California's Medicaid disaster

Posted by on Tuesday, Jul 1, 2008

This entry is from Dr. McCanne's Quote of the Day, a daily health policy update on the single-payer health care reform movement. The QotD is archived on PNHP's website.

Budget deal will do real damage to health care

The choice is clear: Increase taxes or let the impact fall on children and the elderly

The Sacramento Bee
July 1, 2008

Faced with a $17 billion deficit, the governor and state lawmakers are considering cuts that would likely drop tens of thousands of children from the Medi-Cal program, the state’s version of Medicaid.

They also are considering restricting adult eligibility requirements for Medi-Cal, hurting families trying to transition from welfare to work.

Elderly patients would also take a hit. As part of a 10 percent cut scheduled to take effect today, the state plans to reduce payments received by pharmacists who serve Medi-Cal patients. Pharmacists say it would force them to lose money on commonly prescribed drugs.

California’s budget crisis is real. It will demand deep cuts, and the state’s health care programs will have to shoulder a share of the sacrifice. But the level of cuts aimed at Medi-Cal, and the nature of those cuts, would have broad and dangerous impacts. Legislators, particularly Republicans who have taken a vow not to raise taxes under any circumstance, need to consider the consequences.

A better option would be a modest, broadly distributed levy – yes, a tax – to prop up this state’s health care program for the poor. Consider it a down payment on a once-and-future goal: a more universal system of health coverage.

As a welfare program representing patients lacking an adequate political voice, Medicaid has been chronically underfunded. The problem is especially severe in California (where it is called Medi-Cal) with one of the lowest Medicaid reimbursement rates in the nation, and a very large population of low-income individuals who might otherwise qualify for the program. We have more uninsured individuals in California than the entire population of Massachusetts.

Further cuts in Medi-Cal funding will reduce access to providers who cannot continue to accept ever greater losses in caring for patients under this program. Changes in funding and administration of the program will eventually remove close to half a million children from this program (Health Access analysis).

There is no other immediate alternative except to increase revenues – taxes – to pay for this program. Yet the Republicans in the state legislature have vowed not to raise taxes under any circumstance, and they have the power to block the two-thirds vote required for a tax increase.

Compare this with the politics of Medicare. Congress will soon return and restore the 10 percent cut in Medicare payments to physicians that went into effect today. The public has made it quite clear that they will not tolerate political shenanigans directed against our Medicare program.

If the Medi-Cal patients were part of a Medicare program that included everyone, they would be insulated from these budget cuts since the rest of us would demand full funding of the program. One of the great advantages of a single payer national health program is that it would eliminate the welfare-stigmatized Medicaid program. All children would be covered… and so would the rest of us.

AMA supports progressive tax policies for health care

Posted by on Monday, Jun 30, 2008

This entry is from Dr. McCanne's Quote of the Day, a daily health policy update on the single-payer health care reform movement. The QotD is archived on PNHP's website.

AMA meeting: AMA clarifies plan on tax credits for insurance

By Doug Trapp
American Medical News
July 7, 2008

Existing AMA policy, first approved a decade ago, calls for ending employees’ federal income tax exemption for work-based coverage. That should happen, however, only after establishing a system of tax credits to help people buy health insurance. Related AMA policy also calls for… an individual insurance mandate for those earning more than 500% of the federal poverty level, and subsidies for medically high-risk people.

AMA policy adopted at the (House of Delegates) meeting further specifies that once tax credits are in place, employee exemptions for health insurance spending should end only for federal income taxes — not for state or federal payroll taxes, which include Medicare, Social Security and unemployment taxes. (T)he exemption for payroll taxes… would disproportionately affect lower-income people and raise employers’ payroll taxes, and would not provide additional revenue for health insurance tax credits.

Richard Warner, MD, a Kansas psychiatrist, offered an amendment to maintain tax-free HSA contributions after insurance tax credits are in place, but the house did not adopt it.

Delegates also clarified AMA policy on the tax deductibility of health insurance spending. Previous policy had called for deductibility of out-of-pocket medical expenses and insurance premiums, but the house rescinded it in favor of the tax credit plan. AMA policy still envisions people with lower incomes having more generous tax credits and easier access to them than wealthier people.

David McKalip, MD, a neurosurgeon in St. Petersburg, Fla., offered an amendment to give Americans at all income levels tax credits for purchasing health insurance. He said the AMA policy represents a massive transfer of wealth that would discourage wealthier Americans from having health insurance by ending their tax incentives for buying it. His proposal was rejected.

