A Different Kind of Individual Health Mandate

According to a recent report in Health Affairs, health spending in the United States is projected to rise by 5.8% per year over the next decade.

source: CT OPM

Rising health care costs are a problem that must be brought under control.  One approach is to do what Florida's doing.  It is forcing state employees into a single HMO, removing all competition from the market while praying that the HMO won't be motivated by making a profit. 

Another is to look at what the State of Connecticut is doing.

It is betting over $100 million that its employees and retirees will respond to a different kind of “individual mandate” from the one under fire in the Affordable Care Act.  Connecticut has decided to give financial incentives to employees and retirees to manage their health.  It will also penalize financially those who do not. 

State workers overwhelmingly voted to accept the new deal earlier this month.  If the plan works, then it may signal a new path for every state hoping to cut its future health care spending.

Connecticut was motivated to undertake this challenge by its mind-boggling budget deficit.  The deficit in the coming two years was projected to be 50% higher than the entire annual state budget was just a little more than 30 years ago.

To avoid thousands of layoffs, it entered into negotiations with its unions to change salary and benefit packages.

At the bargaining table, negotiators decided not just to employ the old, failed cost-containment strategies of reducing benefits to workers and squeezing payments to providers.  They took a different approach by promoting the participation of employees and retirees in disease management and health maintenance programs. 

They created a new “Health Enhancement Program” for all Connecticut state employees and all future retirees. Those who choose to participate in the “voluntary” program will benefit financially.  Those who do not will pay higher insurance rates as a penalty.

Participants in the Health Enhancement Program will receive some excellent chronic disease management services, including free health care and drugs.  They will not have to pay any co-pays for office visits related to diabetes, asthma, heart disease, hyperlipidemia, or hypertension, as long as they adhere to the schedule of visits recommended by their health care provider.

Participants in the program will also pay reduced co-pays for drugs needed to treat these conditions.  The co-pays will be as low as zero for all diabetes prescriptions and for generic drugs used to treat the other conditions.

In return, participants will have to agree to focus on staying healthy.  They must get regular physicals, eye exams, and dental cleanings.  If they and their dependents do all these things, they will receive a cash award of $100 per year for their efforts.    

On the other side, those who choose not to participate will pay more for health insurance and health care.  They will pay an additional $100 per month for their insurance.  They will pay higher drug co-pays.  They will also pay a new $350 deductible per individual, with a $1,400 family cap, for health care services not covered by co-payments.

Connecticut is betting heavily that its employees, retirees, and their dependents will want to manage their health – and, most importantly, that it will pay off in reduced costs to the state.

In June, the Office of Policy and Management estimated that the Health Enhancement Program will save the state over $100 million annually in health care costs.  OPM believes that 50% of those eligible will choose to participate, and that this will result in a 10% reduction in health insurance claims – even though some participants will be required to visit health and dental health professionals far more often than they do now.

The penalty provisions save the state another $18 million, which the non-participants will pay out-of-pocket in higher premiums and deductibles.

There may be two big holes in the Connecticut plan that will reduce the savings to the state.  While mental health and chronic pain services are still included in health plans just as before, the Health Enhancement Program does not include them among the conditions managed in the program.

Both affect a large number of people, lead to many expensive and preventable health care encounters, and often co-occur in a patient with the covered chronic conditions.  If a patient’s unmanaged mental illness leads to a failure to comply with a diabetes disease management program, both the patient and the state will lose.

Still, the Connecticut plan goes beyond what most other states have attempted, and is well worth a try. Changing the trajectory of increasing health care costs isn’t easy.  It will be interesting to see if Connecticut’s health “mandate” proves more popular and effective than the alternatives.    

If you have questions about this column, or wish to receive an email notice when Our Health Policy Matters columns are published, please email gionfriddopaul@gmail.com.

BCBSFL Wrong To Cut Mental Health Providers

A recent story in Health News Florida broke the news that Blue Cross and Blue Shield of Florida (BCBSFL) has notified all of its participating mental health providers that their contracts are being terminated as of November.

