What We Worry About Least in the Health Policy Debate

You shouldn’t have to worry about anything during vacation season.

So this column is my vacation gift to you. It is about all the health policy matters we seem to worry about the least. 

I have written close to 150 columns.  If you look down the right side of the page, you will find links to the ten most-read ones.  The subjects won’t surprise you – fairness in mental health treatment, Obamacare and private insurance, and cursed football players lead the way.

But do you ever wonder about the columns with the fewest readers?

Based solely and unscientifically on my numbers, here are a half dozen or so health policy matters we seem to care about the least.

Long Term Care. 

Are you worried about continuing high unemployment rates, taxes on small businesses, or another stock market crash ruining your family’s financial security?   If so, you should redirect that worry.  Because US Trust CEO Keith Banks called long term care costs “the biggest risk to family wealth” during a June 27, 2013 CNBC interview.

That’s because neither regular health insurance nor Medicare covers them.

So you can either pay $80,000 or more per year for long term care, or hope states continue to spend billions of dollars to expand Medicaid, or wait for Congress to create a national private long term care insurance program– something a new national Commission on Long Term Care has just been given three months to do.  That should get anyone’s anxiety level up.  But chances are – if you are still reading this column – your mind is wandering already, and you are ready to move on.

Medicare.

Whenever I write about Medicare, I lose 30 percent of my readers that week.  For example, I wrote two columns earlier this spring about something I found really intriguing and have never read anywhere else – that Medicare regularly pays more for men with depression than it does for women.  To me, this is blockbuster news about disparities in care.  But not to my readers. Maybe we need to be eligible for Medicare before we really start thinking about it?

Research.

Without research, there would be no modern healthcare system.  There would be no effective cancer treatments and no once-deadly communicable diseases – like polio – that ruined more than just children’s summers as recently as sixty years ago.  But the one time I wrote about why research matters – just two weeks after I wrote my most popular column ever – it was one of my least-read ones ever.

Child health.

Everybody loves children, but my columns on child health – even ones with sensational headlines – don’t seem to attract much attention.  It may be that we feel that we have solved most of our child health problems over the last few decades.  But as a brand-new Annie E. Casey Kids Count report points out, while we’re trending in the right direction, we still have a way to go.

Personal Responsibility and Wellness. 

This is another subject I have shied away from, after dipping a toe in the water two years ago.  I wrote about the way in which Connecticut, a liberal state, added a component of personal responsibility, a historically conservative concept, to its state employee health plan.  The state believes that it has saved money by doing this, and the approach has proved popular with employees.  But the column wasn’t popular with readers.  Why not?  We all want to be healthier. But maybe we don’t want health insurance to be tied to health!

Environmental health. 

While environmental health is a huge part of public health, environmentalists and public health officials often go their separate ways in policy advocacy.  I wish it were different.  But even when I wrote about the environmental devastation in the immediate aftermath of the Japanese nuclear disaster in March 2011 and put it in a broader public health context, not too many people paid attention.  The column drew fewer readers than almost every other column I wrote that spring.

Eric Cantor.

Don’t ask me why, but the least-read of my 150 columns was the only one that used the words “Eric Cantor” in the title.  If you have forgotten who Eric Cantor is, I am not going to remind you.  But once upon a time, he was actually relevant to the health policy debate in this country.

Lately he seems to be taking a vacation.  A long one.  As we all should be!

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

In the Fiscal Cliff Deal, A New Push for Long Term Care in 2013

When the House of Representatives voted by a comfortable margin a few hours ago to approve the American Taxpayer Relief Act (ATRA) and step away from the "fiscal cliff" for another two months, it agreed to two Senate provisions affecting elders and others with long term care needs.

The first was the "doc fix," which prevented a nearly 30% cut in Medicare payments to physicians.  This was important.  If it hadn't happened, doctors would have fled the Medicare program.

The second was tucked away into Section 643 of the Act.  It establishes a new 15-member Commission on Long Term Care, replacing the CLASS Act provisions of the Affordable Care Act that are now finally, formally repealed by ATRA.

The Commission could turn out to be a very big deal if it does it job well, because it could lead the way in changing our system of providing and financing long-term care in America.

The Commission is charged with writing a bill over the next six months "to establish a plan for the establishment, implementation, and financing of a comprehensive, coordinated, and high-quality" long term care system for elders, people with cognitive impairments, people needing help performing activities of daily living, and all "individuals desiring to plan for future long term care needs."

The Commission will focus on three things:

• the interaction and coordination of new services with Medicare, Medicaid, and private long term care insurance;
• improvements to Medicare, Medicaid, and private long term care insurance needed to ensure availability of long term supports and services; and
• long term care service workforce needs.

If the Commission completes its work on time, it could mean the introduction of new long term care legislation as early as the fall of 2013.

What could this legislation mean for us?

It could be the first step on our nation's long and necessary path to bring long term care costs under control, and make long term care services available to individuals without first impoverishing and exhausting them or their families.

