A Clean Claim of Health

Medicaid has recently released a Final Rule (Federal Register, Vol. 81, No. 88) for Medicaid Managed Care.

By definition, Managed Care is a health care delivery system organized to manage cost, utilization, and quality. Medicaid Managed Care provides for the delivery of Medicaid health benefits and additional services through contracted arrangements between state Medicaid agencies and Managed Care Organizations (MCOs) that accept a set per member per month (capitation) payment for these services.

When States agree to accept funding for Medicaid from the Federal Government, part of the agreement is to determine the type of delivery system in which beneficiaries will receive care. Historically, this was fee-for-service (FFS). However, FFS delivery systems encourage volume billing – i.e. every service a physician performs when a client is in his care is reimbursed at a 1-to-1 rate, thus financially encouraging behaviors that lead to performing non-necessary services. This type of delivery model places the burden of risk on the payer – in this case, you and I as taxpayers.

However, Managed Care models typically use a reimbursement rate that shifts the risk from us to the physicians (or hospitals, networks, etc.,). Capitation payments, typically function (there are caveats to everything, bear with me) as a means to pay a provider a set amount per patient, regardless of the number of services the physician performs. For instance, a physician may receive $180 for every client in his care, every month, regardless of services rendered to those clients. The idea is some healthy patients may not utilize $180 worth of services whereas; some patients may utilize more than $180 worth of services. There are a series of checks and balances here that need constant monitoring to ensure patients are not underserved and physicians are not underpaid.

In 2013, there were 45.9 million Medicaid beneficiaries (73.5%) receiving care through a Managed Care model. Additionally, (in 2015), some 2.7 million children (73%) also received services through Managed Care models. To provide some perspective, the U. S. population in 2015 was approximately 320 million, so roughly 15% of all U. S. residents were in a Medicaid Managed Care setting.

Medicaid’s Final Rule was written to:

• Reform the Managed Care Delivery Systems
• Improve Quality of Care
• Improve the Beneficiary Experience
• Increase Accountability and Transparency
• Reduce Fragmentation of Care

Key components that were addressed in the rule making were:

• Payments for IMDs
• Addressing In-lieu of Services
• Modernization of typically antiquated systems – Digital handbooks for clients, new rules on network adequacy management, etc.,
• Coordination between Long-Term Services and Supports with Primary Care
• Rules outlining clarity and transparency in rate setting
• Including providing data that contains better encounter data
• And the flexibility to minutely adjust rates without a new actuarial certification annually
• Provides new parameters for the CHIP program that were historically lacking. These parameters bring the CHIP program more in line with the provisions that administer traditional Medicaid MCOs.

This final rule is a great first step at clearing away the fog that has existed for years surrounding Medicaid Federal Regulations. Items like ‘in-lieu of services’ and ‘IMDs’ were traditionally reinforced through flimsy policy papers, or State Medicaid Directors Letters, or even worse, internal CMS emails from division heads. The rules seemed to be applied with little or no consistency, and varied on a State-by-State basis. Now, some topics that were a source of past administrative tension between Federal and State agencies can be relieved with clearly defined guidance. States will continue to try and shift away from FFS models into Managed Care (as they are easier on the budget), and as more States expand their Medicaid programs, we can expect to see more and more of the population placed into these delivery systems.

In 2016, Colorado, of all States, could jettison the Medicaid expansion, but not in a way you would expect. Instead of reverting back to the days of inescapable insurance gaps and junk coverage like some Red States have pursued, Colorado’s “purple (1)” initiative would provide comprehensive coverage to individuals. From Kaiser Health News:

Seniors would stay in the Medicare system, and those in Tricare, the military health system, could keep that insurance. And anybody would be free to buy private coverage from a private insurer, though they would still have to pay for ColoradoCare. It would work like a single-payer plan, in the sense that everybody pays in, and everybody would be automatically covered, one way or another

This initiative would be funded through the redirection Medicaid funds, along with increased employer payroll and individual taxes. 

To finance the project, Colorado employers would pay nearly 7 percent in a payroll tax. Employees would pay 3 percent or more of their gross pay toward the health plan. The self-employed would need to pony up 10 percent of their annual net income (to cover the employee’s contribution plus the employer’s contribution — analogous to the formula used to calculate federal self-employment tax). All in all, supporters say, these proposed tax hikes would raise around $25 billion, and save residents money in the long run.

However, opponents of universal care have quickly mobilized to denounce the initiative, and while their criticism is suspect, I don’t know that I necessarily disagree with it (for different reasons). One vocal opponent is Tammy Neiderman: 

The proposed system would also put 4,000 brokers out of work and lead to longer waits for care, according to Tammy Niederman, representative of a trade group for health insurance brokers.

“This will inevitably ration care,” Niederman says. “There’s no way to put in a universal system that doesn’t do that.”

I tend to disagree with Niederman on both points. Brokers will still be necessary, but for different reasons. Like most nations with socialized medicine, consumers still have the option of purchasing insurance for Cadillac care. Brokers could still find employment for distribution of these plans. Would the State still need 4,000 of these jobs? Probably not. 

As for rationing care, I tend to disagree. Care is currently rationed everywhere. The U. S. has historically suffered from a shortage of physicians (Source), and Colorado is no exception (Source). However, this mentality of ‘because a resource is scarce, and I want mine, other people shouldn’t get theirs’ is not only selfish, but borderline disgusting. The solution to healthcare shortages should not be limiting care to people who cannot afford it, but more along the lines of incentivizing physicians for participation in healthcare and increasing access to school for future physicians. 

