States Expanding Medicaid Face Challenges of Their Own

Last week, I wrote about the states that have decided not to expand Medicaid this year.  The decision will cost them in money and lives. 

But the 24 (and counting) states that have chosen to expand Medicaid will face challenges of their own.  As a new article in Health Affairs Blog reveals, expanding states will have plenty to do to assure that the benefits of expansion reach those most in need.

The article, entitled Lessons of Early Medicaid Expansions Under the Affordable Care Act, reviews the experiences of five states and the District of Columbia in expanding Medicaid benefits to additional populations using authority granted to them under Obamacare.  The five states were Connecticut, California, Minnesota, New Jersey, and Washington.

All of the states were able to capture federal dollars to support state or local low-income insurance programs.  But, according to the authors, there were seven lessons these states learned that could be warning signs to other states banking on the savings.

One lesson was that they could not predict the size of their eligible populations as well as they thought they could.

For example, when Connecticut’s expansion was approved in 2010, it was estimated that 45,000 people would be affected.  By May of 2013, over 90,000 had been enrolled.  So while Connecticut may have saved $50 million on the first 45,000; it may have spent all of that on the second.

Connecticut will still benefit in the long run – the original expansion took place under the old federal reimbursement rate.  Higher reimbursement begins in 2014.

But I spoke recently with one former state official, who echoed the concerns of others.  He said that taking into consideration all of the state’s financial difficulties in recent years, perhaps the state should have waited to expand.

Another lesson was that it was not as easy to enroll newly eligible people as the states thought it would be.

On the surface, enrollment seemed straightforward enough.  If a person’s income was below a certain cut-off – 138 percent of poverty – he or she was eligible under the expansion and could enroll.

But this presumes that people are following the news as closely as our public officials do.  And it also presumes that they can easily calculate how much income 138 percent of poverty means for them, taking into account their own family situation.  Finally, it presumes that they can get to the right place to file an application and verify their income, their address, and other information.

Beyond that, once they were enrolled, they often moved or had other changes in their status.  And that meant making certain that the state found them at their new address and captured up-to-date information.

The federal government anticipated these challenges when it provided for more navigators to assist with enrollment.  But not every state is on board with the widespread use of navigators. Even though Florida chose not to expand Medicaid, it still passed a law this year placing some unnecessary and onerous registration requirements on the new navigators.  States following Florida’s lead may discourage both Medicaid and private insurance enrollment in general.

The authors also found that expanding states were covering more people with mental illnesses than they anticipated.

To anyone following the implementation of Obamacare closely, this is no surprise.  The mental health coverage required by both Obamacare and the soon-to-be-implemented Mental Health Parity Act is far more generous – and fairer – than it has ever been.

The authors think that the jury is out on whether every expanding state will experience this.  The early expanders typically focused on very poor people, and there may be more people with mental illness in this group than in the poor and near-poor populations most affected by Medicaid expansion.  We will find out soon enough whether this is so.

Finally, the authors also noted that the political context for expansion is important. 

At bottom, states that want to provide coverage to more people will find a way to do it.  Those that do not, will not.

But in every state, the political drumbeat for better coverage is going to get louder over the next year or two.  

And, according to the authors, the drumbeat may be loudest among the safety net providers.  Hospitals and community health centers have the most to gain by expansion, and the most to lose in states where the numbers of uninsured remain the highest.

Paul Gionfriddo via email: gionfriddopaul@gmail.com.  Twitter: @pgionfriddo.  Facebook: www.facebook.com/paul.gionfriddo.  LinkedIn:  www.linkedin.com/in/paulgionfriddo/ 

Seven Problems With Florida's Medicaid Managed Care Reform

In my last column, I described Florida’s new Medicaid managed care and previewed a few of its implications.

In this column, I look closely at seven problems in the law.  

First, Medicaid recipients will be asked to pay $10 per month to participate in the program, and $100 for each non-emergency use of a hospital emergency room. 

