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1. The best commentaries on Medicaid (in my admittedly self-centered view)
   were in this very blog in Oct 2012.

   “Laughing at the Chutzpath of the Right on Medicaid” was Matthew Holt’s lead article.

2. Tcoyote makes very good points about Medicaid. States like Illinois and Michigan are on very shaky ground financially, and I can sympathize with their unwillingness to take on the woodwork Medicaid enrollments.

   I have less sympathy for the states which have no income tax like Florida.
   These states contain many wealthy people who benefit every day from the labor of cooks, nannies, farm laborers, et al who would benefit from a Medicaid expansion. An extra $2 billion in costs to Florida is not a small sum, but it is a very tiny percentage of the wealth in that state.

3. Great idea to make it federal as long as states can opt out completely.

4. Wow. IMHO, both of them need to be scrapped, and the system needs to be rebuilt from the ground up.

   Also, I had thought this site was objective. Apparently not. So, I’ll just unfollow on my FB feed as of now.

5. Hmm tcoyote, if S-CHIP is any indication, the Red southern states have got a pretty decent ability to kick people off rolls when the going gets tough. And even the Western Blue states (CA & OR) do manage to cut Medicaid spending in recessions.

   But overall you’re right. Medicaid being states based is a stupid idea. In fact Medicaid as a separate program is a stupid idea.

   But apparently having lived through 1994 (and seen what happened in Massachusets in 2006) Daschle and pals decided that expanding this stupid idea was the only way to get to sorta-universal coverage. Oh and adding a subsidized private insurance scheme for the lower middle class.

   And surprisingly (well not acutally) as esteemed an observer as yourself has “No opinion or special insight about how to pay for this. . .”

   Welcome to America!

6. It’s more complicated than merely a matter of trust. It was also the huge reservoir of people (estimates vary, but easily 8-10 million) who were ALREADY eligible for Medicaid, but not enrolled.

   The 100% FMAP was for the NEWLY eligible. For the ALREADY eligible, who are referred to as “the woodwork people”, the state was going to be on the hook for anywhere from 30-50% of every new dollar spent on their care.

   PLUS, the exchanges created a “motor voter” type express lane for the woodwork folk to enroll- you could do it online, instead of having to take the crosstown bus over during your work day and get humiliated applying in person.

   Any Governor of a state with a cyclical economy (Florida, California, Illinois, Michigan) has to be TERRIFIED of a state Medicaid program enrolling upwards of 30% of his citizens (Louisiana’s human services secretary said that at full enrollment, 48% of his state’s population would be on Medicaid).

   That is because when the state’s economy goes south, state revenues go with it, and Medicaid enrollment surges. So then you have to raise taxes to cover the resulting deficit or cut the hell out of doctor, hospital and nursing home payments, or both. And then you get your ass fired at the next election.

   This is a long winded way of agreeing with Barry. It ought to be federal, which has less scary and random cyclicality. The dual eligible part of Medicaid should be federalized tomorrow! No opinion or special insight about how to pay for this. . .

7. Both the Republicans and Democrats understood very well that entitlements are a one way deal. Once you extend them, you cannot take them back. The reason the Republicans fought the Medicaid expansion so hard is the same reason they have fought immigration reforms. It wasn’t about “policy” but about votes. Health reform wasn’t for their people and would strengthen the Democrats grasp on their electoral core.

   The Republican agenda doesn’t have a prayer of being enacted, for precisely the reasons Bob L enumerated. The Coburn bill basically was essential to fill in the blank that arose after people said repeal and replace . . ..?

8. Last year, I heard one of the governors tell an interviewer that 80%-85% of state and local revenue goes to pay for three things. He said: “We educate, medicate and incarcerate.” Medicaid is a big deal for state budgets and to the extent that it grows faster than revenue, it starts to crowd out lots of other worthwhile things including infrastructure spending.

   While the federal promise to pay for 100% of the cost of Medicaid expansion under the ACA for the first three years and 90% after that sounds pretty good, the issue from a governor’s perspective comes down to trust. If a future Congress shifts more of that cost back to the states, it will be very difficult to tighten eligibility criteria to remove enough people from coverage to bring costs down.