It could also help states bring Medicaid costs under control, and the federal government better manage Medicare costs, too.  Long term care costs are the real culprits in rising Medicaid costs for state budgets and state taxpayers.

Let's keep our eyes open, and hope for two things.  First, that this new Commission does a better job fixing our nation's long term care problem than our broken Congress has done with the Fiscal Cliff.  And second, that if it does bring some recommendations forward, Congress listens.

This column is an Our Health Policy Matters extra.  Read on below for this week's regular column.  Follow Paul Gionfriddo on Twitter @pgionfriddo.  

Denying the Inevitable

If 243 members of Congress knew that they were going to develop Alzheimer’s Disease or related dementia, would it change the way they make Medicaid and long term care policy?

Or would they continue to deny the inevitable?

When Congress convened in 2011, the average age of a House member was 57, and the average age of a senator was 62.   They were approaching the prime years for dementia.

If you don’t already have Alzheimer’s Disease or related dementia by the time you turn 65, then your chances of developing it between the ages of 65 and 74 are greater than one in 20.  Your chances of developing it between the ages of 75 and 84 are almost one in 7.  And after that your chances of developing it are one in 4.

At today’s prevalence rates, 28 members of Congress will develop dementia between the ages of 65 and 74, 91 between the ages of 75 and 84, and 124 later on.

The only thing that will change this trajectory is if they die sooner of something else.

If I were a younger elected official today, this might get might attention, and it also might get my attention that the number of people with dementia will increase from 5.2 million today to at least 11 million during my lifetime.

Representative Aaron Schock of Illinois and Senators Mike Lee of Utah and Marco Rubio of Florida all fit this bill.  They were the youngest members of their respective chambers (at 39, Senator Lee was a week younger than Senator Rubio), and they had remaining life expectancies of at least 40 years. 

So while we might forgive 87-year old Representative Ralph Hall of Texas and Senator Frank Lautenberg of New Jersey if they feel they don’t always have the luxury of taking the long view in policy-making, we should wonder a little more about Senators Lee and Rubio and Representative Schock.

They are all likely to be around when the fruits of their recent healthcare work ripen over the coming decades. 

And they may find some of them especially bitter.  

According to the Alzheimer’s Association publication 2012 Alzheimer’s Disease Facts and Figures, the cost of caring for people with Alzheimer’s Disease and other dementias – in today’s dollars – will increase from $200 billion to $1.1 trillion per year by 2050.

These $1.1 trillion are not inflated by forty years of GDP growth or the increased costs of medicine.  They represent what dementia will cost us down the road even with no inflation simply because there are more of us and we’re living longer lives.

Dementia is an adversary worthy of battle at the highest levels of government.  But neither Senator Lee nor Senator Rubio nor Representative Schock mentions it on his website. 

Instead, Senator Lee champions what he calls “saving the American dream,” which rolls back Medicaid funding to 2007 levels and caps it there.  Senator Rubio has endorsed the same approach.  Medicaid currently pays $36 billion a year of the $200 billion cost of care for people with dementia.  Under Senator Lee’s plan, it will pay even less than that toward the $1.1 trillion cost of care in 2050.

And Representative Schock goes one step further.  He touts a bipartisan effort last year to repeal the CLASS Act, which ironically would have offered private insurance for dementia-related care to take some of the burden off Medicare and Medicaid.

Dementia hits close to home for all of us.  A member of our family has it, and it has been progressing relentlessly for several years.  This is a pretty scary thing to witness.  It’s like watching a blackboard filled with facts and figures being erased, one giant sweep at a time, until all the information fades.

Senator Lee wants to save the American dream, but does he really want to do it by substituting a national nightmare of disease with no relief?  And whose dreams is he really saving?  Not the ones of our family members with dementia, nor the ones of their caregivers who already shoulder so much of the burden, nor even the ones of the 243 members of Congress who may someday join the ranks of those with dementia. 

Senator Lee, Senator Rubio, and Representative Schock are, of course, entitled to pursue the policies they choose.  But I hope they will never say that no one could have foreseen what they chose to ignore.

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

CLASS Warfare

Is the CLASS Act already dead and buried, a full year before it comes to life?

A couple of months ago, I wrote a column about the ill-advised, bi-partisan Congressional effort by the Senate “Gang of Six” to deep-six the CLASS Act. 

The CLASS Act is the new national privately-financed long term care insurance program authorized by Congress in 2010.  Without going into all the details again, it is intended to make long term care insurance care available to the working middle class.  This would take pressure off of the Medicaid program, resulting in billions of dollars of savings to taxpayers.

The CLASS Act won’t even take effect until October, 2012, and the Administration hasn’t even announced exactly how it would be structured.  But the Department of Health and Human Services may be closing down the CLASS office.  This past weekend’s news report from the Hill and other media outlets noted that it has let its actuary go and asked the Senate not to appropriate $120 million needed for the CLASS Act’s implementation.

