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Maryland All-Payer Model to Deliver Better Care and Lower Costs

Centers for Medicare and Medicaid Services, January 10, 2014

On January 10, 2014, the Centers for Medicare & Medicaid Services (CMS) and the state of Maryland jointly announced a new initiative to modernize Maryland’s unique all-payer rate-setting system for hospital services that will improve patient health and reduce costs.

Maryland operates the nation’s only all-payer hospital rate regulation system.  This system is made possible, in part, by a 36 year old Medicare waiver (codified in Section 1814(b) of the Social Security Act) that exempts Maryland from the Inpatient Prospective Payment System (IPPS) and Outpatient Prospective Payment System (OPPS) and allows Maryland to set rates for these services.  Under the waiver, all third party purchasers pay the same rate.  The State of Maryland and CMS believe that the new model test announced today will provide an opportunity for Maryland to reform its delivery system to align with the goals of delivering better health, better care, and lower cost.  

Terms of the Model

Maryland’s all-payer rate setting system for hospital services presents an opportunity for Maryland and CMS to test a unique model that has the potential to inform CMS and other states.  This opportunity is available through the authority of the Innovation Center, which was created by the Affordable Care Act to test payment and service delivery models.

Under the terms of the Maryland All-Payer Model:

• Maryland will agree to permanently shift away from its current statutory waiver, which is based on Medicare payment per inpatient admission, in exchange for the new Innovation Center model based on Medicare per capita total hospital cost growth.  

• This model will require Maryland to generate $330 million in Medicare savings over a five year performance period, measured by comparing Maryland’s Medicare per capita total hospital cost growth to the national Medicare per capita total hospital cost growth.

• This model will require Maryland to limit its annual all-payer per capita total hospital cost growth to 3.58%, the 10-year compound annual growth rate in per capita gross state product.

• Maryland will shift virtually all of its hospital revenue over the five year performance period into global payment models, incentivizing hospitals to work in partnership with other providers to prevent unnecessary hospitalizations and readmissions.  

• Maryland will achieve a number of quality targets designed to promote better care, better health and lower costs.  Under the model, the quality of care for Maryland residents, including Medicare, Medicaid, and Children’s Health Insurance Program (CHIP) beneficiaries will improve as measured by hospital quality and population health measures.  

• If Maryland fails during the five-year performance period of the model, Maryland hospitals will transition over two years to the national Medicare payment systems.  

• Before the start of the fourth year of the model, Maryland will develop a proposal for a new model based on a Medicare total per capita cost of care test to begin no later than after the end of the five year performance period.

This model will test whether an all-payer system for hospital payment that is accountable for the total hospital cost of care on a per capita basis is an effective model for advancing better care, better health and reduced costs.  CMS expects that this model will be used to engage all Maryland hospitals, as well as other care providers, in payment reform and innovation.  

CMS and Maryland expect that the All-Payer Model will be successful in improving the quality of care and reducing program expenditures for Maryland residents, including Medicare, Medicaid, and CHIP beneficiaries.  Moreover, the Maryland system may serve as a model for other states interested in developing all-payer payment systems.

http://www.cms.gov/Newsroom/MediaReleaseDatabase/Fact-Sheets/2014-Fact-sheets-items/2014-01-10.html

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Guiding Principles for Implementation of Population­-Based and Patient Centered Payment Systems: A Report from the Advisory Council to the Maryland Health Services Cost Review Commission, January 31, 2014

The State of Maryland is leading a potentially transformative effort to lower health care spending in the State while at the same time improving access to care and quality of care. Stated in terms of the “Three Part Aim,” the goal is a health care system that enhances patient care, improves health outcomes, and lowers total costs.

To achieve this goal, the State of Maryland worked closely with the Centers for Medicare and Medicaid Services (CMS) throughout 2013 to craft an innovation plan that would make Maryland a national leader achieving the Three Part Aim and permit the federal government to continue to participate in the four‐decade long all‐payer system that has proven to be both successful and enduring. The federal government is anticipated to approve Maryland’s new Model Design application and implementation begins in January 2014.