Those who wish to continue to see BCBSFL patients will have to sign a contract with a new provider partially owned by Blue Cross and Blue Shield.  Their payments will be cut between 25% and 55%.

BCBSFL’s notice caused a justifiable uproar – one that may extend beyond the boundaries of the state. 

Mental health advocates see the action as a violation of the federal Mental Health Parity Act, because only mental health providers have been singled out.

Florida residents are also concerned.  BCBSFL has four million members, and insures over 7 million people in the state.  They all may lose access to providers as a result of this action. 

But up to 80 million on Blue Cross Blue Shield plans outside of Florida will also be affected.  Blue Cross Blue Shield plans around the country use one another’s provider networks.  Florida’s providers who are dropped by BCBSFL are also automatically dropped from every out-of-state Blue Cross Blue Shield plan, too.

There is a nagging sense that what is behind the BCBSFL decision is a desire to deny coverage for mental illness by denying the people it insures access to mental health providers.

Providers are already forced to accept low BCBSFL rates when they treat patients.   I have a recent statement indicating that a Florida provider gets $51.97 from Blue Cross and Blue Shield for an hour of counseling.

This may seem like a lot of money, but it is not.  At that rate, a provider would have to treat seven patients per day, five days per week, fifty weeks per year, to gross $91,000 per year.  But office expenses, the cost of help, taxes, and insurance would all have to come from this, leaving the provider with a salary of perhaps $50,000.

And BCBSFL thinks this is too generous?

In the interest of accuracy, I should point out that the provider in question is an out-of-network provider who nevertheless handles the BCBSFL paperwork and accepts the payment on behalf of the patient – relieving the patient of this headache.  Also, the $51.97 payment wasn’t even made by BCBSFL, but by an out-of-state plan.  I contacted the out-of-state plan, and its representative confirmed that it paid the rate set by BCBSFL.

If this is the BCBSFL standard, then we pay plumbers, electricians, carpenters, and auto mechanics more than BCBSFL pays mental health professionals.

Is our mental health care really worth less than our clogged kitchen sinks, our burned-out fluorescent lights, our broken porch railings, and our regular oil changes?  BCBSFL seems to think so.

BCBSFL could make the argument that it pays only a portion of the mental health provider’s bill, and the patient co-pay makes up the difference.  Fair enough.  So I added in the co-pay and the provider’s reimbursement went up to $64.

This is still less than we pay carpenters, plumbers, electricians, and auto mechanics.

The cost of mental illness in America is staggering, but it is not because of high counseling rates paid to psychologists.  Using current research, Mental Health America has argued that the economic costs of mental illness are now in the vicinity of $200 billion per year.  In addition, mental illnesses cost over $57 billion a year to treat, making mental illness the third most costly chronic condition.

But, according to a recent article in the New England Journal of Medicine, private insurance pays for only 27% of our nation’s mental health costs (versus 37% of all health costs), leaving almost three-quarters of the mental health bill for federal, state, and local governments. 

Not bad for a country which continues to believe that it’s not paying for mostly single-payer, government-sponsored, national health insurance.

Poor coverage for mental illness is one of the reasons that states have had to mandate mental health benefits.  It is also a reason why Congress passed the Mental Health Parity Act and put consumer protections into the Affordable Care Act. 

But in a state like Florida, where both the Governor and the Insurance Commissioner have repeatedly opposed the interests of consumers, BCBSFL may not be held accountable.  This is unfair and wrong. 

It is also the best argument I can think of for why we need a government that is willing to stand up to private insurers on behalf of its citizens.

If you have questions about this column, or wish to receive an email notice when Our Health Policy Matters columns are published, please email gionfriddopaul@gmail.com.

For a Less Healthy State, Cut Business Taxes

In a recent column, I wrote about the importance of public health spending in reducing the death rate. 

What other public policy strategies also lead to a healthier state?

Chart shows positve healthy state rank relationship to health spending, negative to business tax climate. 

There are quite a few.  I compared several other state rankings with the most recent state health rankings published earlier this year. These included health care spending per capita, per enrollee Medicaid spending, Medicaid spending for people with disabilities, Medicaid spending on children, and state mental health agency spending.  I also looked at rankings in per capita income, household income, the percentage of people with private health insurance, and business tax climate.  