From a policy perspective, this is really great news. The AMA already is on record for supporting progressive financing of our health care system through the use of refundable, advanceable, inversely-income-indexed tax credits to purchase private health plans. The current additional actions of the AMA House of Delegates even more explicitly support the concept of progressive financing of health care, based on ability to pay.

Health savings accounts (HSAs) are a regressive method of financing health care because they provide a greater tax deduction to higher income individuals. The AMA proposal would end this unfair policy by no longer allowing the deduction of HSA contributions from taxable income. An attempt to endorse the continuation of tax-free HSA contributions was rejected.

AMA policies would tend to shift coverage from employer-sponsored plans to the individual market. To encourage this shift, some policymakers recommend eliminating the deductibility of employer-sponsored coverage, and making premiums and out-of-pocket expenses deductible for the individual. The AMA recognizes that this would perpetuate unfair regressive tax policies. Instead, the AMA recommends not allowing the deductibility of medical expenses or premiums, but instead providing tax credits that are inversely proportional to each individual’s income. There could not be a more explicit support of shifting from regressive to progressive tax policies to fund health care.

The AMA also supports a mandate to purchase insurance for individuals with incomes over 500 percent of the federal poverty level. This is another policy that explicitly acknowledges that the wealthy have a responsibility to contribute to the pooling of funds for health care for everyone.

The AMA also supports tax subsidies for high-risk people, yet another acknowledgment that financing of major health care costs must be through progressive tax policies.

Perhaps the most exciting news of all is the action taken on an amendment offered in protest to the “massive transfer of wealth” that would take place by ending the regressive tax incentives to purchase private insurance. (Technically, the AMA proposal would end the “massive transfer of wealth to the wealthy” through health plan deductibility, and replace it with a transfer to lower-income individuals who need help paying for health care.) The AMA rejected this amendment, seeing through the mean-spirited “massive transfer of wealth” rhetoric. AMA members are first and foremost physicians who really do care about their patients.

In relying on private health plans to provide coverage, the AMA still has a major hurdle before reaching a model that actually would work. They do support greater regulation of the insurance plans, but through a robust market of private plan choices. Regulations are required to make the plans do their job of providing us with affordable access to health care, whereas markets function to provide us with price-competitive insurance products that keep prices down by preventing us from having affordable access to health care that we need. We can avoid that perpetual push-pull by replacing the private plans with a single risk pool, funded through progressive tax policies, and administered by our own public agency.

The AMA is getting closer. If they would just knock down this private-plan hurdle, the AMA could lead the way.

Senate advances plot to privatize Medicare

Posted by on Friday, Jun 27, 2008

This entry is from Dr. McCanne's Quote of the Day, a daily health policy update on the single-payer health care reform movement. The QotD is archived on PNHP's website.

Medicare Advantage Organizations: Actual Expenses and Profits Compared to Projections for 2005

June 24, 2008

On average, MA organizations’ self-reported actual medical expenditures as a percentage of revenue were lower in 2005 than they had projected. MA organizations, on average, reported spending 85.7 percent of total revenue on medical expenses in 2005, but had projected medical expenditures of 90.2 percent of total revenue. Because organizations spent less revenue on medical expenses than projected, they earned higher average profits than projected. On average, MA organizations’ self-reported actual profit margin was 5.1 percent of total revenue, which is approximately $1.14 billion more in profits in 2005 than MA organizations projected.


Medicare Cloture Narrowly Fails

By Drew Armstrong
CQ Politics
June 26, 2008

It now looks certain that doctors will take a deep cut to their Medicare payment rates next week, after the Senate failed to move forward on a take-it-or-leave-it Medicare bill offered up by Democrats.

The White House reiterated its veto threat against the bill on Thursday, likely making moot the narrow victory that seemed possible for Democrats. The administration opposes a provision that would partially offset the cost of the bill by cutting some bonus payments to private Medicare Advantage plans in areas with teaching hospitals. It also disagreed with a provision to limit a subset of the plans known as “private fee for service,” saying the bill would “reduce access, benefits, and choices for many of the approximately 2.25 million beneficiaries who have chosen to enroll in” those plans.

The Medicare Advantage plans are paid at a higher rate than traditional Medicare, and Democrats have long argued that the private plans’ rates should be cut.

The Bush administration and many Republicans argue that the plans inject private competition into the market and will eventually lower costs.

The House passed the measure two days ago, 355-59, in a vote comfortably more than the two-thirds majority that would be needed to override a presidential veto.

The political defeat of the measure to prevent Medicare pay cuts for physicians was not partisan. Enough Republicans joined Democrats in the House to form a veto-proof majority in support of the legislation. Though many Republicans also joined the Democrats in the Senate, they came up one vote short on cloture. Sens. Obama and Clinton interrupted campaign activities to vote, but Sen. McCain was a no-show.