   In a better world, Medicaid should probably be federalized altogether. Obviously, a tax increase at the federal level would be needed to finance that. At the state level, the freed up money could be used to bring unfunded state and local pension and retiree health insurance obligations to or at least near fully funded status. If any states have money left over, they could use it for property tax relief especially for those who are spending a comparatively high percentage of their income for property taxes. Since at least 15%-20% of rent is attributable to property taxes on the building and nominally paid by the landlord, renters should also get a break.

9. Texas’ FMAP (Medicaid Matching Rate) dropped to 58% after the temporary stimulus bump- from around 70% and California went back to 50%. The FMPA is based in states’ per capita wealth.

   The state share of both programs is a huge fiscal problem. The ACA provided enhanced (e.g.100%) federal funding for the newly eligible Medicaid folks, falling to 90% after a few years.

10. One more point. If the provider is out of network, the patient can be balanced billed for the difference between what the insurer pays, if anything, and the list price.

    The friend I referred to in an earlier comment had that happen to her one year. Her oncologist who practiced at the academic medical center was in the insurer’s network but the hospital’s imaging center wasn’t. What a system!

11. legacyflyer,

    Thanks for your last comment which largely squares with my perceptions. Those are that Radiologists often read images for both hospitals and independent centers and the difference in payments to hospitals and the independent centers is NOT justified.

    When insurers negotiate with hospitals, if the insurer has a significant market share in the state or at least the region, the ultimate payment agreement is usually some percentage above the Medicare rate. When the insurer has a small market share and the hospital is a large dominant system and/or a famous academic medical center, the payment is usually a discount from “charges” with the discount as small as 20% in some cases and rarely more than 50%. So, an academic medical center with a list price of $4,200 for a brain MRI can be and often is paid between $2,000 and $3,000 and I’ve read of occasional instances when more than $3,000 is paid. I know that MD’s all payer system creates a different system with less variation for hospital based care in that state.

    Even Medicare, though, pays hospitals facility fees even for outpatient care like colonoscopies and imaging. I know that academic medical centers have inherently higher costs because of their medical education and research missions. If it were up to me, I would pay for those with a separate payment stream rather than build them into the price of care.

    I still would love to see a decent study that compares U.S. hospital costs vs. comparable hospitals in other countries. I’ve never seen one. Princeton’s Uwe Reinhardt says it would be difficult and expensive to do one but how much could it cost? It should be easily affordable for an entity like CMS or a large healthcare focused foundation like Robert Wood Johnson or Bill and Melinda Gates.

12. Barry,

    First of all, it is important to distinguish between the “list price” and what was actually paid. Most payors get a substantial discount from the “list price”. Of course Medicare sets its own prices. (And as has been pointed out before on this blog, only the uninsured are charged “list”) So the first thing I would say is: Are you sure you know what was paid vs. what was charged?

    Having said that, there are typically significant price differences between hospitals and independent imaging centers with hospital prices being higher. In my opinion these differences are NOT explained by the quality of the equipment, quality of the techs or quality of the Radiologists (our same docs read the cases in both hospitals and offices).

    I am not sure that I can explain what these differences are due to. In my state (Maryland), hospital prices are set by a governmental agency (the HSCRC) so I guess you should ask the HSCRC how it arrived at its prices. Prices in our Imaging Centers are either set by Medicare or by negotiations with the payors.

    It is true that hospitals need to provide services at night and on the weekends and there are extra costs associated with 24/7 services. But I don’t think this explains much of the price difference either. The really expensive part of a CT or MR is having the gantry empty, rather than staffing it on the off hours.

    Probably most of the difference in actual cost is due to “payor mix” with the hospitals getting a worse mix of Medicaid and uninsured and hospital bureaucratic “bloat”. And if you want to understand “bloat” look for job titles like “Assistant Vice President for Community Outreach, Quality Assurance and Compliance”

13. Bob,

    I’ve said before that the German and Swiss insurers negotiate prices as a group with providers who also negotiate as a group in each region. We would need an anti-trust exemption to use that approach in the U.S. The French actually use reference pricing. Doctors and hospitals are allowed to charge more than the price the government will pay but they have to make that transparent to the patient and, presumably, convince the patient that the value they offer is worth the extra money. The Japanese have a national fee schedule but patients who want to see the most popular doctors will often wait three hours or more in the waiting room for face time with the doctor that may last all of three to five minutes. I don’t think that would fly in the U.S.

