Scott Walker and the Third Way

Scott Walker and the Third Way
February 18, 2013

Benjamin Domenech

Benjamin Domenech (bdomenech@heartland.org) is a senior fellow at The Heartland Institute. Domenech... (read full bio)

Consumer Power Report #361

For governors who can’t just say no to the Medicaid expansion for political reasons, Wisconsin Gov. Scott Walker’s stance is going to be the guide: expansion into the exchanges, not the Medicaid program.

Governor Scott Walker (R-Wisconsin) announced Wednesday that Wisconsin will not accept federal funding under the Affordable Care Act to expand the state’s Medicaid program. … According to the Kaiser Family Foundation study, if the program is expanded as proposed under Obamacare, it could cost Wisconsin up to $725 million. The federal government is currently $16 trillion dollars in debt.

Gov. Walker announced in the same speech a proposed expansion of the current state medical assistance program and changes in the eligibility requirements for some currently enrolled in the program. According to Governor’s office, the proposal will “reduce the number of uninsured individuals in the state by nearly 50 percent with the number of uninsured adults ages 19-64 to be reduced by 224,580.”

Here are Walker’s PowerPoint slides from his presentation. Now, this won’t work as well for states that have less-generous Medicaid programs than Wisconsin (nearly all states have more limited programs than BadgerCare), but it’s a much better solution than the alternative: forcing more people into a costly system with poor health outcomes. Avik Roy says it should be the model for the nation.

Walker’s plan would walk back the eligibility requirements for BadgerCare back to 100 percent of FPL for adults, while keeping the program unchanged for children, the disabled, and the elderly. While the Obama administration would strongly prefer that states fully expand their Medicaid programs up to 138 percent of FPL, Health and Human Services Secretary Kathleen Sebelius has stated that “we will consider waivers at the regular matching rate” for those who seek a different route. In other words, Washington will fully fund a Medicaid expansion up to 138 percent--for now--but will fund it at a lower rate, of around 58 percent, for states that do something else.

The Walker administration understood this to be a good trade. “82,000 adults will become eligible [for Medicaid] because we are lifting the [enrollment] cap,” explains Wisconsin health secretary Dennis Smith. “There are 87,000 adults currently on the program with income above 100 percent of FPL. So those individuals will [now] seek coverage through the exchanges, [and] there will be a net reduction--in our estimates--of 5,000 adults on Medicaid.”

Indeed, by Smith’s count, the Walker plan will expand coverage by 224,520 individuals, compared to 252,678 by doing things the Obama administration’s way. That should help insulate the plan from the kind of left-wing criticism that focuses on the number of people with or without coverage, instead of the quality of coverage that individuals receive.

There’s an interesting dynamic here. When the left complains that Walker is letting more people access subsidies to buy private insurance as opposed to being forced onto Medicaid, which is mandatory if you’re eligible for it under Obamacare, they are complaining about the governor finding a way to get more people coverage without cramming them into a program that is already stressed and overburdened.

You’d think they’d be happy that more people are getting coverage, no matter how they get it! But this is a tacit admission that the real aim of the Medicaid expansion was to dramatically increase the entitlement state, shifting the cost burden over time to the states. Other states should learn from Wisconsin’s lesson and see the Medicaid expansion for what it is: a lure designed to make the state expand their programs, then leave them holding the bag.

-- Benjamin Domenech


IN THIS ISSUE:


STATES PREPARE FOR RATE SHOCK

Get ready: here it comes.

Higher premiums could undermine a core promise of the Affordable Care Act: to make basic health protections available to all Americans for the first time. Major rate increases also threaten to cause a backlash just as the law is supposed to deliver many key benefits Obama promised when he signed it in 2010.

“The single biggest issue we face now is affordability,” said Jill Zorn, senior program officer at the Universal Health Care Foundation of Connecticut, a consumer advocacy group that championed the new law.

Administration officials have consistently downplayed the specter of rate increases and other disruptions as millions of Americans move into overhauled insurance markets in 2014. They cite provisions in the law that they say will hold down premiums, including new competitive markets they believe will make insurers offer competitive rates.

Exactly how high the premiums may go won’t be known until later this year. But already, officials in states that support the law have sounded warnings that some people -- mostly those who are young and do not receive coverage through their work -- may see considerably higher prices than expected.

That is because of new requirements in the law aimed at making insurance more comprehensive and more affordable for older, sicker consumers.

Insurance regulators in California, which has enthusiastically embraced the law, cautioned the Obama administration in a recent letter about “rate and market disruption.”

Oregon’s insurance commissioner, another supporter of the law, said new regulations could push up premiums for young customers by as much as 30% next year. He urged administration officials to slow enactment of the new rules.

A leading advocate for consumers in their 20s, Young Invincibles, sounded a similar caution, suggesting in a letter to administration officials that additional steps may be needed to protect young people from rising premiums. Young Invincibles mobilized in 2010 to help pass the healthcare law.

And regulators in Massachusetts, which was the model for Obama’s law, recently warned that although many residents and small businesses in the state “will see premium decreases next year, a significant number will see extreme premium increases.”