This will increase Medicaid costs, not lower them.  Charging even $10 a month for Medicaid encourages people to avoid enrolling in the program until they get sick. What they don’t get is preventive care, so their care costs more. 

Half of all emergency room visits are “non-emergency,” but the patient doesn’t know this until after he or she gets the diagnosis.  For example, chest pain is sometimes indigestion, but other times, a heart attack. You don’t want someone who might be having a health crisis to delay receiving care because they don’t have $100.  If they do and guess wrong, their care will only cost the state more.

Second, Medicaid recipients will be required to share their complete medical records with the government. 

There is no reason for this, and this kind of privacy invasion isn’t popular with anyone.  We may not care when it happens to someone we don’t know, but watch how we react when it happens to mom in the nursing home. 

Third, Florida has created a Medicaid profit-sharing plan which encourages managed care companies to drive up costs in the first year and take them back in profits the second year. 

The law allows plans losing money in the first year to recoup those losses in the second year.

This creates a perverse incentive for organizations.  Because they don’t have to worry about first-year losses, they have an incentive to enroll the highest cost patients possible in order to maximize their payment rates.  If they then crack down on utilization in the second year, they can maximize their profit potential at little or no risk. 

Fourth, Florida’s plan creates a really perverse economic incentive for the state. 

The higher the profit made by a managed care company, the more the state gets back as a rebate. 

If the state has a future budget crisis, it could be tempted to manage that crisis by pressuring its managed care partners to deny or delay care to recipients – especially in the latter part of a fiscal year – to increase the amount of the rebate the state will receive.

Fifth, each plan must offer smoking cessation, substance abuse treatment, and “medically directed weight loss” programs. 

Personally, I support this.  However, when “the government starts telling us what we can and cannot eat,” a lot of small-government advocates (including some Florida legislators) claim they draw the line.

Sixth, Medicaid recipients who are found judicially or administratively to have engaged in Medicaid fraud will forfeit their Medicaid eligibility for ten years. 

This sounds fine, but what happens when an addict is found “administratively” to have engaged in fraud by pill shopping among providers?  Or when a person with mental illness is found “administratively” to have engaged in fraud by claiming phantom physical complaints?  Do we really intend to discriminate against certain people for their medical conditions?

Also, what happens when someone found to have engaged in fraud develops a high-cost condition, such as cancer, several years later?  Does this “one-strike-and-you’re-out” policy mean the state expects providers to cover the future cost of care without any reimbursement?

Seventh, Florida’s Medicaid reform re-introduces hospital rate setting. 

A generation ago, in a far more “big government-friendly” era, Medicare adopted a prospective payment system to set hospital rates.  It used “diagnosis-related groups,” or DRGs to do this, and several states used DRGs to establish hospital rate-setting systems.  While Medicare has retained and adjusted its DRG system, most other DRG-based rate setting vanished years ago.

DRGs, however, will re-appear in Florida in 2013. The legislature has directed AHCA to develop a DRG system for Medicaid.    

Here are two reasons why this won’t work as intended.  The first is that Medicaid patients are a far more diverse group that the Medicare population.  Forcing hospitals to work within pre-set DRG rates can be extraordinarily unfair to the hospitals serving the neediest and most complex of patients.

The second is that the only way hospitals can guard against DRG harm is to engage in the legal practice of “DRG creep.”  Hospitals have a financial incentive to assign the highest-paying diagnosis code possible to every patient they see.  The result?  Rates may come down, but costs will go up.

Florida’s Medicaid reform has been called transformational.  Life is full of transformations. Some last, but others fade quickly.  The new Florida law may seem like big change, but its promised benefits may soon be regarded as something of a mirage.

The Florida Medicaid Reform Law is the result of the passage of two separate bills, HB 7107 and HB 7109. Information referenced in this column can be found in the text of one of the two bills.  If you have a question about the specific location of any text, please contact the author at gionfriddopaul@gmail.com.