That’s not “life support,” as one writer who is sympathetic to the Act suggested.  It’s a death rattle.

A program designed to cost the government next to nothing, provide benefits that people need, and save taxpayers significant dollars should be popular with elected officials.  However, that’s not the case here. 

According to the Hill, Senator Kent Conrad, a Democrat, has called the CLASS Act “a Ponzi scheme of the first order.”  Representative Phil Gingrey, a Republican, agrees with him.  Last March, according to Howard Gleckman in his Caring for Our Parents blog, Rep. Gingrey called the CLASS Act “a Bernie Madoff Ponzi scheme run by the Secretary of Health and Human Services.” 

On CNN almost two years ago – before the CLASS Act was even enacted – Senator Lindsey Graham called anyone who would vote for it a “co-conspirator to one of the biggest Ponzi schemes in the history of Washington.”  And Senator John Thune also characterized it in a 2009 Timearticle as “a classic definition of a Ponzi scheme.”

Aside from the hyperbolic tic that appears to compel all these members of Congress to refer to the CLASS Act in precisely the same way, and in the most demeaning manner possible, you get the bi-partisan picture.  They oppose it.

Their problem seems to be that it would collect premiums from a lot of people to pay for the care needs of a few.  What they call a “Ponzi scheme” is often referred to as “insurance.”

Other opponents have literally thrown the kitchen sink at the CLASS Act.  Heritage Foundation writers have made the simultaneous and contradictory arguments that too few and too many people will enroll, premiums will be too low and too high, benefits will be too small and too great, and the Trust Fund it establishes will be so big the Congress will raid it and so small that it will have to be subsidized.

The real problem seems to be that as it is currently designed, the program’s primary beneficiaries will be working members of our disappearing middle class. 

This is because most well-to-do aging Americans, like members of Congress, have personal wealth sufficient to help finance their long term care.  Long-term care insurance isn’t a necessity for people who have over $1 million in assets, because they can usually generate enough income from these assets to pay for their own long term care needs.

Or they can protect these assets by transferring them to their children, and qualify for Medicaid just like any other indigent person.    

Transferring assets to qualify for Medicaid is a common occurrence, but no one seems to know exactly how common.  In one analysis in New York, 7% of Medicaid applicants were denied because of a recent transfer of assets.  The percentage transferring assets successfully was likely much, much higher.

Maybe limiting the CLASS program to working people, or setting a $50 per day benefit level, or locking in an age-related premium aren’t the best approaches to setting up the program.  Perhaps its Trust Fund will prove too tempting for politicians who to raid for other purposes. 

But we need long term care insurance or our long term care system will collapse one day.  And the current private plans are far too scarce, and too few people are enrolled in them. 

So, instead of doing something about this, Congress will kill the one program it has passed that promised to make a difference – and, at the same time, help the middle class afford long term care.

That’s what CLASS warfare is all about. 

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

Deep Sixing the CLASS Act

The debt ceiling and deficit reduction command the attention of Congress this week.  Its members are trying to find trillions of dollars of cuts to balance the budget.

So why are some members of Congress trying to do something that is guaranteed to increase the already sky-high cost of the Medicaid program?  Do they want to drive us further into debt?

The Senate Gang of Six wants to deep six the CLASS Act before it takes effect.  The CLASS Act is the new national long term care insurance program that will take effect next year.  It will cost the federal government nothing and is projected to save the Medicaid program billions of dollars.

The Medicaid program, as most U.S. citizens now know, is a federal/state partnership resulting in different plans in every state.  In 2010, roughly 55 million people were insured through state Medicaid programs.  If they were all combined into one plan, Medicaid today would be the single largest health insurer in the nation. 

Of the 55 million people on Medicaid, half are children, and many more were working adults.  But they are not the most expensive people on the program.

The biggest costs in the Medicaid program are incurred on behalf of the five million elderly and nine million people with disabilities on Medicaid – the long term care populations.

Many members of Congress have put the Medicaid entitlement program at the top of their deficit reduction hit list. The federal government paid about $275 billion for Medicaid in 2010, and total state outlays approached $200 billion more.  That constitutes almost a half trillion dollars of health care spending. 

Almost half goes to long term care.  Medicaid typically becomes a long term care payer when an elderly person develops an age-related condition, like Alzheimer’s, which forces them to enter an institution for twenty-four hour care and exhaust their personal savings.  It also pays for younger people with mental retardation, or people with serious mental illness or other chronic diseases. 

The challenge for policymakers wanting to control Medicaid costs is, therefore, to control long term care spending for people with chronic conditions.  Cutting nursing home provider rates has long been a favored strategy, but this has never succeeded in reducing costs for any length of time. 

Policy makers have also explored managed care options.  These don’t work as well with people with chronic conditions as they do with a healthier population, because people with chronic conditions already have significant care needs.

So policy leaders are faced with only two choices. 

The first is for government to deny people care.  This is taking health care rationing to an extreme, choosing to leave older, sicker, and poorer Americans to fend for themselves while the government protects the interests of those who are better off.  This choice is inhumane and morally reprehensible to most people. 

