How Many Uninsured Will Medicaid Cover After Health Reform?

One of the major components of the Affordable Care Act is the extension of Medicaid eligibility to all citizens and legal residents who earn below 133% of the federal poverty level. As of 2011, that is approximately not a lot of money. Prior to the ACA, Medicaid eligibility was contingent on satisfying both income eligibility and categorical eligibility criteria, the former meaning you had to be poor and the latter meaning you had to be the “right” type of person to qualify. For example, poor pregnant women qualified, poor childless adults did not. Prior to the ACA, people who thought Medicaid was a program for poor people were only partially right. Fortunately for these people, without having to change their thinking, the implementation of the ACA will make them right. Medicaid will now be for everyone who is low-income. It’s much simpler and makes more sense, but the big question is: How will it work?

We already know that there are a number of people eligible for Medicaid coverage currently who are not enrolled in the program. It stands to reason, then, that when more people become eligible, some fraction of them will not enroll. How many do enroll will be important for many reasons: covering these folks was a major goal of health reform, newly insured individuals will need more doctors to care for them, and all of this will have an effect on health care costs. It would be helpful if we could anticipate–if not predict–the future, which is exactly what the Congressional Budget Office and the Centers for Medicare and Medicaid Services have tried to do. The problem is that they appear to be using two different crystal balls.

The CBO says that 16 million will gain coverage, while CMS says 18 million. Somebody’s wrong. My hunch is that it’s CMS, because they assume that 97% of newly eligible people will enroll in Medicaid. That seems awfully high to me. It also seems high to some health economists at Harvard who have the next best thing to a crystal ball: a simulation model. Benjamin Sommers, Katherine Swartz, and Arnold Epstein have a paper coming out in Health Affairs that considers all of the major factors that will determine how many people will be eligible and how many will enroll and calculates these estimates under a variety of assumptions that range from conservative to bold. According to their model, about 13.4 million people will newly enroll in Medicaid because of the ACA. However, using different assumptions, they come up with a 95% confidence interval that ranges from 8.5 million to 22.4 million people. That, folks, is a pretty large amount of uncertainty. The good news is that more people will be covered. The bad news is that we really won’t know how many until happens, which means we won’t be able to do too much planning ahead.

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The End of the Wonk Week

It’s Friday. That’s not usually the day that the new Health Wonk Review comes out, but sometimes things happen and folks get delayed. Fear not, however, for Joe Paduda saves the day with his “Superhero” edition of HWR. Check it out here. I didn’t submit anything this week, but a line of fine folks did. I especially recommend Chris Langston’s report of a MedPAC meeting. If you’ve always wondered what went on, but were too afraid to ask, Chris will tell you.

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Accountable Care Organizations: The Future of American Health Care?

The implementation of the Affordable Care Act continues to move ahead, although the kinds of things that are happening lately aren’t exactly the kinds of things that make it onto the evening news. A major example is the Obama administration’s release of the final regulations for accountable care organizations (ACOs). You may not have heard much about ACOs, because they are the sort of thing that only health care administrators, insurance companies, and policy wonks care much about. That’s unfortunate, however, because ACOs may–and I stress may–have the potential to dramatically change the way our health care system works.

ACOs propose to change the way Medicare pays hospitals and physicians. Instead of the more traditional fee-for-service system, where the more a doctor or hospital does, the more they get paid, the ACO structure makes a single payment either per patient or per diagnosis that is shared by the hospital and the physician. This is, essentially, capitation. If the hospital and physician can provide care to the individual for less than the fixed amount they are paid, they get to keep a portion of the difference as their “reward.”

The idea is that this creates incentives for providers to provide high quality care and increase efficiency by, for example, reducing duplicitous services. Of course, there’s always the possibility that people will figure out how to game the system. For example, if the capitated payment is diagnosis-based, expect to see people diagnosed much more readily with far more ailments. There is always the potential for fraud and abuse. As one mentor of mine is fond of saying, “In a program this big, if it can happen, it will.”

So, ACOs may completely change American health care, or they may do nothing at all. Over at the Health Affairs blog, the release of the ACO regulations prompted a series of excellent posts. You can find them here, here, and here.

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Massachusetts Leads The Way Again on Health Reform

It’s no secret that the Affordable Care Act was based largely on the health reform law signed into law by then-Governor Mitt Romney in Massachusetts. The early evidence has shown that the Massachusetts reform reduced the number of uninsured individuals to 2% of the state’s population, but hasn’t done much, if anything, to control health care costs. It looks like that may be about to change. Legislation is being hammered out in Massachusetts that aims to control health care costs by introducing what Abby Goodnough and Kevin Sack of the New York Times label “flat global payments to networks of providers for keeping patients well, replacing the fee-for-service system that creates incentives for excessive care by paying for each visit and procedure.” After reading the rest of their article, I call that “risk-adjusted capitation with quality incentives.”