    George Halvorson said in his recent book, “Don’t Let Health Care Bankrupt America: Strategies for Change,” that if we paid Canadian prices for all healthcare services, tests, procedures and drugs, it would cost 40% less than it actually does. In Canada, though, most provinces don’t cover prescription drugs. People either pay out of pocket for drugs or buy a separate insurance policy that covers them.

    What he doesn’t show and what I’ve never seen is a thorough cost comparison between U.S, academic medical centers and community hospitals vs. similar hospitals in other developed countries. How much does it actually cost to do a hip replacement or a CABG in those hospitals? I would really love to see the numbers. I’ve also never seen a good study that covers how healthcare costs are actually accounted for. For example, physician credentialing is done by hospitals in the U.S. but by the state in Germany, similar to issuing driver’s licenses in the U.S. Does Germany count that as a healthcare cost? Germany uses taxpayer money to insure its children. Does that count? In Switzerland, one-third of hospital revenue comes from taxpayers instead of insurance premiums. Does that count? We know that the definition of a live birth varies among countries. Maybe there are differences in healthcare cost accounting too.

    Healthcare utilization in the U.S. is comparable to most other countries or lower. Hospital length of stay is lower in the U.S., for example. We do use more imaging than any other country except Japan but their equipment is not quite as good as our but is far cheaper. The Japanese think it’s good enough. We wouldn’t, especially given our litigation environment. So it goes.

14. legacyflyer,

    Regarding imaging specifically, I had a brain MRI in 2009 in NYC at a non-hospital owned imaging center. My insurer’s contract rate was $475 vs. a list price of $1,800. A friend in the Midwest needs to get the same test every year. In her area, a non-hospital owned facility charged $600. At the high end, the regional academic medical center charged $4,200 and actually received close to that amount from some insurers. A year or so later, the independent imaging center was acquired by a local hospital and the price for the same image suddenly surged.

    Perhaps you can shed some light on the extent to which there is any difference between an MRI, assuming similar equipment, done at an independent imaging center vs. a hospital owned facility. Is there any difference in the quality of the technicians or the competence of the radiologists? How much difference could there actually be in the cost of doing the image between labor, equipment, and space? How can such large price differences be justified? It seems that reference pricing is tailor made for this category of testing.

    I know that hospitals have inherently higher costs because of the need to be staffed around the clock. However, I remember being in the ICU at my local community hospital back in 2000. The doctor ordered an ultrasound that evening but said it could wait until the morning when it was done. The bottom line is that I think hospitals have a lot to answer for when it comes to costs and prices they are actually paid as compared to hospitals in other countries.

    Interestingly, when we see comparisons of how much more various tests and procedures cost in the U.S. vs. other developed countries, it is always for hospital based care, imaging and, sometimes, prescription drugs. We don’t see those comparisons for long term care, home health care, primary care office visits or dental care. It looks to me like it’s the hospitals that are largely responsible for our high healthcare costs though brand name drugs are also a contributor as well.

15. Well, I am probably showing my socialist stripes a little here, but Canadians, Germans, and Japanese are extremely insulated from the cost of care, and they have not experienced our extreme medical inflation.

    That is because they have strong civil service bureaucracies who pay constant attention to the cost of care; and their doctors and hospitals essentially (though not happily) obey the national fee schedules.

    I understand that national systems cannot be just transplanted lock stock and barrel. However, on all the blogs I read I bring up the point that there is more than one way to achieve cost control. And other nations seem to do in a way that is faster and gentler than making individual patients fight against high prices.

16. Legacy Flyer,

    There are plenty of examples of large hospital systems that can extract prices from private insurers that are well above Medicare rates. The best example that I’m aware of is Partners Health System in Massachusetts which includes Massachusetts General Hospital and Brigham & Women’s Hospital. Most employer plans want these hospitals in their network and the hospitals know that. In the past, insurance plans that excluded those facilities in exchange for a lower premium just didn’t gain much traction in the market.

    I’m told that Partners commands prices that are 30%-40% higher than what its local competitors are paid even though Partners’ care quality is generally no better. Insurers with relatively little local market share have minimal market power. The same is true for small independent community hospitals and small physician practices. Since many of the insurance plans being offered on the new exchanges are narrow network offerings that exclude the most expensive hospital systems, we will presumably soon find out how popular they prove to be and how much market acceptance they ultimately achieve.