It turns out that a higher state ranking in eight of the nine areas is related to a higher state health ranking.  In only one area – business tax climate – did a higher ranking predict a lower state health ranking.

Like spending on public health, more generous health care spending – including safety net spending – is a strong indicator of a healthier state.  The healthiest state, Vermont, was 8^th overall in per capita health care spending.  Massachusetts, the second healthiest state, ranked second in Medicaid spending for people with disabilities.  Maine, which topped the state list in mental health spending, was the eighth healthiest state overall. 

The strongest indicators of a healthier state among the five areas of health spending were Medicaid expenditures on behalf of people with disabilities and the state’s ranking in per capita mental health spending. 

The next strongest was overall Medicaid spending.  Behind this were overall health care spending per capita and Medicaid per capita spending on children. Spending more on children generally means better prevention, and spending more on health care usually means better health care.  Both contribute to a healthier population. 

Some people might argue that there are economic factors at play here.  After all, wealthier people are healthier than poor people, so it stands to reason that higher per capita income would be a much better predictor of a state’s health ranking than entitlement spending would be. 

Higher per capita income is, in fact, related to a higher healthy state ranking.  Eighteen of the states in the top 25 in the healthy state rankings are also in the top 25 in per capita income.  However, a state’s per capita income ranking is no better a predictor of the state’s health ranking than is its overall spending on Medicaid.

Put another way, a state’s spending on mental health and disabilities services is a better indicator of a state’s health ranking than is its per capita income.

Another economic factor – the state’s ranking in the number of people who are privately insured in the state – is strongly related to the state’s health ranking.  The more people on private insurance, the healthier it is for a state. 

So it turns out that there are many policy decisions state legislators can make to improve the health of the people of their states.  They can spend more on Medicaid, put more state resources into mental health services, get more people on private insurance, increase minimum and living wage standards, and make sure that health care providers are plentiful and paid decently for their services.

Most states are doing exactly the opposite today. 

Some are even taking it one step farther.  They are cutting business taxes in an effort to improve their business tax climate.

However, the better the business tax climate ranking, the lower that state’s health ranking seems to become.

Nevada, for example, has the 4^th best business tax climate, but it was the 47^th healthiest state.  Florida has the 5^th best business tax climate, but it was the 37^th healthiest state.  The least healthy state, Mississippi, had the 21^st best business tax climate. 

Chart shows poor relationship of business tax climate to per capita income and private insurance rankings.

There is a reason why so-called “business tax expenditures” don’t translate into a healthier state.  It is that these don’t appear to improve a state’s economy. 

A better business tax climate ranking is related to lower, not higher, per capita income, and has no effect at all on the state’s ranking in the number of people who are privately insured.

A good business tax climate does not have to lead to a poor state health ranking.  New Hampshire, for example, is the third healthiest state and has the seventh healthiest business tax climate.  But it also prioritizes health and worker benefits.  It is in the top tier of state per capita mental health and Medicaid spending, its per capita income is high, and its employers are tops in providing private health insurance to workers.

We can have a healthier population working within the constraints of bad economic times.  We just have to stop knee-jerking about entitlements and taxes, focus our attention on what works, and invest in our people again.

Column note:  The two charts accompanying this blog may be difficult to interpret because of the number of state data points on them.  I added the liner trend lines to simplify them.  Trend lines that move in the same direction as the line to which they are being compared (the healthy state ranking in the first chart and the business tax climate in the second) have a positive relationship to it; flat lines have no relationship and those moving in the opposite direction have a negative one.  For further reference, I have created a new page with a table (see the “State Rankings” tab) of all the state rankings I used.  The sources for the rankings and the charts are on that page.

 If you have questions, or if you wish to receive an email notifying you when new Our Health Policy Matters columns are published, please email gionfriddopaul@gmail.com.

Entitlement Reform Could Lead to Mental Health and Health Care Armageddon

It was hard to witness the embarrassing spectacle of politicians responding to the credit downgrade by circling their firing squad yet again.

I’d like to see some grown-ups emerge from the mess.  But I’m not holding my breath.