The second is to devise a plan through which all people can pre-pay some of the cost of their long term care through private insurance before they get sick, reducing the government’s financial burden.

When Congress passed the CLASS Act in 2010, it chose the second way, the humane and rational way.    

It didn’t want to burden taxpayers, so it required the CLASS Act to be self-sufficient.  Premiums had to pay the full cost of benefits.  The premiums will only be affordable if younger, healthier people participate.  But if having to rely on Medicaid when they get sick is the alternative, then that may be the only reason people need to purchase a policy.

Earlier this year, the Congressional Budget Office projected that the CLASS Act will save the federal government $83 billion in its first ten years of implementation. That’s a lot of money.

This month, however, the Gang of Six joined an increasingly dissonant chorus wailing against common sense and humane, rational decision-making.  They don’t like the CLASS Act, so they want to get rid of it.  This won’t save anyone – ever – even a dime. 

The law may be flawed in its present form and need some revisions, but it’s the right idea.  Private long term care financing has to be part of our Medicaid long term care financing solution.

It is too soon to tell whether the CLASS Act will be deep-sixed as part of “deficit reduction,” gutted before it takes effect, left to languish unimplemented in 2012, or implemented as promised.

But there’s no way for our elected officials to argue that they care about deficit reduction if they jettison an $83 billion savings in Medicaid.

Unless, that is, they’re planning to choose the morally reprehensible option.

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

Florida's Medicaid Millionaires

Florida recently elected to turn down – again – over $2 million in Federal money to pay the administrative costs of expanding its Medicaid long term care program’s home and community based services.

In March 2011, Florida qualified for over $35 million to join most of the rest of the nation in participating in the Money Follows the Person program.  The program was created during the Bush Administration as a way of helping people move back out of nursing homes into the community. 

It became so popular in the 29 states (and District of Columbia) participating in it that it was expanded as part of health reform.  Thirteen additional states, including Florida, were invited to participate.  Former Governor Charlie Crist authorized Florida’s Agency for Health Care Administration (AHCA) to file Florida’s application.

Rejecting the program means that people who want to leave Florida nursing homes won’t be given control of the resources they need to do so. 

On the other hand, as a result of Florida’s 2011 Medicaid reform legislation, people who don’t want to leave Florida nursing homes may be forced out, and the money will go to managed care companies.

When Florida’s current Governor Rick Scott took office there was some question as to whether he would pursue the Money Follows the Person program.  After saying he would not implement anything in the Affordable Care Act, he changed his mind and said that he would accept the federal money for this program.  He sought approval from the Legislature to draw down the dollars. 

Then, he apparently changed his mind in May, and allowed the legislative session to pass without pushing for the action needed to allow AHCA to accept the money. 

After a strong reaction from the public against this decision, the Governor asked legislative leaders to revisit the issue in late June.  Key Senators cast a bipartisan vote to accept the money, but House members refused on a party line vote.

Though DHHS earlier said that it would leave the door open to Florida for the remainder of the year, this action may finally kill Florida’s participation in the program.

According to an Associated Press article, at least one of those who voted against it argued that Florida did not need to duplicate its existing programs.

But Florida spends only about half as many of its Medicaid dollars on home and community-based services as the national average.  In 2009, AARP put Florida’s percentage at 14%, while the national percentage was 27%.

This would suggest that at the very least, Florida does need to “duplicate” its existing programs.

Another House member correctly pointed out that although these dollars could have lessened the burden on state taxpayers, they were still federal taxpayer dollars.

This begs a bigger question.  Why would Florida’s elected officials not want tax dollars Floridians pay to Washington to come back to Florida to help meet our needs?  Because of this decision, Florida’s share of these federal home care tax dollars is going to be sent to, and used by, residents of 41 other states and the District of Columbia instead of Florida. 

It was a nice gesture for Florida’s state legislators to send $35.7 million to the people of Texas, Arkansas, North Carolina, Georgia, Louisiana, Mississippi, Kansas, Iowa, and Ohio, among others.  But they don’t represent these states. 

What they did to the Floridians they do represent was the equivalent of either imposing $35.7 million in additional taxes without adding new services, or cutting $35.7 million in services without reducing taxes.  Either way, Floridians lose.

These home and community-based dollars typically provide for the care of adults with disabilities.  About a third of program participants nationwide have physical disabilities, and about a third more have developmental disabilities.  Most of the people in Florida who would have benefited from the program are among the almost 900,000 Medicaid recipients between the ages of twenty and sixty-five. 

In nursing homes, many will become Medicaid Millionaires.  The lifetime cost of their nursing home care will probably exceed $1 million.  So long as they remain institutionalized, there is zero chance that they will ever be able to contribute independently to the cost of that care.

If they were to return home, that picture changes.  People with significant disabilities on the Money Follows the Person program are living and even working in the community again, spending – and sometimes even saving – a little money.  Early evaluation data from the Kaiser Family Foundation also suggest that the program is less costly per person than either nursing home care or other home and community-based programs, like Florida’s.