This was a victory for conservative/libertarian ideologues who wish to destroy the traditional Medicare program and replace it with private health plans. Their first step was to use taxpayer funds to overpay private Medicare Advantage plans so that patients would be attracted by the greater benefits that could be offered (benefits that in all fairness should be offered as well to those remaining in the traditional program). The next step is to reduce compensation in the traditional Medicare program so that physicians will bail out. Fee reductions of about 40 percent are scheduled over the next couple of years, which should accelerate the physician exodus. That would convert Medicare into an underfunded Medicaid-type welfare program, with patients fleeing to the private options.

The eventual surprise that Medicare Advantage beneficiaries are not anticipating is that it will be converted into a defined contribution program with the costs of health care inflation being shifted to the patients’ portion of the Medicare Advantage premium and to other out-of-pocket cost sharing.

Fortunately, many Republicans do support the social solidarity represented by Medicare. They are offended by the efforts to waste taxpayer funds on the excesses of private insurers in a nefarious plot to destroy the best health care financing program we have (though it needs further improvement). Joining with the Democrats, these Republicans will surely do the right thing when they return from their recess. Sen. McCain will also have another opportunity to dispel the claim that he offers us only four more years of Bush policies.

As a primary care doctor, I live with one foot in the horse and buggy era and one in the silicon age. I spend most of my time talking to patients and wielding a stethoscope, and I also use the latest high tech gadgets. But the gadgetry is getting out of hand; its overuse threatens patients and is blowing the lid off health care costs. Here’s one example. Last week, when a patient came in complaining of a cough that had lingered longer than usual, I sent him down for a chest x-ray. The x-ray was absolutely normal to my eye, a reading confirmed by the radiologist. But he added one key phrase after the word “normal.” “Consider obtaining a CT scan.”

Now the radiation from a single chest CT is equivalent to about 500 chest x-rays, which carries a real risk of causing cancer down the road. And there’s virtually no evidence that a CT would help a patient like mine. But it would certainly benefit the radiologist. He and his colleagues are paid as piece workers – they get an additional fee for each scan they interpret. Radiologists have gotten rich (they average over $400,000 annually) by buying CT scanners, MRI machines and other high tech gadgets, and prodding other doctors to order these expensive tests. And each test breeds more tests. A tiny abnormality on one CT (and most of us have something that looks a little funny if you look hard enough), means a radiologist’s report recommending “follow-up CT in 6 months to assess progression.”

It’s not just the radiologists who work this scam. Perhaps half of the stents that cardiologists put in do patients no good at all; oncologists inflict lucrative chemotherapy on many patients who gain nothing but suffering from these potions; and orthopedists often needlessly scope knees and operate on backs. And hospitals are willing partners to these rip-offs. The useless and harmful procedures keep ORs humming and beds full of high-paying patients. It’s gadgets and procedures that bring in the big bucks.

HMOs and insurers have tried to crack down on unnecessary care. But doctors and hospitals can easily outsmart them. We manufacture the data they use to monitor us. I can always make a plausible case for an expensive test, and just try interrupting a cardiologist in the middle of a diagnostic catheterization to debate whether a stent is really needed. So insurers are turning to high deductible insurance policies in an effort to get patients to do the dirty work of limiting care. Unfortunately, the high deductibles mostly keep people away from inexpensive primary and preventive care, and do little to discourage high cost, useless procedures. Even one day in the hospital pushes most patients over their deductible, leaving them no further reason to economize.

As Milton Roemer (a distinguished health policy professor) once observed: “an empty hospital bed will soon be filled.” He probably would have added “an idle CT scanner will soon be in use,” but CTs hadn’t been invented yet. Once you build it, they will come – encouraged by their doctors – and costs will rise.

So what are the implications of all this for health reform? Not good. Almost everywhere you look, hospitals are building, and the new buildings won’t house psychiatrists or family doctors who devote their days to the routine, inexpensive care that has the biggest impact on health and wellness. They’re for big ticket items like surgery and imaging suites. Those buildings will soon be filled, driving health costs further skyward. And legislation encouraging prevention, or electronic medical records, or even banning drug company gifts won’t make a whit of difference (even though I favor all of these things).

What can help? Real health planning, which limits the supply of expensive gadgets and ORs. Paying doctors on salaries rather than as piece workers. And a ban on for-profit medicine. Unfortunately, all of these require far more radical reform than Chapter 58. They’re only feasible under a real national health insurance program.

Originally posted on WBUR’s blog.

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