Building on the Commission’s existing authority to regulate and set hospital rates across all payers including Medicare, the State is preparing to tie system‐wide hospital inpatient and outpatient payment to economic growth. Effectively, the State is instituting a plan to shift from payment based on inpatient hospital cost per admission to total hospital cost per capita. The ultimate goal is to tie total health care spending per capita to the per capita growth of the state’s economy. New health care delivery and payment models will be aligned with numerous existing initiatives to help meet the goals.

Advisory Council Recommendations

2.  Hospital Global Payment Models are the best strategy for the first phase of implementation.

The HSCRC anticipates that most hospitals will be operating under global payment models by early 2014. These models hold the most promise for meeting the revenue targets in the early years because they move away from incentives in fee‐for‐service payment that foster a greater volume of services and offer strong budget discipline. In addition, global payments provide clear and simple revenue targets with flexibility for hospitals to manage within these macro goals. In the long‐run, these models will need to evolve to ensure that the revenue in the system follows the patients.

(DISCLAIMER: This is a draft document for discussion purposes which has been prepared by consultants to the Advisory Council. The contents of this draft have not been reviewed or approved by Advisory Council members.)

Draft Report: http://www.hscrc.state.md.us/documents/md-maphs/ac-meet-2014-01-09/hscrc-advisory-council-initial-draft-report-2014-01-07.pdf

Maryland Health Services Cost Review Commission

All Payer Hospital System Modernization: Advisory Council: http://www.hscrc.state.md.us/hscrc-advisory-council.cfm

Overview of Proposed New All-Payer Model: http://www.hscrc.state.md.us/documents/md-maphs/ac-meet-2013-11-13/hscrc-overview-of-maryland-all-payer-model-proposal.pdf

Comment:

By Don McCanne, M.D.

The model for a single payer national health program, as proposed by Physicians for a National Health Program, includes placing hospitals on global budgets. Just as police and fire departments are funded by single, publicly-financed global budgets rather than being paid for each fire or crime intervention as they arise, hospitals would likewise be placed on single, publicly-financed global budgets that are adjusted based on some reasonable index of inflation. Not only does that cost less, partly by dramatically reducing administrative waste, it also improves quality by providing the hospital administration with the flexibility to improve the allocation patient care dollars, plus it slows health care inflation to a sustainable level.

Maryland is the only state that currently has an all-payer hospital rate regulation system. Under this system, all payers, including Medicare, Medicaid, CHIP, private insurers, and individuals pay the same rates for the same hospital services. This has reduced administrative complexity, made payment for hospital services more equitable, and has slowed the increases in hospital spending from one of the most expensive states down to average.

Since their all-payer system pays for services provided, incentives remain to increase volume of services. Under the new system just approved by CMS, payment will still be all-payer but will not be based on volume of services, but rather will be based on “the Medicare per capita total hospital cost growth.” In essence, that establishes “global budget” as a form of hospital financing in the United States, though it is limited to Maryland under the authority of the Innovation Center, which was created by the Affordable Care Act to test payment and service delivery models.

We certainly have many questions about the details that have not yet been revealed. It does fall short of hospital global budgets as envisioned by PNHP. For instance, this model still seems to pool funds from multiple public and private sources, whereas the PNHP model would use only public funds from a single pool funded by equitable taxes. That is a crucial difference since multiple sources leads to administrative complexity and inequities in funding.

In general though, it seems that we can celebrate this step towards a more equitable and just financing system. It won’t get us in the back door of single payer, but it will provide us with another talking point on policy – the fact that global budgets are an improvement but that we can make them even better when we mesh them in with a bona fide, comprehensive single payer system – an improved Medicare that covers everyone.

Emergency visits seen increasing with health law

By Sabrina Tavernise
The New York Times, January 2, 2014

Supporters of President Obama’s health care law had predicted that expanding insurance coverage for the poor would reduce costly emergency room visits because people would go to primary care doctors instead. But a rigorous new experiment in Oregon has raised questions about that assumption, finding that newly insured people actually went to the emergency room a good deal more often.

The study, published in the journal Science, compared thousands of low-income people in the Portland area who were randomly selected in a 2008 lottery to get Medicaid coverage with people who entered the lottery but remained uninsured. Those who gained coverage made 40 percent more visits to the emergency room than their uninsured counterparts during their first 18 months with insurance. …

In remarks in New Mexico in 2009, Mr. Obama said: “I think that it’s very important that we provide coverage for all people because if everybody’s got coverage, then they’re not going to the emergency room for treatment.” …

“I suspect that the finding will be surprising to many in the policy debate,” said Katherine Baicker, an economist at Harvard … and one of the authors of the study….