Nationwide, twelve thousand people had returned to homes and apartments because of the Money Follows the Person program as of the end of 2010.  It’s too bad at least some don’t get to call Florida their home today.  Perhaps they’ll retire here.

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

Why Medicaid Cost Containment Fails To Contain Medicaid Costs

For over thirty years, states have tried and failed to contain Medicaid costs.

And if they continue to do what they’ve always done, then “more flexibility” through block grants – code words for cutting people and benefits from the programs – isn’t going to help. 

This is because the strategies they have used don’t work.  I wrote a few weeks ago about problems with some of the specifics of Florida’s Medicaid reform bill this year.  In this column, I want to add a more global perspective. 

source: US DHHS, 2007

Between 1980 and 2004, total personal health care expenditures in the United States increased by 726%.  Total Medicaid expenditures increased by 1,028%. 

That’s a pretty compelling opening argument against the four common “cost containment” strategies -- cutting provider rates; reducing the number of people eligible; eliminating chronic disease detection, prevention, and management services; and making recipients pay for services.

These strategies have two things in common that lead to higher Medicaid costs – they cause patients to become sicker before getting care, and they force Medicaid to pay higher-cost providers. 

Consider the well-documented problem with cutting provider rates, a most favored state strategy.

Providers often opt out of the Medicaid program when rates are cut.  A Merritt Hawkins and Associates 15-city survey in 2009 found that only 65% of family practice physicians, 44% of orthopedic surgeons, 44% of dermatologists, and 41% of obstetrician/gynecologists accepted Medicaid.

The American Psychiatric Association reported in 2010 that 46% of psychiatrists were accepting no new Medicaid patients as of 2008, and only a third were participating fully in the program.  Also, many who do accept Medicaid patients work in community mental health clinics, not as independent practitioners. 

Paying community providers too little doesn’t keep costs down.  It just pushes patients to hospitals.  Medicaid paid for only 10% of all hospital care in 1980, but the percentage increased to 17% in 2004.

Ignoring the needs of the near-poor population is another strategy with the perverse consequence of raising Medicaid costs.

Poverty and illness go hand in hand.  People living in poverty are approximately 50% more likely to suffer from migraines, chronic back pain, chronic neck pain, and heart disease as are people who are well off. 

Yet those are the only people who often qualify for Medicaid. 

This is bad for the program, because people just above the poverty level are often uninsured.  They are around 10% less likely than those below poverty to have a variety of chronic conditions, including migraines, low back pain, heart disease, and cancer. 

But they are also one diagnosis away from poverty and Medicaid.

According to a study published earlier this year by the U.S. Library of Medicine, treatment for localized breast cancer costs the Medicaid program an average of $22,343 after twenty-four months, but the cost of advanced breast cancer averages $117,033 over the same time period. 

When the Affordable Care Act required Medicaid to cover people up to 133% of poverty in 2014, it didn’t go far enough.  200% of poverty would have been far better to reduce Medicaid costs, provided the program offered a full range of early disease detection and health maintenance services.

Though it may seem counterintuitive, covering more people with a greater range of services is the way to save Medicaid money.

Here’s an example.  A major expansion in the Medicaid long term care program in the 1980s and 1990s was saving $8 billion every year by 2004.

The expansion was to new home and community-based services, beginning in 1981.

Medicaid paid 50% of the nursing home bill in 1980, but only 44% in 2004.  It accomplished this by increasing Medicaid’s share of payments for home health care from 12% in 1980 to 32% in 2004.  Because many home health care services cost less, the overall Medicaid share of long term care payments went from 46% for of total long term care costs in 1980 to less than 41% in 2004.

If Medicaid had continued to spend the same percentages on nursing and home care in 2004 as it spent in 1980, it would have spent $73 billion on these 2004.  Its actual bill was $65 billion – not a small amount, but $8 billion per year less.

That’s a pretty big difference.  Long term care costs increased by 833% in that time frame, to $158 billion.  But Medicaid long term care costs increased by “only” 738%.

While program expansions are often seen as the culprit in Medicaid growth (the number of people on the program grew from approximately 20 million in 1980 to over 50 million in 2004), the long term care experience – where most of the money still goes – suggests something different. 

To save Medicaid money, we should do more, not less, with it, and stop pushing “cost containment” strategies that don’t contain costs.

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

Florida's Disappointing Medicaid Reform

Florida’s Medicaid reform law, which takes effect on July 1, mandates the enrollment of most of Florida’s 3 million Medicaid recipients into managed care programs.  It has been called transformational, but it probably won’t deliver on its promise.

There is a lot to write about, so I’m devoting two columns to the subject – and publishing them both this week, instead of one this week and one next week. 

This column focuses on the details of the new program.  It explains how first year cost savings are unrelated to managed care, why families of nursing home residents in particular should be worried, and how a new profit motive has been built into the Medicaid program. 