We know that capitation controls costs, but there is also evidence out there that it may reduce quality, because providers make an effort to keep patients from seeking care. Incentivizing providers with extra payments based on quality of outcomes is an attempt to offset this unintended consequence of capitation. How all this will play out is unknown, but it’s promising that Massachusetts is taking action in hopes of controlling health care costs. If it works, you’re likely to see other states and the federal government following suit. After all, everyone acknowledges that the Affordable Care Act only took the first step in getting everyone into the system, and does much less to control costs. If the Massachusetts model gets results, Obamacare part 2 may not be far off. Of course, how dire things have to get before the political process is overcome by desperation leading to action is an open ended question.

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A Review of Paul Starr’s Remedy and Reaction

The passage of the Affordable Care Act has seen a number of books published about how the law was designed and successfully enacted, written by a wide range of authors from Tom Daschle to a team of Washington Post reporters. However, if you’re only going to read one book on the ACA and health reform, it should be Paul Starr’s Remedy and Reaction: The Peculiar American Struggle Over Health Care Reform, which is due out from Yale University Press on October 25th.

You may know Starr, Professor of Sociology and Public Affairs at Princeton University, from his Pulitzer-Prize-Winning book on the history of the American health care system, The Social Transformation of American Medicine. In Remedy and Reaction, Starr is at it again, first chronicaling the history of health reform in America, then providing a behind-the-scenes look from his time in the Clinton White House working on what was ultimately a failed attempt at reform, and concluding with the politics and policy of the Affordable Care Act. For anyone who wants to engage in informed debate about health reform, Remedy and Reaction should be considered required reading.

Starr acknowledges at the outset that he is biased in favor of the ACA–and a progressive approach to reform more generally–but that doesn’t detract from what is, in my opinion, a balanced discussion of the issues at stake, and the evidence in support of various approaches to reform. His central premise is that the U.S. health care system is trapped–growing “increasingly costly and complicated” but having “satisfied enough of the public” and having “so enriched the health-care industry as to make change extraordinarily difficult.” As political moderates disappear from existence, the path to reform, Starr argues, has grown even more challenging.

The history is all here, from discussions of reform (and the lack thereof) by Presidents dating back to Teddy Roosevelt to the implementation of the ACA. It is striking to fully understand how our nation has been grappling with the same philosophical questions for a century without reaching any real consensus, while at the same time watching our problems mount as a result of our disagreement and inaction. It is eye-opening to watch as Republican ideas, espoused by Democrats in a spirit of cooperation, became antithetical to Republican ideals. When you finish Remedy and Reaction, you will know the truth about “death panels” and the tax breaks we give to those with the best insurance coverage. You will understand how an individual mandate can at once be viewed as the pinnacle of individual responsibility and the destruction of individual liberty. You will know where we came from and how we got here. And you will be both more enlightened and more cynical.

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Tobacco Tax Policy Affects Social Interactions

As you probably know, I recently moved to Rhode Island after spending most of my time in the states of Georgia, Virginia, and North Carolina. Now, you might not think about it, but those latter three states grow a lot of the country’s tobacco. As a result of that, and extraordinary lobbying efforts, the state taxes on tobacco are relatively low in those places. In fact, they are three of the lowest in the nation. In Virginia, the tax is 30 cents per pack. In Georgia, it’s 37 cents. In North Carolina, it’s 45 cents. (For a great map of tobacco tax rates, go here.) By contrast, in Rhode Island, which doesn’t really grow tobacco, the tax is $3.46 per pack. That’s more than 10 times the rate in Virginia.

Not surprising is that the per pack tax gets passed on to the consumer. So, in Georgia, I’ve seen cigarettes sell for about $3 a pack or so. When I was in CVS last week, I noticed behind the counter that Rhode Island cigarettes sell for closer to $8 a pack. A big chunk of that difference is obviously the different state tax.

But here’s the funny thing: I ride the bus to work every day from a fairly “blue-collar” part of the state, and I often overhear people trying to bum cigarettes off of fellow passengers. In fact, while I don’t smoke, someone asked me for a cigarette a couple of weeks ago. But in most cases people ask people who visibly have at least one cigarette on their person. I’ve yet to observe someone happily sharing a smoke with a stranger. If memory serves, bumming cigarettes had a much higher success rate in the tobacco friendly states where the per pack cost was much lower. In effect, the “charitable” act of giving someone a cigarette is more expensive here than it is down south, so people do it a lot less often. It’s pure economics. Well, that, or a lack of hospitality. This is Yankee country after all.