Comment:

By Kip Sullivan, JD

Last Friday the New York Times, the Wall Street Journal and other media outlets trumpeted the news that a recent study shows that low-income people newly insured through Medicaid use 40 percent more emergency room services than a control group of low-income people who remained uninsured. In a sane world, this finding would not have deserved any coverage, much less headlines on front pages. The conditions that would cause Medicaid enrollees to visit the ER more than the uninsured have been known for a long time, and it’s well known that some of these conditions have been getting worse. The conditions include:

•  the uninsured use roughly half as many health care services as the insured,

•  the uninsured are in worse health than the insured and have more unmet medical needs, and 

•  Medicaid enrollees have much more trouble finding primary care doctors and specialists who will take Medicaid than the privately insured.

Anyone familiar with these facts could have predicted that if the State of Oregon were to offer Medicaid coverage to 10,000 of its poor people those people would make more visits to emergency rooms than an uninsured control group. But the media’s fascination with this paper suggests the study’s results were indeed surprising to “many in the [health] policy debate,” as Ms. Baicker asserted.

How do we explain the surprise? I nominate the overuse myth – the conventional wisdom that the main reason America’s per capita health care costs are double those of the rest of the industrialized world is that doctors order, and patients demand, great volumes of unnecessary medical services. The overuse myth has led far too many policymakers on the left and the right to think that emergency rooms are vastly overused. Liberals like Obama use the myth to claim better coverage will reduce all that unnecessary ER use and free up money to insure the uninsured. Conservatives use the myth to decry more coverage. According to conservatives, better coverage will just encourage poor people to consume even more unnecessary care. As conservative blogger Avik Roy wrote on the Forbes blog about the new study, “Because Medicaid was nearly free to the program’s enrollees, those enrollees ended up seeking – and receiving – lots of inappropriate care.”

http://www.forbes.com/sites/theapothecary/2014/01/02/new-oregon-data-expanding-medicaid-increases-usage-of-emergency-rooms-undermining-central-rationale-for-obamacare/

In fact, researchers have determined (with the luxury of hindsight, it should be noted) that only 10 percent of Medicaid enrollees go to emergency rooms for non-urgent matters, which is close to the 7 percent rate seen in the privately insured http://www.hschange.com/CONTENT/1302/.

Like all sturdy myths, the overuse myth has a kernel of truth to it – some overuse of medical services does occur. But underuse is far more common than overuse, even among the insured, possibly four times worse according to a 2003 study by Elizabeth McGlynn et al. in the New England Journal of Medicine. Even for some expensive procedures like heart surgery underuse is far worse than overuse.

The media’s surprise at the new study’s finding and reporters’ and right-wing bloggers’ eagerness to report the political winners and losers of this story concealed the real problems, notably:

•  Because America sequesters its poor people in a separate program called Medicaid, it has never found the political will to pay the providers who care for poor people anywhere near as much as we pay providers for taking care of everyone else;

•  this policy has made it difficult for Medicaid recipients to find doctors;

•  this difficulty is further aggravated by the widespread use of managed care in Medicaid programs which forces recipients to pick doctors from “preferred” lists; and

•  Despite these facts, Oregon sought to increase coverage under Medicaid while doing little to increase the supply of primary care providers or the resources available to those who treat Medicaid enrollees.

In a sane world, we wouldn’t be debating whether a rich nation should be attempting to insure a minor portion of its uninsured through a separate and underfunded program for the poor. But if we must debate whether to do that, the least we can do is focus on the real issues, not promises of cost containment based on a false assumption, in this case, that overuse is our main problem and underuse, high prices and excessive administrative costs are nonexistent or trivial.

The truth is we are going to need to put more money into primary care in this country, and it will have to come from somewhere. Single-payer supporters propose that it come from reduced prices and reduced administrative waste. By clinging to their pet version of overuse, managed-care and high-deductible advocates dodge the issue. Managed care advocates claim that even within the underfunded world of Medicaid greater access to primary care can be paid for without harm to patients by reducing overuse via capitation, report cards, pay-for-performance, ACOs and other vaguely defined “changes to the delivery system.” High-deductible advocates claim consumption of medical services by poor people can be reduced without harm (because the foregone services weren’t necessary), and the savings can be directed to lower taxes or a lower deficit. Neither claim is credible.