My next column will focus on seven policy problems built into the new law.   

While managed care got the headline, the first-year savings in the legislation come from a 5% provider rate cut, not from managed care. 

Medicaid will still be a $20 billion+ program.  It will still consume nearly a third of the state budget, and it will still expand significantly in 2014.

By incorporating the 5% cut into the law, Florida legislators anticipated a possible rejection of the managed care program by the Department of Health and Human Services. 

HHS has problems with Florida’s approach.  Florida Senators threatened to drop out of the Medicaid program if HHS did not approve the changes, putting $11 billion at risk.  Cooler fiscal heads prevailed, and this threat was dropped from the final version.

Assuming HHS eventually agrees, the Florida Medicaid program will be divided into three parts.

One will serve mostly elderly people with long term care needs.  Another will serve families, children, and adults with chronic health and mental health conditions.  The third will serve people with developmental disabilities.

Nearly everyone in the first two groups will be required to enroll in managed care plans.  Those in the third group will not.  They will keep their current Medicaid program, but payments will be capped and a plan for restructuring it will be submitted to the Legislature by 2014.

For the other two groups, the state will be divided into 11 regions.  Between two and six managed care plans will serve each region.  There will be separate plans for the long term care group and the families and children group.   One of the plans approved for the long term care group in each region must be offered by a Long Term Care Service Provider Network, led by a long term care provider.  One of the plans approved for the families and children group in each region must be offered by a Provider Service Network, led by a hospital, public agency, or other safety net provider.

The long term care program will be fully operational by October, 2013, and will include incentives to transition as much care from nursing homes to the community as possible. 

The CARES (Comprehensive Assessment and Review for Long Term Care Services) evaluation system will be used to determine each Medicaid recipient’s level of need.  Level 1 recipients must be in a nursing home.  Level 2 recipients still living in the community must have extensive physical or mental impairment.  Level 3 recipients will have mild physical or cognitive impairments.

Payments to plans will be based on three levels of need of the patients in each plan.   

For the first year only, all nursing home patients will be protected from discharge, whether or not their level of need changes.  However, plans will receive incentive payments from AHCA for every 2% shift in their population toward community care in either the first or second year, and for 3% shifts in subsequent years.  Incentive payments will continue until no more than 35% of plan recipients are in institutional settings.

So what could happen to an elderly nursing home resident? 

After the first year, any time her level of need is determined to be less than Level 1, she could be discharged to home care whether or not she or her family agreed.

Also, a managed care company with a motive, not a family and a clinician, will decide when an Alzheimer's patient needs institutionalization.

This new Medicaid program puts a premium on profits. 

In the families and children program, most recipients will have 30 days to choose a plan.  If they don’t, they will be assigned to one.

The state will negotiate rates with plans based on a “per member per month” fee, adjusted for the region and clinical profile of the patients in the plan.  For the first two years, provider service networks will have the option of receiving traditional fee-for-service payments.

Plans will be able to take up to 8.5% in profits, and the state will be their silent business partner. 

Here’s how this works.  Plans can retain the first 5% of total income received as a profit.  They can make another 1% if they exceed state quality measures.  They capture 2.5% of the next 5% of profit.  The rest goes to the state.  After that, all profits go to the state.

Plans are protected from losses in the first year.  The law allows them to subtract those losses from income during the second year.  A plan losing 5% in the first year will be allowed up to 13.5% in profits in the second year.

Is creating a profit motive for safety net health care really such a good idea?

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.

Florida's $11 Billion Medicaid Gamble

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Treating the public policy arena like a casino is never a good idea.

Florida is placing an $11 billion bet on Medicaid this year.  If the state loses, we’ll all be emptying our pockets for lower services.

The bet involves moving all Medicaid recipients to managed care.  As reported in an article by Jim Saunders in Health News Florida last week, passage of this legislation this year is as close to a sure thing as there is in government.

Florida hopes to save $1 billion the first year, and $2 billion by 2013 – nearly 10% of the total State Medicaid budget.

There are three problems with this calculation.

The first is that the projected savings from moving to managed care might be too high.  In a 2009 report prepared for America’s Health Insurance Plans, the Lewin Group found that savings in 24 different state Medicaid plans ranged from half of one percent to 20% after a switch to managed care.  Savings tended to be low at first, and most were still in the single digits after several years.

The second is that the savings will be offset by lost federal revenues, because the federal government will reimburse at least 55% of Florida’s Medicaid costs the next two years.  The actual savings to taxpayers is under $1 billion in FY2013, less than half of what the Governor and legislators are claiming.

The third problem is that to achieve these savings, Florida has to include elders and people with disabilities – who together account for 70% of Medicaid expenditures – in managed care.

To many people, “managed care” means the same thing as “care delayed or denied.” If $700 million of Florida’s Medicaid savings come from denying care to nursing home residents, cutting back on treatment services to people with mental illness, and delaying care for people with mental retardation, legislators fighting Medicaid growth won’t exactly be hailed as conquering heroes.