Sources: CBO, GIH, KFF, CDC, NAPH

Our debt problem was caused by tax cuts that didn’t create jobs, wars for which we didn’t pay, and an unsustainable and under-regulated financial bubble that burst.  It wasn’t caused by entitlements.

Despite this, politicians are pushing entitlement myths and reforms.  But in the unsteady hands of this unstable Congress, entitlement reform could result in a health and mental health care Armageddon that could blow us all back into the 19^th century – the stone age of modern medicine.

The Social Security and Medicare Trust Funds still have surpluses.  They aren’t responsible for the debt.  In fact, Social Security Trust Funds hold U.S. debt, just like China.

We can do two things about future Social Security and Medicare costs.  We can cut benefits, which our citizens don’t want, or raise Social Security and Medicare taxes to pay for the benefits people do want.  It would take a 1%-2% Medicare tax increase to preserve Medicare as it is today for the next three generations.

Medicaid is a different story.  Medicaid doesn’t have a trust fund.  It contributes to the federal deficit and debt, and we need to lower its cost. 

However, the federal deficit this year will be at least $1.3 trillion.  The entire federal share of the Medicaid program is approximately $300 billion. 

Suppose Congress passed the most radical entitlement reform possible – eliminating the entire Medicaid program – as Texas Governor Rick Perry once proposed.  The federal deficit would still be over $1 trillion.

The debt wouldn’t go down much, either.  Our national debt is over $14 trillion today.  Before the passage of the recent deficit reduction act, the CBO projected that the debt would grow to $23 trillion by 2020.  The Act reduced this by almost $1 trillion in Round 1, with at least another trillion to come in Round 2. 

If Medicaid’s $300 billion per year, plus inflation, were made part of Round 2 cuts by the “SuperCongressional Committee,” the U.S. debt would still be almost $20 trillion in 2020.

This assumes that there would be no bad outcomes from such a radical action.  However, eliminating Medicaid would kill health and mental health care in America. 

If Medicaid were eliminated, then the number of uninsured people would mushroom to one-third of our population.  Many would have chronic diseases.

We would witness the first major fallout within a few weeks.  Sixty percent of nursing home beds are funded by Medicaid.  So nearly every nursing home in America would collapse, unable to finance their operations.  Frail elders and people with chronic conditions would be released.  Social services providers would be overwhelmed.

Within a few months, the fallout would spread to every community health center in America.  Without Medicaid, which accounts for 37% of CHC revenue, they, too, would crumble.  Millions of their patients would flood into hospitals for care. 

Most hospitals could probably survive this onslaught for a year or two, but the pressure on them would be terminal.  Public hospitals, which get 35% of their revenue from Medicaid, would fail first. Then private hospitals, which get 17% or more of their revenue from Medicaid, would fail, leaving vast areas of our national landscape without emergency, trauma, or surgical care. 

Behavioral health services, which get 26% of their revenue from Medicaid, would implode next.  People with mental illness would be out on the streets or hidden away without services.

Private physicians could hold out a little longer.  But within a few years, patient-hoarding would be their only survival strategy, and most of their practices would die.  A few urgent care centers, surgical centers, and concierge practices would remain, but their prices would skyrocket.  Few could afford them.

By 2020, without Medicaid pretty much all that would be left of our health system would be our public health services and our $20 trillion debt.  A significant percentage of 14 million healthcare jobs would be lost.  Life expectancy would plummet to pre-1900 levels, and most diseases would be death sentences again.

“Entitlement reform” is a new catch phrase for politicians who do not want to face reality.  To balance our federal budget and pay off our accumulated debt, we will have to raise taxes, pay for the wars we’ve already fought, and create more jobs – including jobs in the public sector, in which one in every six U.S. workers is employed.

The discourse in our Congress must be more grown-up.  We must pay for what we have already consumed and what we want in the future.

But paying bills is a bigger nightmare to some politicians than destroying our health and mental health care systems.  So the demonizing myth of entitlements will continue.

If you have questions about this column or wish to receive an email notifying you when future Our Health Policy Matters columns are published, please contact gionfriddopaul@gmail.com.