Sharing the Pain in Florida?

There were more than a few sighs of relief when Florida House and Senate members came to an agreement on health and human budgets this week.

There was also some welcome news. 

But not everyone is happy, and there will still be plenty of pain to go around.  People like me won’t feel it, but millions of others will.

First, let’s get to the good news. 

After weeks of uncertainty, funding for adult mental health services will not be eliminated or cut.  Senate and House leaders, led by Rep. Denise Grimsley, came to the conclusion that asking people with mental illness to shoulder this much more pain this year was just too much.  This is a tremendous relief to everyone affected by mental illness.  Though we may not be able to quantify “things that don’t happen,” we know that legislators saved many people from harm, and prevented scores of crises down the road.

The Medicaid “medically needy” and “aged and disabled” programs in Florida also remain intact.  If they had been eliminated, over 81,000 elders and people with disabilities would have been left with no more health care and no money.  These are all people either living in poverty already or who have monthly incomes too high to qualify for Medicaid – even though they have no savings and have to spend most of their income on medical care.    

Legislators deserve credit for making these choices in the face of surprisingly strong headwinds.

Now let’s get to some of the bad news.

Hospitals will take a 12% cut in state Medicaid payments, and nursing homes will take a 6.5% hit (on top of a 10.5% cut this year).  Home care providers will also be cut.

It’s always a little easier to cut from providers than it is to cut from people, but these cuts to providers affect real people, too.

For example, many hospitals already lose a lot of money providing care to the Medicaid population because reimbursement rates are low.  There are only two ways they can absorb another 12% reduction in payments.  Either hospitals will be forced to cut back on services to everyone, or private health insurance rates will have to increase to offset the reduction.

Nursing homes are often the last home many people with chronic illnesses will experience in life.  60% of nursing home residents rely on Medicaid to pay some or all of their bills, making Medicaid the largest payer of nursing home care.  Cutting Medicaid rates another 6.5% means further constraining care for some of our oldest, sickest citizens.

People relying on home and community based services as an alternative to nursing home care also weren’t spared.  The compromise appears to reduce funding for home-based services by over $36 million, by reducing provider rates by 4%.

Medicaid managed care will also move forward.  This is an unsettling prospect for many.  It will mean months of testy negotiation with a federal government that will be reluctant to approve Florida’s waiver.  If Florida reaches a compromise with HHS, it will then mean years of transition to a managed care program that could still result in less care for almost 3 million Floridians.

In commenting on proposed cuts before the final votes were cast, a State Senator noted that “everyone is going to have to share in the pain.”

But is that what really happens in this budget?

It doesn’t look like I’ll be feeling any pain when this Florida state budget gets put to bed.  My health insurance will be there when I need it, my physician will still make enough money to cover his cost when he treats me, and I probably won’t need hospital or nursing care this year.

Looking at the bigger budget picture, my youngest son graduated from our local public high school a couple of years ago, so I won’t feel the effects of school funding cuts.  My daughter is in an out-of-state university, so I won’t notice the tuition increases here in Florida.  My mother died a decade ago in Connecticut, so she won’t be affected by cuts to a Medicaid program that allowed her to live her final years in the comfort of her own home.

For me and people like me, there are $308 million in tax relief in this budget - far less than the $2 billion the Governor wanted.  Some of it may even lower my property taxes again.  They have already been cut by 41% this year – largely because of the odd methods we have of determining the taxable value of property in this state.

It’s nice to know that I won’t have to live with any pain this year.  While I’m grateful that some people with mental illness and impoverished elders won’t either, I can’t help thinking at least a little about those who will – and wonder why.

If you have any questions about the column, or to receive a weekly email notifying you when new Our Health Policy Matters columns are published, please contact gionfriddopaul@gmail.com.