Together, these factors leave at most $300 million in savings associated with the non-long term care Medicaid program.

But the savings may not be even that high.

The reality is that Florida had a much slower growth rate in its Medicaid program from 2004 through 2009 than did the nation as a whole. The cumulative savings in Florida over this period was 10% compared to Medicaid spending in the nation as a whole.  Florida may have already squeezed the savings from Medicaid without resorting to managed care. 

Also, there is a new cost associated with turning the program over to the private managed care companies.  Unlike the state, these companies have to make money, which has to be added into the cost calculation.

Finally, reports authored by Jack Hoadley and Joan Alker of the Georgetown Health Policy Institute and released yesterday by the Jessie Ball DuPont Fund suggest that Florida’s own Medicaid managed care pilot program has disrupted care for Medicaid recipients while saving little or no money. 

In the face of all this evidence, saving even $300 million in Medicaid non-long term care is a long shot. 

So on what is Florida wagering $11 billion? 

Senator Joe Negron, the Senate legislation’s sponsor, says that Florida will drop out of the Medicaid program if the Federal Government refuses to go along with Florida’s managed care plan.

That’s an $11 billion gamble – the annual Federal reimbursement that Senator Negron says Florida will give up if the federal government doesn’t let it switch to managed care.      

Obtaining federal approval for unpopular Medicaid changes which could disproportionately and adversely affect elders is no sure thing.     

If Florida drops out of Medicaid, 3 million Medicaid recipients will become uninsured.  This will bring the total number of uninsured people in Florida to close to 7 million – more than 35% of the population.

Hospitals, nursing homes, independent physicians, community health centers, mental health centers, and other providers do not have the capacity to absorb care for 7 million uninsured people. 

Instead, Florida would have to create and fund a new plan to pay for the care of all 7 million people.  To do this, it would have 9 billion state Medicaid dollars with which to work. 

$9 billion – or $1,300 per person – may seem like a lot of money to provide care for these 7 million people.  But they aren’t young and healthy – remember, 70% of the Medicaid dollars go to long term care – and one nursing home bed alone can cost fifty times this amount.

$9 billion could disappear in a matter of weeks.

Florida can’t afford the gamble.  If saving $300 million in the Medicaid non long-term care program is the state’s goal, it should either find out in advance if the federal government is willing to approve or find another way to do it.   

After all, Florida’s not playing with house money, but ours.      

A Long Term Care Win for Everyone

Why is it so important that Florida has won a $35.7 million health reform act grant to participate in the federal “Money Follows the Person” program?

A recent news story provides the answer.   It tells the story of a 20-something Florida resident who is a quadriplegic living in a nursing home.  He doesn’t want to live there.  But he doesn’t have a choice.  It’s the only option for which the Florida Medicaid program will pay. 

We hope he’ll be alive for many years.  A back-of-the-envelope calculation suggests that the cost of his care could approach $4 million by the time he is 65.

A December, 2009, AARP Long Term Care Brief showed that Florida spent 86% of its Medicaid long term care dollar on institution-based services.  It spent about half the national average on home and community-based services (HCBS).

The “Money Follows the Person” program offers a low cost remedy. 

Enacted in 2007, the program has already provided over $1.4 billion to 30 states.  It has helped over 30,000 people transition from nursing home care to lower-cost community-based care.    

The result is improved well-being, greater independence, and more productivity at lower cost.  Not just young people benefit; many older Americans with chronic conditions also prefer living at home.

Wildly popular, the program was re-authorized by the Affordable Care Act.  It was extended for several years and expanded to allow more states to participate.  By accepting the new federal grant, Florida will be one of them. 

In spite of the bluster that Florida would refuse to implement any of “Obamacare,” AHCA and the Governor saw the wisdom of pursuing this piece aggressively. 

Florida may have come late to this party, but better late than never. 

The cost of long term care is one of the biggest drivers of the increase in health care costs in our country.  A majority of our population has one or more chronic conditions.  These conditions are often diagnosed and monitored using expensive medical tests.  They are managed with costly pharmaceuticals.  People with them often need physical and occupational therapy and other supports.  Treatment costs may rise in the future, because genetic therapies are on the horizon.

In a recent issue brief on Medicaid and long term care, the Deloitte Center for Health Solutions noted that Medicaid expenditures are projected to increase by 7.5% per year, largely due to the increase in the numbers of elders and others with chronic conditions on the program.  Examining Florida and nine other states, Deloitte estimated that the percentage of state resources devoted to long term care could double over the next twenty years. 

Controlling long term care costs should be a priority for everyone.  However, this isn’t always the case.  The report noted with concern that states are cutting back on lower-cost community-based services covered by Medicaid, instead of increasing them.

That’s what makes the “Money Follows the Person” program so important.  It helps expand community-based services, at a time they are sorely needed.

Florida’s action also serves as a reminder that the Affordable Care Act isn’t one big government health care program.  It is a collection of smaller, independent initiatives that affect many different components of our health care delivery system.