Medical Debt among People with Health Insurance

By Karen Pollitz Cynthia Cox, Kevin Lucia and Katie Keith
Kaiser Family Foundation, January 2014

An estimated 1 in 3 Americans report having difficulty paying their medical bills – that is, they have had problems affording medical bills within the past year, or they are gradually paying past bills over time, or they have bills they can’t afford to pay at all. Medical debt – and a host of related problems – can result when people can’t afford to pay their medical bills. While the chances of falling into medical debt are greater for people who are uninsured, most people who experience difficulty paying medical bills have health insurance. Medical debt can arise when people must pay out-of-pocket for care not covered by health insurance or to which cost-sharing (such as deductibles) applies. Medical debt might also result from health insurance premiums that individuals find difficult to afford.  The consequences of medical debt can be severe. People with unaffordable medical bills report higher rates of other problems – including difficulty affording housing and other basic necessities, credit card debt, bankruptcy, and barriers accessing health care.

How does medical debt become a problem for people with health insurance?

 * In-network cost-sharing

    * Medical bills high relative to income and savings

    * Cost-sharing “multipliers”

       * Treatments spanning two plan years (doubles cost-sharing)

       * Family-level cost-sharing (2 family members doubles cost-sharing)

       * Cost-sharing for chronic conditions (cost-sharing restarts each year)

    * Extremely high cost-sharing (deductibles may not apply to OOP limits)

 * Out-of-network care

    * Fewer cost-sharing protections

    * “Inadvertent” out-of-network care

    * Balance billing (paying balances exceeding allowed charges)

 * Health plan coverage limits or exclusions

 * Unaffordable premiums

 * Other factors unrelated to insurance

    * Income loss due to illness

    * Challenges to effective self-advocacy (overwhelmed with bills, statements)

    * Medical debt collections

    * Credit card financing of medical debt

Consequences of medical debt

  * Damaged credit

  * Emotional distress

  * Economic deprivation

  * Depleted long term assets

  * Housing instability

  * Bankruptcy

  * Difficulty accessing care

ACA will not address all of the underlying causes of medical debt. For example:

  * High cost-sharing will persist under many plans

  * Limited protections for out-of-network care

  * Limits on essential health benefits standards

  * Lack of resources for consumer assistance

The ACA will provide health insurance to millions of Americans who are currently uninsured, which may also improve access to health care and lower their out-of-pocket expenses and exposure to medical debt. People who are insured will also see improvements in the protection that health coverage offers. However, in light of the limited assets many people have, the problem of medical debt is likely to persist and lead to continued debate over the tradeoffs inherent in providing more comprehensive coverage and limiting federal costs for premium and cost-sharing subsidies.

http://kaiserfamilyfoundation.files.wordpress.com/2014/01/8537-medical-debt-among-people-with-health-insurance.pdf

Comment:

By Don McCanne, M.D.

Medical debt is a horrendous problem, and it will still be with us after the Affordable Care Act is fully implemented. This important report from the Kaiser Family Foundation and Georgetown University explains the devastating effects of medical debt with special attention given to the role of cost-sharing that can create intolerable debt.

Why did the ACA legislation include such onerous cost-sharing measures? The answers have to do with ideology and federal budgeting.

Conservatives have long supported the principle that individuals must be responsible for their own lot. They define insurance as a product to protect only against catastrophic losses. They are opposed to comprehensive prepaid health care since they believe that individuals should use their own personal funds to negotiate the health care marketplace, making them empowered consumers. This concept has permeated the health policy literature in the United States to the extent that many progressives now also believe that patients have a responsibility to make a cash payment at the time they access health care in order to improve their health care shopping judgements. 