    As for Kaiser, I agree that their success in Northern and Southern CA has not been replicated in several other markets. What works in one geography may not work in another either because the market is not as willing to accept it or it lacks critical mass to effectively execute its model or both.

    Bob,

    Most of the ABD population that qualifies for Medicaid is already on it. The new enrollees who qualify under liberalized ACA income eligibility criteria are likely to be childless adults who didn’t qualify before and young families who made a little too much money to qualify under the old rules.

    On the employer side, if they move to a defined contribution model with private exchanges offered through benefit consulting firms like Mercer, Aon Hewitt or Towers Watson, employees are likely to be much more price sensitive and better able to choose a policy that best meets their needs. If they choose a plan that costs less than the defined contribution amount, under current tax rules, they could probably redirect the excess into a health savings account, additional 401-K contribution, disability benefits or some other fringe benefit that does not trigger additional tax liability.

    The current model of employer provided health insurance tends to drive up healthcare costs because people, in effect, opt to take more of their compensation in the form of health insurance benefits than they would if the tax preference didn’t exist. Moreover, to the extent that people are insulated, for the most part, from the actual cost of care, they have precious little incentive to care about costs especially once they have satisfied their deductible or exceeded their OOP amount for the year. This is why price transparency alone is not enough to mitigate cost growth. Prices need to be relevant to the member as well meaning that he will pay more if he chooses a more expensive provider when a more cost-effective high quality alternative was available.

17. Barry,

    There is this idea out there that Insurance Companies are naive/stupid and if they only learned how to negotiate better, we (patients and health care consumers) could save a “gazillion” dollars. I think people who subscribe to this idea are themselves naive.

    While I cannot speak with any great insight into negotiations between Insurers and Hospitals, I can tell you that Insurers definitely DO know how to negotiate with “providers”

    We (Radiology/Imaging) negotiate with Insurers on a regular basis. Trust me, they do not walk into these negotiations, lay on their backs and raise a white flag. Nor do we.

    It remains unclear to me how “reference pricing” would change anything. We try to negotiate the best (highest) price we can, they try to negotiate the best (lowest) price they can. If they make too low an offer, we will tell them to “pound sand”. And vice versa.

    And to add a gratuitous comment: While Kaiser Permanente has a good reputation in California (and my Med School roommate works for them), their local operation is decidedly second rate. What George Halvorson thinks (at least based on how Kaiser runs its local network) does not impress me.

18. Good points, Barry.

    But let me go back to the fine article by Robt Laszewski and raise a few questions:

    a. Why do Republicans dislike Medicaid so much? Especially when 2/3 of Medicaid spending is on the poorest elderly and the disabled, and not on poor kids or the working poor.

    Even the states with the greatest opposition to Medicaid — Texas, LA, et al —
    have in most cases been riding on an 80-90% federal share for decades.

    Bill Maher once said that “The primary job of the Democratic Party is to drag the hillbilly half of this country into the 21st century.” Not far off.

    b. The Republicans should be for extending the subsidies above 400% of poverty. This would give a benefit to the entrepreneurs and self-employed persons who are attracted to their party anyways.

    I suppose that Grover Norquist-tax phobia is getting in the way of political self-interest in this case.

    c. There is a theory that generous employer plans have created America’s high cost structure for health care…..and that if benefits were taxed, the prices of health care would come down.

    I do not quite follow this whole train of thought, although there may be some grains of truth to it.

    What the Repubs seem not to notice here is that hitting 70 million or so families with non-trivial higher taxes could cause a recession. Heck, a $1 rise in the price of gasoline could cause a recession and that only costs each family about $1200 a year.

    There is some evidence that the ACA is holding back economic growth.
    The Repub plan would put economic growth into absolute reverse.

19. Legacy Flyer,

    Reference pricing is a concept that would be most useful in controlling costs for the commercially insured non-Medicare population. Here’s an example.

    The big CA state pension fund, CalPERS, found that it was paying, at contract reimbursement rates, $15,000 to $110,000 for hip and knee replacements in Southern CA. There were 110 hospitals in the network and there was no discernible difference in quality of outcomes. In working with Anthem Blue Cross, owned by Wellpoint, it decided that it would pay $30,000 for this procedure and 46 of the 110 hospitals agreed to do them for that price. Members who wanted to go to one of the more expensive hospitals would have to pay the entire amount above $30K out of their own pocket. Within a month or two, 12 additional hospitals agreed to the $30K price in exchange for being placed on the preferred provider list. In the first year, CalPERS’ cost for these surgeries fell by 19%. The concept lends itself best to surgical procedures, imaging, lab work and prescription drugs.