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A Health Care Parable

There was a family of four living in the suburbs of a major city. A mother and father, and two young children, a boy, age 4, and a girl, age 3. The father worked in a good job downtown, while the mother stayed at home to take care of the house and the children, who were not yet in school. The family lived comfortably off of the father’s income, but money was tight from time to time when unexpected expenses were incurred for one reason or another. In fact, there were times when the father’s income was not enough, and they were forced to dip into their savings to pay their bills. Unfortunately, that had happened so often over the last three years–ever since their daughter had been born–that they had depleted their entire life’s savings, and were now living paycheck to paycheck.

Then, just as before, it happened. The father got into a car accident on the way home from work. He had to pay $50 (just go with it) to have his car fixed, or the family would lose their sole source of income. But, without any savings, spending that $50 meant that something else would have to go. The father earned $1,000 a month. The family spent $600 on rent, $200 a month on groceries, $100 a month on utilities, $50 on cable television, and $50 on miscellaneous things like gas for the car. The parents looked at their budget and tried to figure out where they could cut the $50.

They decided that they had to pay rent and utilities. They thought about cutting out miscellaneous spending, but realized that the father had to buy gas to get to work, so there wasn’t $50 worth of spending to cut. Finally, they narrowed it down to groceries and cable television. “We have to eat,” said the mother, “Why don’t we cancel the cable? “Because watching TV is important to me,” said the father. “Well, I suppose we could cut back on how many groceries we buy,” said the mother. “Nonsense!” said the father. “I work hard for this family, and I come home hungry. And you work hard around the house, so I’m sure you build up an appetite, too. Let’s just stop feeding one of the children,” he said. “But if we don’t feed a child, they will surely die!” exclaimed the mother. “Besides, how could we ever decide which child would go hungry?” “Well,” said the father, “Perhaps we should feed each of them half of what we normally would.” And so, that is what they decided to do.

By the end of the month, the two children were malnourished and had developed all sorts of ailments. Taking them to the doctor was going to cost far more than $50, but at least the father got to watch TV, and both he and mother were well fed.

The moral of the story? Sometimes acting out of self-interest ends up being more expensive than making a personal sacrifice for the greater good.

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Four Types of Hospitals

Today I want you to try out a thought experiment with me. Imagine that you were asked to rate hospitals according to the quality of care they provide and how much the care they provide costs. Then, imagine that you were asked to select a group of hospitals that should serve as the model for all hospitals in the country. In other words, with regards to quality and cost, you are trying to identify the “best” type of hospital. Which hospital or group of hospitals would you select as the best?

Well, you might consider creating a two-by-two table that contained all the possible combinations of quality and costs. So you’d have low quality, low cost hospitals; low quality, high cost hospitals; high quality, low cost hospitals; and high quality, high cost hospitals. Clearly, high quality is preferable to low quality, right? So the first two groups are clearly not the best. And, as far as cost goes, less is more, so the best hospitals are those in the high quality, low cost group, right? Well, it depends on who’s deciding.

The government, for example, loves the idea of high quality, low cost hospitals, because they provide maximum benefit at minimum expense. Such facilities could hold the key to enormous cost savings in health care. It turns out, though, that patients actually express a preference for the high quality, high cost hospitals. This according to a recent study by Ashish Jha, John Orav, and Arnie Epstein. The authors identify different levels of nurse staffing as explaining this patient preference. They don’t come right out and say it, but it seems that above a certain point, having more nurses on staff does nothing to improve quality of outcomes, but does improve patient satisfaction. In short, American hospital patients are paying to be pampered. If insurance didn’t foot so much of the bill, I wonder how much our preferences would change.

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Latest Health Wonk Review

Chris Fleming hosts the most recent edition of the Health Wonk Review over at the Health Affairs blog. Here’s hoping you’ll read it and get up to date on the best health policy blogging of the past two weeks! (And a thanks to Chris for including my post.)

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New Insurance Rate Reporting Tool Goes Live Online

The implementation of health reform is a lengthy process, but I think it’s kind of fun, because every so often a new element is introduced. We started by letting children stay on their parents’ plans until age 26. A good friend of mine is working hard for HHS to help get the exchanges up and running. And starting September 1 of this year, insurance companies finally had to start explaining their rate increases.

As you may recall, part of the Affordable Care Act requires health insurers to justify any annual increases in premiums that exceed 10%. On top of that, insurers are also required to spend 85 cents of every premium dollar to provide benefits to policy holders. Well, HHS has created a website that went live just last week that allows you to take a look at your insurance company and see if they’re raising rates and if so, why. The site also lets you look at the data by state, which is helpful because it might help you know whether the rate increase is happening with all insurers in your state or if you should consider switching insurers to save money–provided you have the option.

On the one hand, this site may seem simple and unimpressive. On the other hand, it’s providing information that almost none of us has ever had access to. At this point, it hasn’t got much data available, but that will change with time. If shining a bright light on the rate-hiking tactics of insurers doesn’t lead them to become more competitive, I will be somewhat surprised, and a whole lot more cynical.

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