Column note:  There are more hyperlinks than usual in today's column, and I want to thank especially the Congressional Budget Office, SAMHSA, the Center for Medicare and Medicaid Services, the Center for Budget and Policy Priorities, Grantmakers in Health, the National Association of Public Hospitals, Gallup, the Federal Bureau of Labor Statistics, the Kaiser Family Foundation, and the Centers for Disease Control and Prevention for the valuable information they make available through their web sites for use by people like me!

Public Health Spending Prevents Deaths

If you are as grateful as I am that the nonstop coverage of debt ceilings and deficits is behind us for a while, and want to talk about something even Congress should be able to agree is worthwhile, then just repeat after me these two magic words. (No, not those two!)

The words are "public" and "health."  There is a new article out entitled Evidence Links Increases in Public Health Spending to Declines in Preventable Deaths. 

Source:  Mays and Smith, Health Affairs, 7/11

The article has been published online by Health Affairs, and is in the August 2011 edition of the print journal.  It was written by Glen Mays and Sharla Smith.

Spending on public health has long been one of our government’s great success stories.  It keeps our water clean, our air free of pollution, our food pure, our children immunized, and our homes and neighborhoods free of lead, rats, and violence.  It also promotes our health. 

I wrote in a previous column about what this means for individuals like you and me.  Our life expectancy in America grew by 30 years during the last century.

The Health Affairs article makes it clear that public health is still getting the job done today.

Here’s the bottom line.  When more money is spent on public health, death rates go down.  When less money is spent on public health, death rates go up. 

It can’t be much clearer than that.  The authors studied public health expenditures and death rates in a number of communities between the years of 1993 and 2005. 

Local health departments whose spending increased by an average of 10% per year during those years experienced significant declines in infant deaths, deaths from heart disease, deaths from diabetes, and deaths from cancer.

These declines were not inconsequential.  For each 10% increase in public health funding, there was a decrease of 3.2% in deaths from heart disease, a decrease of 1.4% in deaths from diabetes, and a decrease of 1.1% in deaths from cancer.

There was also a 6.9% decrease in infant deaths.

These percentages may seem small, but consider this.  In a county of one million people, a 10% increase in public health funding per year for twelve years means a decrease of over 1,000 deaths from heart disease alone. 

These are not avoided deaths among people who had heart attacks and were saved by advanced medicine.  These deaths usually occur among people who seem healthy.  If it weren’t for public health, these thousand people wouldn’t be playing with their children and grandchildren, walking and jogging along our streets, working at jobs, dining in our restaurants, shopping in our stores, and even serving as elected or appointed officials.   

It seems a no-brainer to invest in public health.  However, one-third of local health departments actually had their funding reduced during the twelve year time period of the study.  The communities they serve had an increase in deaths equivalent to 430 for every one million people.

We’ve all heard how tight our public budgets are as public officials work to reduce spending.  Can we afford to save this many people through public health?

The short answer is yes, and the longer one involves some embarrassment that we don’t try harder.  The average community spends about $40 per person per year on public health.  Increasing this expenditure by 10% would average out to $4 per person per year, about the cost of one movie rental or one beer per year.  

Local people have also already delivered a message about this to state and federal officials.  They don’t mind giving up a movie rental or a beer every year to save 1,000 lives. 

In states where counties or cities control their own local health departments, the authors note that public health spending is 24% higher than it is in states where the states themselves control the local health departments.  It turns out that local people are willing to give up a movie rental and a beer for public health.

The authors calculated that the ten percent increase in public health spending per community would increase local public health budgets by an average of only $312,000 per community each year.  Compared to the billions and trillions of dollars our elected officials have been talking about – or even the $9.2 million one hospital recently charged the estate of a dead patient – $312,000 doesn’t seem like a very big number to me. 

Public health is responsible for 50% of the gains in life expectancy in the United States during my lifetime.  We can certainly do better than to give it less than 5% of all health funding, as we do today.

Public health doesn’t need a lot to do its job.  Just 5.05% would make a measureable difference.  And 5.5% across the nation could save the lives of millions.   

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