Ida Hellander, M.D., David U. Himmelstein, M.D., and Steffie Woolhandler, M.D., M.P.H., constructed a quick pros and cons of the colorado single-payer initiative, and I agree whole-heartedly with their initial assessment:

Strengths of ColoradoCare

1. The proposal if implemented would cover all, or nearly all of Colorado’s uninsured – apparently (and laudably) including the undocumented.

2. The proposal includes some useful cost-control features, notably the creation of an annual budget, and the ability to negotiate lower prices with pharmaceutical companies.

3. The plan allows for a free choice of primary care doctor.

4. The financing plan is more progressive than the current system.

5. ColoradoCare's organizers have mounted an impressive campaign with considerable mobilization.

Weaknesses of ColoradoCare

1. Multiple payers would persist – probably including private insurers. As a result, it sacrifices much of the administrative savings that could be realized through a true single- payer reform because providers would have to maintain much of their current cost-tracking and billing apparatus in order to apportion costs among the multiple payers. Published cost estimates for ColoradoCare overstate the savings that could be achieved through single payer, and do not take into account the additional costs entailed by ColoradoCare's failure to adopt a full single-payer structure.

2. The initiative makes no mention of how hospitals or other institutions would be paid – apart from a rhetorical nod favoring ACOs. It makes no mention of global budgeting, separating operating and capital payments, or other constraints on hospital capital spending. Global budgeting is critical to achieving administrative savings; separating operating and capital payments is a bedrock of effective health planning, which is essential for long-term cost containment.

3. The initiative would not ban for-profit hospitals or other providers, despite clear evidence that they inflate costs and compromise quality. For-profit ACOs (indistinguishable from HMOs in most respects) might also flourish.

4. The initiative specifies that patients would have a free choice of primary care physicians, but makes no mention of whether the choice of specialist or hospital could be restricted.

5. While the plan would outlaw deductibles, the Board could impose copayments.

6. While the 10 percent tax rate would apply to both the rich and poor (including those with incomes below the poverty line), income over $350,000 would not be taxed.

7. The campaign's anti-government rhetoric is problematic. 

8. Rather than specifying critical aspects of the plan, the initiative leaves many of these to be decided later by the Board. Delaying such decisions has often favored corporate interests, who can intervene after the popular mobilization required to pass a reform has subsided. In the case of the ACA, corporate lobbying during the rule-making process attenuated cuts in Medicare HMO overpayments; reduced promised funding for public health and community clinics; effectively neutered limits on insurance overhead; and watered down the mandated benefit package. In Vermont, the broad-brush program initially passed by the legislature was whittled down in the detailed design stage, leading to rising cost estimates and ultimate rejection by the governor.

According to CMS, we will exceed the $10,000 per-capita threshold in 2015. 

Lastly, the elephant in the room is the $25 billion price tag this initiative arrives with. It seems as if ColoradoCareYes is perfectly comfortable with this price tag, and accepts it as an inevitable. The real question, and it’s the same question I pose to all of the Affordable Care Act reformation, is – Why do we accept this cost of care? Both ColoradoCare and the ACA have done very little (nothing) to address the rising cost of healthcare. According to a study conducted by the Commonwealth Fund, the costs of health insurance is unaffordable for a quarter of all working-aged adults. 

And what are we paying for?

We spend more on healthcare than any other nation (per-capita) more for health at no advantage:

1. How did we arrive at the $25 billion dollar price tag.
2. Elaborate on Section 7 of the proposed ballot measure: 
   (2) COLORADOCARE SHALL PHASE IN PAYMENT REFORMS AND A UNIFIED BILLING SYSTEM. (3) COLORADOCARE SHALL USE PAYMENT MODELS THAT OPTIMIZE QUALITY, VALUE, AND HEALTHY OUTCOMES FOR BENEFICIARIES.

There are a slew of other issues that need addressing, such as plans for fraud prevention, legal authorities for recover and overpayment, quality assurances, access standards, etc., but those can be addressed at a later date. 

Purpose in 140 Characters: 

Create a blog dedicated to educating on the basics of the American Healthcare System, while providing some personal conjecture and thoughts. 

Purpose in 140 Words:

The more I speak with the public, both healthcare professionals and in general, the more I realized the American Healthcare System is operated behind a curtain of mystery, invisible to the average person. My intent is to slowly draw back Oz's curtain, revealing the interlocking mechanisms that churn Emerald City's healthcare. 

I am, by no means, an expert. The mechanisms which turn our convoluted, fragmented healthcare system take years of experience to understand, and I've just started my journey. However, the more we read, write, and process, the better we understand. So this is my outlet for those tools of understanding. 

Who would benefit from subscribing to this blog?

Anyone interested in how our healthcare system works. Professionals currently in the industry looking for tips, thoughts, and reminders about Medicaid or Medicare rules, deadlines, and processes. Lastly, anyone who, out of pity, wants to support my professional endeavors. 

What type of subject matter do you intend to write about?

Ideally, I would like to alternate between current events and educational materials. For instance, I may post my thoughts on gun crime statistics as a health epidemic in one post, followed by a small lesson on capitated rate setting the next. All very captivating, I'm sure. 

Lastly, who are you and why should I read your work?

I am a current Health and Human Services employee, but my posts here are in no way the reflection of Health and Human Services, or those of the Centers for Medicare and Medicaid Services. I've spent time as a criminal investigator in the greater-Houston area, investigating Medicare and Medicaid Fraud. I spent four(+) years working with the State of Colorado implementing the Affordable Care and Patient Protection Act and Medicaid expansion. Lastly, I currently work in Medicare fee-for-service contracting. I've dabbled in a bit of everything, and I have a genuine enthusiasm for the American Healthcare System. I mean, it's a unicorn in a haystack, after all. It's a public/private fragmented venture; a beautiful mess. Let's look at it one shard at a time.