Many other nations provide first dollar coverage for health care services and yet are able to keep their total health care spending well below ours. This real life practical experience in these nations obviates the need for us to get into discussions of moral hazard, the RAND HIE, Pareto parity, selective definition of insurance, asymmetrical information, health savings accounts, and so forth when these concepts are used to obfuscate the real debate that is over pure ideology – having the freedom as an individual to interact in the health care marketplace versus collectively covering all of our essential health care costs in a system dependent on rigid government regulation (social insurance) or government ownership (socialized medicine). Both markets and government can control spending, but the former does so at a cost of depriving far too many people of health care that they should have, whereas the latter enables everyone to have the health care that they need.

When ACA was crafted, the highest priority was given to make sure that the impact of the legislation on the federal budget was balanced. On the spending side, the new plans to be offered in the insurance exchanges were designed so that the most popular plans would have a low actuarial value – 30 or 40 percent of the costs of health care would be paid by the patient. It was realized that many would not be able to pay either the full premiums or the full out-of-pocket costs of these low actuarial value plans, so income-indexed subsidies were included in the legislation, but clearly not enough. Low cost plans with inadequate subsidies worked for the federal budget, but it will not work for many patients, as today’s report shows us.

So a system designed to satisfy ideology and to comply with federal budget restraints is proving to be a system that will saddle far too many patients with intolerable medical debt, with its horrendous consequences, including impaired access to health care. It’s such a shame. An improved Medicare for everyone with first dollar coverage would have prevented all of this. (We can still do it, you know.)

National Health Spending In 2012: Rate Of Health Spending Growth Remained Low For The Fourth Consecutive Year

By Anne B. Martin, Micah Hartman, Lekha Whittle, Aaron Catlin, the National Health Expenditure Accounts Team
Health Affairs, January 2014

Abstract

For the fourth consecutive year, growth in health care spending remained low, increasing by 3.7 percent in 2012 to $2.8 trillion. At the same time, the share of the economy devoted to health fell slightly (from 17.3 percent to 17.2 percent) as the nominal gross domestic product (GDP) grew by 4.6 percent. Faster growth in hospital services and in physician and clinical services was mitigated by slower growth in prices for prescription drugs and nursing home services. Despite an uptick in enrollment growth, Medicare spending growth slowed slightly in 2012, mainly due to lower payment updates. For Medicaid, slowing enrollment growth kept spending growth near historic lows. Growth in private health insurance spending also remained near historically low rates in 2012, largely influenced by the nation’s modest economic recovery and its impact on enrollment.

Medicare

Medicare accounted for 20 percent of national health spending in 2012, with expenditures reaching $572.5 billion (Exhibit 1). Overall, Medicare spending growth slowed slightly, increasing by 4.8 percent in 2012 compared to 5.0 percent in 2011. Growth in fee-for-service expenditures, which accounted for nearly three-quarters of total Medicare spending, slowed from 4.3 percent in 2011 to 2.7 percent in 2012. Medicare Advantage spending accounted for the remainder, increasing 10.9 percent in 2012—a faster rate than in 2011, when growth was 7.0 percent.

Enrollment in Medicare for all beneficiaries (fee-for-service and Medicare Advantage) jumped 4.1 percent in 2012—the largest one-year increase in enrollment in thirty-nine years—and more than half of these enrollees joined Medicare Advantage. The noticeable increase in total Medicare enrollment reflected the oldest members of the baby-boom generation, who became eligible to enroll in Medicare in 2011.

Total Medicare spending per enrollee grew by 0.7 percent in 2012—slower than the 2.5 percent rate of growth in 2011. This slowdown was largely due to a prominent decline in spending for nursing home care, which declined by 2.2 percent in 2012 following an increase of 9.9 percent the year before. This in turn was driven primarily by a one-time payment reduction to skilled nursing facilities, which followed a large increase in payments in 2011 corresponding to the introduction of the new payment system. In 2012 this reduction was applied to skilled nursing facility rates to recalibrate payments for the newly implemented payment system.15

For Medicare fee-for-service, per enrollee spending growth decelerated from 2.7 percent in 2011 to 0.6 percent in 2012. In addition to the decline in skilled nursing facility spending, slower growth in fee-for-service spending was influenced by spending trends for prescription drugs, physician and clinical services, and hospital care. For beneficiaries with traditional fee-for-service Medicare, prescription drug spending growth slowed because of the increased use of popular lower-cost generic drugs. Slower growth in the volume and intensity of physician services and inpatient hospital admissions contributed to slower fee-for-service Medicare physician and hospital spending in 2012. Finally, for all Part A and most Part B providers, the ACA reduced payment updates in 2012, most notably for hospitals.