Another provision of the Act – the creation of the CLASS Long Term Care Insurance program, effective in October, 2012 – is also aimed at changing the way we finance long term care in the future.  It will make more private long term care insurance available for home and community-based care.  My wife and I purchased long term care insurance policies several years ago, when we were in our early 50s and healthy.  Unfortunately, many others wait until it’s too late. 

The HHS National Clearinghouse for Long Term Care Information notes that over 70% of us will need long term care services at some point in our lives.   HHS Secretary Sebelius has pointed out that one in six people who reach the age of 65 will spend over $100,000 in their lifetime on long term care.  The total cost could be upwards of $5 trillion.  The government can’t pay all this.  Private long term care insurance will be needed.    

However, as the planning for the CLASS program is unfolding, people who develop serious chronic conditions before applying for long term care insurance may be out of luck.  To keep insurance costs affordable, HHS is considering limiting the program to higher wage-earning, healthier people at the start. 

That means Medicaid will remain the main long term care payer for the foreseeable future. 

The more it can do to help 20-somethings stay in the community and be productive, the better off we all will be.  This is a health care reform with which no elected official should disagree.

The Top Ten Health Policy Stories of 2010, Part 2

Last week, I reviewed five of my top ten health policy stories of the year.  Here are the other five, all of which involved matters that will have a major impact on our day-to-day lives in the coming years.

5.  The Enactment of CLASS.  Private long term care insurance has been on the policy agenda since the 1980s.  Seniors realized that the cost of long term care could bankrupt them, so they began protecting their assets by transferring them to their children.  The state and federal governments were left to pay the tab, and went looking for help.

Private long term care insurance products were developed as a solution.  However, not enough people bought them.  When they were young, people didn’t think they would need the insurance, but once they got into their 60s and 70s, the premiums were too high.  This year, the federal government took action. 

Tucked into the pages of the health reform legislation is a new government-sponsored long term care insurance program starting in 2012, called CLASS, aimed at making long term care insurance more common and more affordable.  It will probably take a generation or more before its benefits are fully realized, meaning that this was a vote for our children and grandchildren.  Passing it knowing they won’t be around to get the credit for it was a class act on the part of the members of Congress.

4. The Closing of the Medicare Donut Hole.  The Medicare Donut Hole was more like a black hole for the seniors who fell into it each year.  As of 2010, consumers paid the first $310 in drug costs, and were reimbursed for 75% of their drug costs between $310 and $2,830.  Then they entered the donut hole, where they were completely responsible for approximately the next $3,600 in costs.  Finally, once their out-of-pocket drug costs in a year hit $4,550, their prescription benefits kicked in again and paid 95% of whatever remained. 

This was confusing and expensive, and it came to embody the worst of our confusing system of insurance reimbursements for over two million people trapped in the donut hole each year.

Reform legislation is closing the Donut Hole over the next ten years.  When the first $250 rebate checks arrived this year, Medicare beneficiaries could see the light again. 

3.  The Enactment of Consumer Protections in Health Reform.  By now, we’re all familiar with the new consumer protections we have.  Insurers can’t deny coverage for pre-existing conditions, they can’t drop people who become sick, and they can’t cap annual and lifetime benefits.    Several are already in effect.  Others are on their way.

Some states are arguing that they don’t have the authority to enforce them, and that could present a problem for consumers in the short term.  However, these provisions are so popular that it is likely that if states don’t enforce them, Congress will probably take further steps to ensure they do.

2.  The Comeback of Government Regulation in the Private Health Insurance Market.  For the past thirty years, the mantras of government have been “protect the free marketplace” and “less regulation, not more.” 

First, opponents of health reform argued for a freer marketplace to bring down insurance costs.  Then proponents argued that if the federal government could provide insurance at a lower cost than the private sector, it should be allowed to compete in that market. 

When the public option died, however, the alternative was to establish a more regulated, less-free market.

When Congress set minimum loss ratios (of 80 for individual policies and 85 for most group policies, meaning that insurers must pay out 80 to 85 cents in benefits for every dollar they collect in premiums), this was a very traditional, back to the 1970s, regulatory response to a problem.  Private insurers won’t have to compete directly with the government, but they will have to meet standards the government sets.

And number 1, the Passage of Any Health Reform at All.  We forget how much in doubt this was after the election of Senator Scott Brown in Massachusetts.   When Brown won in an upset, it looked for several weeks like there would be no bill at all.  Finally, President Obama and Congressional Democratic leaders hammered out a compromise that could pass with simple majority votes using the budget reconciliation process, and the most significant health care legislation since Medicare and Medicaid was signed into law in late March.  In the true spirit of representative government, the final compromises left no one completely happy, setting the stage for more health policy debate in the future.

Happy New Year!  Thank you for helping me launch Our Health Policy Matters over the past two months.  I’ll kick off 2011 next week by making some predictions about some upcoming health policy debates.