Slaying the Medicaid Monster

Legislators have created a Medicaid monster, which eats up 22% or more of their state budgets.  Now they want to slay it. 

However, they’re not seeing the real monster clearly.  Cutting the legs out from under Medicaid recipients isn’t the same as cutting the monster down to size.

A Florida bill illustrates how states are attacking the wrong things. 

Under a Florida Medicaid reform proposal, Medicaid patients would be charged $100 for non-emergency visits to a hospital emergency room.  The purpose is to save money by discouraging unreasonable use of emergency rooms. 

Nearly half of all visits to emergency rooms are for non-emergency reasons.  This is true of Medicaid patients, insured patients, and uninsured patients.  The main reason the percentage is so high isn’t that people choose to go to the emergency room for minor complaints.  Laypeople aren’t qualified to diagnose their own emergencies.  Health professionals tell them to use emergency room because it’s better to be safe than sorry.

Here are three true-life examples that illustrate the point.

• A 56 year old man complains of chest discomfort and shortness of breath, and the paramedics who respond advise him to go to the hospital immediately.  Even though clinicians describe his symptoms as those of a classic heart attack, the tests are negative. It is a false alarm. 
•  A 35 year old woman walks into the emergency room complaining of an upset stomach.  She is examined and advised to take an antacid.  She reports feeling better and is discharged. Several days later she is admitted to the hospital in severe pain, and is diagnosed with an ovarian cyst. 
• Three times in two weeks, a young man enters the emergency room complaining of leg pain.  Clinicians suspect that he may be shopping for pain pills.  They find nothing wrong with his leg, and discharge him.  A few days later, the patient is in the hospital after attempting suicide.  His complaint was about his leg, but his problem was his mental illness.

Who is to say which of these patients shouldn’t have gone to the emergency room?    

When people need health care someone has to pay for it.  For too long, states have taken the position that this should be someone else.  Letting people at the poverty level shoulder more of the burden through $100 charges is just the latest strategy. 

This is because imposing a $100 charge on patients will cause care to be deferred, delayed, or denied.  People will try to wait out their emergencies.    

This won’t matter to the 56 year old who didn’t have a heart attack.  He’ll be fine the next day.  The woman with the ovarian cyst and the suicidal man won’t be so lucky.

Medicaid isn’t a monster.  It’s a lifeline for people who need health care. 

It is also a lifeline to the states.  It may absorb 22% of their budgets, but it also supplies 15% or more of their total projected state revenues.  The federal government reimbursed states for an average of 57% of their costs through 2009, 66% in 2010, and will pay 90-100% of the cost of program expansions under health reform. 

This payment results in four times the amount of revenue states receive from corporate taxes, and almost as much as they raise from all state income taxes combined. 

Like the governor of Texas, some Florida legislators are threatening to drop out of the Medicaid program unless the federal government agrees to let them cut Medicaid benefits to the elderly, children, and lower middle class families.  The Governor of Texas dropped this idea when his commissioner reported how much harm this would do to the state. 

The way for states to control Medicaid costs isn’t to make it harder for people to receive Medicaid benefits.  States need to fix the mistakes they have made over the years that have led to higher costs, not compound them. 

First, they reduced Medicaid reimbursement to physicians and other providers to such a low level that most dropped out of the program.  In many areas, the only Medicaid providers left are the hospitals, so that’s where Medicaid recipients go for care.  To its credit, Florida is following the federal government’s lead and considering higher reimbursement rates for some providers.   

Second, they limited community care, home care, and non-health care options to people on the program, and refused Medicaid to people with mental illness, pushing them into higher-cost treatments.

Third, they forced recipients into managed care programs that did a better job of denying care than coordinating it, making the population sicker.

Fourth, they put healthier, working people with incomes slightly above the poverty level onto county and local programs that receive no federal reimbursement.

Despite the harm they’ve done, some of these mistakes are still on lists of state-proposed “reforms.”   

That’s the real Medicaid monster.