Thanks to Julie Ferguson for hosting the latest edition of the Health Wonk Review on the Workers’ Comp Insider blog. If you’re wondering why Rudolph’s nose is red, why President Obama and Speaker Boehner are ignoring $200 billion in low-hanging spending cuts, or why even the most conservative Governors will eventually participate in the Medicaid expansion, then this wonk’s for you. Whether you’re sitting by the fire or just sitting in the airport, you can check it out here. And then, get ready, because I’ll be hosting the next edition in early January!
Monthly Archives: December 2012
State-Federal “Partnership” Exchanges: The Rarely Discussed Alternative Option
Beginning in 2013, states will begin rolling out health care insurance exchanges as required by the Affordable Care Act (ACA). To this point most legislators, policymakers and health care experts have discussed the state-based and federal insurance exchange options at length. However, there is another form of insurance exchange that states are beginning to explore: the “partnership”.
In a state-federal partnership, states will divide obligations with the federal government. For this partnership model there is no requirement for a 50-50 split of labor, and the states are actually more of a facade whereby the consumers (individuals and employers) merely interact with the state. The federal government, on the other hand, will essentially perform all functions of the exchange management except customer service and plan management. Moreover, states have the choice to run either one or both of those functions. According to former head of insurance exchange planning at HHS Joel Ario, “States that choose this option are ceding the more technical aspects of exchange activity to the federal government but can retain control of insurer oversight and consumer assistance.”
In the state-federal partnership model, the federal government will operate everything from consumer eligibility and enrollment to financial management and risk corridors. This essentially means that the federal government will take on most responsibility for the exchange, while granting states many of the perks they would receive if they had created a state-based exchange.
If the federal government is left to the heavy lifting, what exactly will the states portion of labor entail? The states can choose to be responsible for plan management, meaning they will be charge of qualified health insurance plan certification and reinsurance, data collection and basic supervision. The states can further choose to be in control of customer service functions such as in-person assistance. Nonetheless, even in this case, the federal government will oversee the websites and call centers where the heavy lifting will occur.
To date, only a few states have revealed that they intend to participate in a state-federal exchange. Illinois, whose Governor Pat Quinn announced its intention to run a partnership exchange in July of 2012, has already received $39 million for the state, and this sum does not even include Medicaid expansion. Arkansas has been making significant progress on their partnership since 2011. For its hard work, the federal government has given the state nearly $9 million in grants.
For more detail about the current responsibilities of the partnership, visit the PwC “Anatomy of an Exchange” chart created with data from the Robert Wood Johnson Foundation.
Health Insurance Exchanges, Policy and Politics
When the Affordable Care Act was being debated in Congress, not a single Republican supported it. When the votes were cast, not a single Republican voted for it. In fact, the Democrats had to work especially hard to minimize the number of moderate-to-conservative Democrats who wanted no part of the bill. Yet the policies outlined in the legislation were clearly more moderate than anything else. In fact, many of the specific proposals were borrowed directly from the conservative playbook, while more progressive ideas like the public option were omitted entirely. Why, then, did the left work so diligently to pass this law, while the right fought it tooth and nail? The answer is one of politics, rather than policy, and looking at one part of the law–the health insurance exchanges–makes this point loud and clear.
As Julie Appleby writes for Kaiser Health News, “insurance exchanges have had both conservative and liberal support. Conservatives, including the Heritage Foundation, endorsed the idea of market-based exchanges as a way to promote competition among insurers, which would benefit individuals who buy their own coverage as well as employers who offer policies to their workers….Conservatives have also generally supported the idea that states would retain regulatory control….In the end, the Senate version became law in 2010 – but without the vote of a single Republican. As a result, few GOP governors wanted to be seen as supporting it, or moving forward on creating state-based insurance markets. Many waited until after the Supreme Court decision or the November elections before deciding which way to go – leaving insufficient time to build a state-based market if they had not already made some preparations.”
So, the exchanges are a conservative idea, widely supported in the past, and only shunned by Republicans once the Democrats warmed to the idea. And now, with the bill become law, red states are playing political games that will result in a less conservative version of the exchanges being imposed on them. In short, politics has turned good policy into bad policy, because no Republicans wanted any Democrats to do something to help the country that might, in turn, benefit the opposing party. That gives me the impression that politics have taken the place of advancing the common good, and that concerns me greatly.
Great New Health Wonk Review
Hank Stern hosts, and it is one of the best compilations in a long time. Pay him the compliment of checking it out at his site InsureBlog.
Penalizing Hospitals for Readmissions: Will It Work?
With notably few exceptions, the American health care system has been financed on the basis of volume rather than value. That means that we’ve been paying providers for everything that they do, rather than paying them for the outcomes they produce. This is not common in other fields. For example, if you are in an accident and have to take your car to a body shop, you (or your insurance company) typically pay them for the work once. If they haven’t repaired the vehicle properly, you can typically return the car to them and they will “make it right” for no additional charge. If you go out to eat, and the meal is not to your liking, the restaurant’s manager will typically offer to make you something else at no additional charge, or will discount the price of your unsatisfactory meal.
In health care, you pay the doctor to treat you, and if the treatment fails, you pay them to treat you again, and again, and again. Now, I’m not suggesting that this alone prompts physicians to do their job poorly or to provide more care than is necessary. Rather, I’m suggesting that the financial incentives are such that they do not reinforce physicians’ efforts to provide high quality care. Efforts to work around this include managed care and capitated payments, with the thinking that this shifts risk onto the providers and encourages them to doggedly pursue better outcomes. In some cases, this has worked. In other cases, it has backfired, as physicians simply reduce the amount of care they provide, much of it arguably needed care.
The latest development in this area is the implementation of financial penalties for hospitals with excessively high readmission rates among Medicare patients. As of October 2012, if a hospital’s readmission rate exceeds their expected readmission rate, they are fined by the Centers for Medicare & Medicaid Services (CMS). Right now, the maximum penalty is a 1% reduction in total Medicare payments over the coming year. By 2015, the penalty will increase to a maximum of 3%. This is a lot more money than it might seem from the percentage figures. In fact, it’s estimated to save Medicare roughly $300 million this year. That means, if hospitals don’t improve, CMS might keep nearly $1 billion a year starting in 2015.
Of course, the goal is to save even more money by using the penalty to encourage hospitals to prevent as many readmissions as possible. Medicare currently spends about $17 billion a year on readmissions, so there is considerable room for improvement and savings. However, I’m doubtful that the new penalties will achieve their desired effect. The reason is that hospitals have ways of artificially reducing their readmission rates. One prominent example is through the use of observation care, where patients are held in the hospital–sometimes for days–as outpatients. This is more costly for patients, who are responsible for a greater portion of their outpatient bills, it raises questions about the quality of care provided while a patient is under observation, and it seems like an ideal way for hospitals not to lose up to 3% of their Medicare reimbursement going forward. So, will penalizing hospitals for readmissions work? I doubt it. Not unless we find a way to prevent hospitals from working around the penalty.