The acceleration in Medicare Advantage spending growth in 2012 was driven by a 10.0 percent increase in enrollment. On a per enrollee basis, however, Medicare Advantage spending growth slowed to 0.8 percent in 2012 (from 1.6 percent growth in 2011), partially as a result of the implementation of the ACA’s new payment mechanism. That mechanism links benchmark payment rates to fee-for-service costs, and its implementation effectively lowered the increase in total Medicare Advantage payments. In addition, the ACA required quality ratings of plans to factor into payments beginning in 2012.

Conclusion

In 2012 the economy continued to modestly improve, and GDP grew faster than health care spending, causing the health spending share of the economy to fall slightly—from 17.3 percent to 17.2 percent. Spending growth for personal health care goods and services accelerated in 2012 as trends for hospital services and physician and clinical services more than offset one-time impacts that helped decelerate growth, such as numerous patent expirations for brand-name retail prescription drugs and a Medicare payment reduction for skilled nursing facilities. From a payer perspective, Medicaid spending growth accelerated somewhat in 2012 after experiencing low growth in 2011, while Medicare and private health insurance spending growth slowed slightly. These mixed trends produced the fourth consecutive year of low overall health spending growth and led to a relatively stable health spending share of GDP. However, this pattern is consistent with historical experience when health spending as a share of GDP often stabilizes approximately two to three years after the end of a recession and then increases when the economy significantly improves. Recently, however, the question has arisen about whether a more fundamental change is occurring within the health sector and whether this stability will endure. From our perspective, more historical evidence is needed before concluding that we have observed a structural break in the historical relationship between the health sector and the overall economy.

http://content.healthaffairs.org/content/33/1/67.abstract

Comment:

By Don McCanne, M.D.

With the release of this annual report on health care spending in the United States, many are celebrating the fourth consecutive year of a slow down in spending increases, with some even suggesting that this is a new permanent trend due in a large part to the implementation of the Affordable Care Act (ACA). However, according to this report, ACA “had a minimal impact on overall national health spending growth through 2012.”

The reasons for increases in spending are complex and change from year to year. The excerpt on Medicare, selected above, demonstrates some of these variabilities. Spending in Medicare is important to understand since it is often held up as a program that could serve us all well as a single payer national health program. However, under our fragmented system of financing health care, it is difficult to use the current Medicare data to predict what spending might be under an Improved Medicare for All program, particularly with the split in Medicare between the traditional fee-for-service program and the private Medicare Advantage plans, but also because Medicare has little control over most of our health care spending. It is even more difficult to predict total future health spending for the entire nation with our current administratively complex, fragmented financing system.

If we had a unified single payer system, we could look at the variables that really count when we try to predict future spending. These include elements such as demographics, inflation, prices, legitimate costs, access, new technology, elimination of ineffectual technology, and the health of the economy. When you look at this list, it cries out for adopting public policies that would ensure future value in our health care spending. Many of these policies would be extremely difficult if not impossible to implement under our current financing system. That is perhaps the most important reason for replacing our dysfunctional system with a single payer national health program – an improved Medicare that covers everyone.

Top Health Stories of 2013

By Nancy Snyderman, M.D., NBC’s chief medical editor
Morning Joe, MSNBC, December 30, 2013

Dr. Nancy Snyderman:  I think there should be a single payer system. And increasingly you’re seeing physicians in their late 50s, 60s and 70s who are saying, you know what, we got it wrong; we should have taken Medicare, expanded it and done it smarter.

http://www.msnbc.com/morning-joe

YouTube clip of segment: http://www.youtube.com/watch?v=x0giveiH1Zc

Comment:

By Don McCanne, M.D.

The endorsement of single payer by NBC’s chief medical editor, Dr. Nancy Snyderman, is a welcome addition to the many voices of those who have long understood the superiority of the single payer/improved Medicare for all model of reform but who now believe that it is finally time to speak out in support of it.