    Medicare and Medicaid both pay what they pay based on their administered / dictated price list but it’s commercial insurers that have to deal with cost shifting. Making members aware of these price differences ahead of time and making those differences relevant by requiring them to pay any additional charge above the reference price should make them much more price sensitive and willing to choose the more cost-effective provider if it can be shown that quality is just as good if not better than the more expensive alternatives.

    By contrast, if the member only had to pay a flat coinsurance amount no matter which provider he chose while contract rates were vastly different based on market power, the member would be likely to choose the more expensive provider thinking that it must offer better care because it costs more. In most other areas of commerce like cars and houses, at least in the same zip code, more expensive usually does mean better. In health care it often doesn’t. Instead, higher prices usually have more to do with local or regional market power than care quality.

20. Barry,

    I generally find myself agreeing with what you say. However, in this case I find some of what you say confusing. What does this mean:

    “Bring reference pricing to surgical procedures, imaging ….”

    I am sure you are aware that Medicare has an extensive price list for particular procedures/tests.

    I presume you also know that insurance companies have access to this data and negotiations with “providers” are conducted based on “percent of Medicare”.

    In what way does “reference pricing” differ from what is currently being done?

21. I think Republicans would be better served if they focused on ideas that would reduce healthcare costs. The fact is that the poor need Medicaid and a pretty significant percentage of the rest of the population that don’t get their health insurance through an employer or qualify for Medicare need subsidies to afford coverage. I also think the employer tax preference issue should be deferred for now and tackled later as part of a future broad based tax reform effort.

    Ideas to reduce health insurance costs could include the following: (1) Get more of the Medicaid eligible population into managed care plans and/or allow states to use Medicaid money to purchase private health insurance for poor people, (2) bring much more care coordination to the very expensive dual eligible population – about 10 million people who qualify for both Medicare and Medicaid, (3) encourage new payment models that focus on buying care by the package instead of by the piece as recently retired Kaiser CEO, George Halvorson suggests, (4) make healthcare prices both more transparent and more relevant to healthcare consumers, (5) bring reference pricing to surgical procedures, imaging and other elements of care that best lend themselves to that concept, (6) encourage private employers to move toward a defined contribution model and private exchanges for their employees and pre-Medicare eligible retirees instead of the traditional defined benefit model, and (7) push for sensible tort reform including safe harbor protection from failure to diagnose lawsuits for doctors who follow evidence based guidelines and protocols where they exist.

    Liberals have pushed for years for universal health insurance coverage and Obamacare is a big step toward that goal. Republicans should accept that and move on to cost control where their free market bias is likely to add a lot more value to efforts to make healthcare and health insurance more affordable for everyone.

22. Nice article… I think you’re exactly right. The foundation has been laid but what gets built on top of this base over the next 4-5 years will be the real model into the future. The “Doc Fix” is just one of the many things that now need to be corrected….

23. Fix Obamacare?

    Here’s my two cents.

    1. We’re going to need a real “doc fix.”

    We’re going to have empower healthcare workers rather than trying to systemize and process them into submission. And doctors are the logical people to go to if you’re trying to get leadership on the ground. Like it or not, Dems are going to have get over their instinctive hatred of doctors if they want that can make this work. They probably won’t be able to do this.

    Instead they’ll work with administrators. Exactly the people you want on your side in a fight. Smart.

    2. Intelligent use of technology. Healthcare.gov showed that it isn’t enough to assume that technology will get the job done. Technology can be inspiring, efficiency-driving, cost-saving or can it be soul-sucking, time-wasting and a budget destroyer. We need to get a handle on it.

24. I think Mr. Laszewski is correct.

    People are in favor of saving money spent on other people – not on themselves. Once you have given someone a benefit, it is hard to take it away.

    Several years ago, in a Yogi Berraesque moment, one tea party member was heard to say “keep the Government’s hands off my Medicare!”

    As for who is going to pay for all this:

    “Don’t tax you
    Don’t tax me”
    Tax the man behind the tree”

25. If anybody is going to be fixing Obamacare, it’s going to be Hillary.