. Worse, it incentivized people not to work, because earning even a minimal amount of money now made you ineligible for Medicaid.

The worst problem with the setup of medicaid was the lack of cost controls. It was assumed (see reference in the link above for source) that the State determined eligibility requirements and requirement for State matching would be the force to hold costs down. However, Medicaid pays for care, not for insurance. And as the program got larger, costs needed to come down somehow. Benefits were not directly cut (at first, though eventually some benefits were made more restrictive), however payments to providers of that care were.

The federal government determines what the fee schedules are to pay physicians and hospitals. Increasingly, the states are facing budget shortfalls and looking for ways to cut their part of Medicaid, and doing it by holding back payments to physicians and hospitals (usually skewed towards physicians since hospitals have more political influence), limiting access to certain medicines, and again, lowering the thresholds for eligibility.

As a result of these cuts, Medicaid pays physicians and hospitals less than the cost of providing these services. And while hospitals can only write that off, physicians who can choose their patients, choose not to take Medicaid as it is as if the patient is uninsured. Or they limit the number of Medicaid patients they will see. And specialties such as pediatrics which depend highly upon the Medicaid population for their business earn proportionately less than their internal medicine counterparts.

Despite these cost-cutting attempts, Medicaid is still a 200 billion dollars a year behemoth (approximately half of Medicare) that grows more in the lean years and shrinks somewhat during the booming years of the economy.

Getting back to the health care reform issue, one of the main tactics for insuring more people is by increasing the thresholds for eligibility for Medicaid. Yes, this will insure more people. Massachusetts proved this to be the case in their 97% universal health care plan. However, physicians and hospitals that are located in poor areas dominated by Medicaid find they are losing money.

Physicians decide not to see those patients, or give them 4 month waits for a limited number of "Medicaid" appointments, and those patients understandably end up in the ERs getting expensive care that is incompletely reimbursed, thus jeopardizing the solvency of hospitals like Boston Medical Center.

If we model our national health care reform efforts after Massachusetts then we will get the same problems magnified fifty times over: escalating costs, poor access to primary care physicians - especially for those with Medicaid/Medicare, and risk of insolvency of critical hospitals. And the states will have a harder time than they already have making their budgets work, since they will be paying out more to Medicaid than previously (which was already enough to break the budgets).

Since we have the example of Massachusetts to learn from (good aspects and bad aspects) we should learn those lessons - the chief being, MEDICAID MUST BE REFORMED BEFORE IT IS EXPANDED.

One possibility of reform is to increase payments to physicians and hospitals giving them a margin of profit, and encouraging better coordinated care to patients with multiple and/or chronic conditions requiring good primary care. While this increases costs on the front end, it decreases costs on the back end, since patients with expensive chronic conditions get better, less costly primary care, instead of more costly ER and inpatient hospital care. Of course, this implies there are sufficient primary care physicians available to give this increased care, which, if you read my previous blog, is likely not the case.

Another possibility of reform is to take Medicaid and rather than pay for services, just subsidize Medicaid patient's premiums with a private insurer in a group market/exchange system. This will undoubtedly cost more money, as Medicaid's expenditures per patient is less than private insurance (likely due to their lower payments to providers). If the market/exchange enacts good cost controls then this option could work. If not Medicaid will cost the country more than ever.

If we don't enact significant Medicaid reform, our whole country will face the problems Massachusetts' reform is only now revealing, and it could continue the downward spiral of healthcare in this country, rather than improve it.


  1. Good point. The best way to reform Medicaid is to federalize it. There's too much state to state variability. In WA (my state) medicaid is a low payer, but fast and low hassle. In IL, Medicaid is six months behind. In NY and CA, it's an absolute shambles. Worse, it's a massive drain on state budgets that goes up when inelastic state revenues go down. They should just roll it into Medicare, but that would cost way way too much.

    This is also the reason I loved the Wyden Healthy Americans Act, because it did away with Medicaid altogether.

  2. I strongly agree with shadowfax here that the current variability between states is unacceptable. That variability forced me to move to another state!!

    The biggest ignored elephant in the room is federal Medicaid law regarding long-term care, which both parties are completely ignoring in this debate. The feds will continue to mandate that state Medicaid agencies provide care for the disabled in institutions, which cost the most of any long-term care option, while home care services, the least expensive option, are slashed to the bone by states because they are “optional.” Nursing homes, an antiquated, discriminatory model based on segregation and neglect that is widely hated, is enshrined in law as mandatory, because Congress' corporate pimps say so. People with disabilities are forced every day to leave their taxpaying jobs and families behind to go into these prisons. It’s the only way they can get the care needed to stay alive. “Give up your freedom or give up your life,” is no choice at all.

    I bang the drum against this injustice frequently on my blog, but (aside from
    perhaps this new piece in Salon)I am hearing NOTHING from doctors discussing reform. These policies are resulting in billions of unnecessary cost, and countless stolen lives, yet few seem to even notice, much less care.

    Please notice. Please care.


  3. Nick, part of the reason I left out long-term care is bc of my (false) perception of it being a separate issue, not to be dealt with in basic health care reform, but one to address when Medicaid is reformed, repaired, or dismantled.

    But your point is well said. Your plight is not the only one in that vein: home and peritoneal dialysis costs less than a dialysis clinic, but the financial reimbursements favor clinics (corporate entities) for instance.

    I don't know if you saw my blog about compassionate elder care and blog about inadequate mental health care. The mental healthcare system in particular suffers from the lack of federal grant uniformity that used to exist and now is left in the hands of states using block grants.

    What is happening to you and others is unacceptable and I agree with your plight. Thank you for your post, and for educating me about further injustices with the medical system. I twittered your website to my peeps.

  4. Thank you for listening and responding! I'm impressed!