It is interesting that this video clip of Dr. Snyderman has been circulated widely on conservative blogs. We are hearing “single payer” from the conservatives so frequently now that it’s almost as if they are trying make the term a pejorative much as Reagan, Thatcher and others did with the term “socialism.” Another example just this weekend was on Fox News – six minutes of meaningless jabber, with the exception of one token, fair and balanced panelist who supports single payer:

http://video.foxnews.com/v/3009813083001/new-push-for-single-payer-health-care-in-america/?playlist_id=928378949001

Medicaid Increases Emergency-Department Use: Evidence from Oregon’s Health Insurance Experiment

By Sarah L. Taubman, Heidi L. Allen, Bill J. Wright, Katherine Baicker, Amy N. Finkelstein

Science, Published Online January 2, 2014

Abstract

In 2008, Oregon initiated a limited expansion of a Medicaid program for uninsured, low-income adults, drawing names from a waiting list by lottery. This lottery created a rare opportunity to study the effects of Medicaid coverage using a randomized controlled design. Using the randomization provided by the lottery and emergency-department records from Portland-area hospitals, we study the emergency-department use of about 25,000 lottery participants over approximately 18 months after the lottery. We find that Medicaid coverage significantly increases overall emergency use by 0.41 visits per person, or 40 percent relative to an average of 1.02 visits per person in the control group. We find increases in emergency-department visits across a broad range of types of visits, conditions, and subgroups, including increases in visits for conditions that may be most readily treatable in primary care settings.

From the Discussion

These findings speak to one cost of expanding Medicaid, as well as its net effect on the efficiency of care delivered, and may thus be a useful input for informed decision-making balancing the costs and benefits of expanding Medicaid.

http://www.sciencemag.org/content/early/2014/01/02/science.1246183

How Obamacare will change the emergency room

By Dan Gorenstein

Marketplace, January 2, 2014

And the report already has pundits worked up, especially with 9 million Americans projected to newly sign up for Medicaid this year under the Affordable Care Act.

The reason this is so hot – at least politically – is because the report over turns conventional healthcare thinking. Harvard health economist Amitabh Chandra describes the theory.

“If we insure the uninsured, they are not going to use the emergency room and they are going to use less healthcare. So in the long run, insuring the uninsured saves us money,” says Chandra.

Affordable Care Act advocates have used this argument to say insurance should be expanded.

There’s just one thing: that’s not what happens.

“Its basic economics that I would teach my students,” says MIT economist Amy Finkelstein – one of the report’s authors.

“When you lower the price of something, people buy more of it,” says Finkelstein. “That’s true of apples and bananas and it turns out it’s true of healthcare too.”

Co-author Katherine Baicker says… “That doesn’t mean that it’s inefficient, good or bad. It just means that insurance makes healthcare more affordable, and that has both financial consequences and health consequences.”

Perhaps most important, Harvard’s Amitabh Chandra says when it comes to money, this isn’t where the action is.

“The spending is not in the emergency room. The spending is on high cost patients. These are cancer patients. Many of them in the end of life,” he says.

Chandra says it would be easy to use this report and argue that the Affordable Care Act is too costly.

He says the big question – the tough question – is how to limit the care everyone agrees is inefficient and expensive, regardless of who gets it or where that care is received.

http://www.marketplace.org/topics/health-care/how-obamacare-will-change-emergency-room

New Oregon Data: Expanding Medicaid Increases Usage Of Emergency Rooms, Undermining Central Rationale For Obamacare

By Avik Roy

Forbes, January 2, 2014

(The authors) found that those on Medicaid used the emergency room 40 percent more than the uninsured did—1.43 ER visits per Medicaid enrollee, as against 1.02 for the uninsured. More to the point, a majority of the emergency room visits were unnecessary, because they involved conditions that could easily have been managed outside of the ER.

Because Medicaid was nearly free to the program’s enrollees, those enrollees ended up seeking—and receiving—lots of inappropriate care. That led to massive cost overruns that, even today, are bankrupting state governments. The one thing they have been able to do is pay doctors and hospitals less and less to provide the same care.

That trend, in turn, has led many doctors to stop accepting new Medicaid patients. So it’s extremely difficult for Medicaid enrollees to get appointments with primary care physicians. They have to spend weeks on the phone to find someone who will treat them.

Put yourself in the shoes of that Medicaid enrollee. Why would you bother calling primary care docs all day and all week, if you can go to the emergency room and get the same care for the same price? So that’s what Medicaid patients do.

Many hospitals say that they lose money on every Medicaid patient they see. But somehow, if we have more Medicaid patients, taxpayers will be better off?

It was bunk in 2009, and it’s bunk today. It’s why the states that have chosen to forego Obamacare’s Medicaid expansion were wise to do so

http://www.forbes.com/sites/theapothecary/2014/01/02/new-oregon-data-expanding-medicaid-increases-usage-of-emergency-rooms-undermining-central-rationale-for-obamacare/

National Study of Health Insurance Type and Reasons for Emergency Department Use

By Roberta Capp MD, MHS, Sean P. Rooks BA, Jennifer L. Wiler MD, MBA, Richard D. Zane MD, Adit A. Ginde MD, MPH

Journal of General Internal Medicine, December 2013

Objective

We evaluated the association between health insurance type and self-perceived acuity or access issues among individuals discharged from the ED.

Key Results

Overall, 65.0 % of adults reported ≥ 1 acuity issue and 78.9 % reported ≥ 1 access issue. Among those who reported no acuity issue leading to the most recent ED visit, 84.2 % reported ≥ 1 access issue. Relative to those with private insurance, adults with Medicaid (OR 1.05) and those with Medicare (OR 0.98) were similarly likely to seek ED care due to an acuity issue. Adults with Medicaid (OR 1.50) and Medicaid + Medicare (dual eligible) (OR 1.94) were more likely than those with private insurance to seek ED care for access issues.

Conclusion

Variability in reasons for seeking ED care among discharged patients by health insurance type may be driven more by lack of access to alternate care, rather than by differences in patient-perceived acuity. Policymakers should focus on increasing access to alternate sites of care, particularly for Medicaid beneficiaries, as well as strategies to increase care coordination that involve ED patients and providers.

http://link.springer.com/article/10.1007/s11606-013-2734-4

Comment:

By Don McCanne, M.D.

There has been extensive media coverage of this new study which confirms that uninsured individuals who become covered under the Medicaid program will increase their use of Emergency Department (ED) services. Is this good or bad? Conservative physician/columnist Avik Roy writes, “It’s why the states that have chosen to forego Obamacare’s Medicaid expansion were wise to do so.” Really? Let’s try to make some sense of this.

Medicaid patients have learned that access to care is impaired because far too many physicians refuse to accept patients who are on this program. Patients have also learned that they will be seen when they present themselves to the ED, and that they won’t have to pay for the care because of their Medicaid coverage. Even Avik Roy concedes that.

The study by Roberta Capp et al shows that all patients, including Medicaid patients, who perceive the acuity of their condition to warrant ED services will go to the ED for care. Yet Medicaid patients who have impaired access will also use the ED simply because of the access issues. This applies as well to dual eligible patients who have both Medicare and Medicaid, indicating that Medicare patients stigmatized with Medicaid will also have impaired access, except in the ED.

Clearly, the problem is with inadequate access to primary care within the community, largely because of the refusal of too many physicians to accept Medicaid as a payment source.

What does this greater use of EDs do to health care costs? Harvard’s Amitabh Chandra says, “The spending is not in the emergency room. The spending is on high cost patients.” Although many state that ED costs are too high to warrant providing ED care for these patients that should have been served by primary care professionals within the community, in fact it is only the ED prices that are high, and Medicaid doesn’t pay those high prices anyway. The actual marginal costs for taking care of these low acuity patients are almost negligible.

There are some obvious solutions to this problem. The most important is to establish a single payer system so that patients are not sorted out by their payment source. Along with that it is crucial to reinforce the primary care infrastructure so that access is always available. For night and weekend hours, the ED could serve a triage function with primary care services being provided as a community service. If that would overload the ED staff, the community physicians could rotate weekend and night call to back up the ED staff for these lower acuity problems. Also, free standing 24 hour clinics could be established, though in most communities a triage function in the ED would be more appropriate.

What we don’t need is more blaming the victims – condemning Medicaid patients who “overuse” EDs, when they are simply trying to access care that they should have. We also need physicians with a heart, but, unfortunately, medical schools don’t seem to include that requirement amongst their admissions criteria.