SOURCE: Los Angeles Times


IF OBAMACARE FAILS, BLAME THE BUREAUCRATS

It’s what Hill Democrats are prepared to do:

Democrats who supported President Obama’s healthcare law grilled a top Health and Human Services official Thursday over what they see as holes in the implementation effort and the White House’s political bargaining.

Gary Cohen, the director of the HHS office overseeing the bulk of the healthcare law’s implementation, fielded tough questions from several Democrats.

Sen. Bill Nelson (D-Fla.) hammered HHS for inviting Congress to cut funding for a new nonprofit insurance model. Funding for healthcare co-ops was eliminated in the year-end tax deal, and Nelson said officials offered up the program as a place Congress could cut.

“Why was that negotiated away at the 11th hour?” Nelson asked.

Cohen didn’t have an answer.

Nelson noted that the co-ops funding was axed while applications for new co-ops were still in the pipeline. HHS had already approved a few of them.

“I want somebody to be accountable for this, and if it was a mistake, for somebody to own up to it,” Nelson said.

Cohen also took hits from Sen. Maria Cantwell (D-Wash.), who criticized the administration for delaying implementation of the Basic Health Program -- an option for states to provide cost-efficient health coverage outside of Medicaid and the law’s new insurance exchanges.

HHS has said it will not have the Basic Health Program ready until 2015 -- a year behind schedule. State officials have balked, and Cantwell echoed their criticisms Thursday during the Senate Finance Committee hearing on the status of the implementation effort.

“We’re very concerned about the approach by the agency in trying to thwart this effort,” she said. “Are you artificially raising the cost to all taxpayers by trying to lure them onto the exchange?”

Here are four reasons Hill Democrats are nervous about the law’s implementation.

SOURCE: The Hill


NEW YORK’S MEDICAID SYSTEM IS FRAUGHT WITH PROBLEMS

Time for a full audit of a fraud-ridden system:

In a bipartisan vote, the U.S. House of Representatives Oversight and Government Reform Committee on Thursday adopted a report that slams waste and inefficiency in New York’s $54 billion Medicaid program and calls for an independent audit.

The report, called Billions of Federal Tax Dollars Misspent on New York’s Medicaid Program, was accepted by all but Rep. Carolyn Maloney of New York, who talked about Gov. Andrew Cuomo deserving credit for taking steps to improve the situation.

“The report details some of the historic problems with New York State’s Medicaid program as revealed by independent investigators, news organizations, and the Committee’s own research. The report shows that fraud, waste, abuse, and mismanagement has been a large problem in New York’s Medicaid program for decades,” the committee said about its work.

To save taxpayers billions of dollars a year, it recommends:

-Stop overpayments and recover an appropriate share of the overpayments for taxpayers. The report questions the effectiveness of the Medicaid Inspector General’s work.

-Ensure accurate accounting in correcting misspending. “New York State has submitted several waiver applications to CMS that relate to the financing of its Medicaid program. The Medicaid Redesign Team (MRT) Waiver Amendment asks CMS to allow New York to keep $10 billion of the anticipated federal savings from the waiver. … Before considering the merits of these waivers, CMS and the State must come to an agreement to reduce the State’s developmental centers to a rate of about one-fifth of their current levels, as CMS indicated was its intention at the September 20, 2012 hearing before the Subcommittee on Health Care, District of Columbia, Census and National Archives.”

-Complete an independent audit of New York’s Medicaid program.

-Only individuals who meet the legal eligibility thresholds should be enrolled in New York’s Personal Care Services Program and aggressively pursue estate recovery against those who abuse Medicaid eligibility rules.

-New York’s Legislature should codify Gov. Cuomo’s executive order that limits compensation of executives at organizations that are funded almost entirely by Medicaid.

The Oversight Committee report is here.

SOURCE: Capitol Confidential


THE CHALLENGE: LURING PRIMARY CARE DOCS INTO MEDICAID

It doesn’t require a crystal ball for doctors to see the raw deal:

The authors of the Affordable Care Act foresaw that there would be a growing shortage of primary care doctors for Medicaid when expansion occurs January 1st, 2014. That’s why the law includes a provision that raises the Medicaid fees paid to doctors practicing primary care medicine to the same levels Medicare pays for those services. The Medicare-Medicaid match went into effect January 1st and will remain in effect for two years. Best of all from the states’ point of view, in most cases the federal government will bear the entire cost of that increase. (Most other Medicaid costs involve both state and federal contributions.)

As a result of the provision, Medicaid physician fees for primary care services have climbed an average of 73 percent, according to a report prepared for the Kaiser Family Foundation by the Urban Institute. It is the biggest fee increase in the history of Medicaid.

But whether the pay raise will accomplish what its champions intended is hardly a given. One drawback is its sunset provision in two years. No one knows what will happen at that point. Will states be willing to contribute to the higher pay rates after two years? Will the federal government extend the pay raise?

Maybe not, says Matt Salo, executive director of the National Association of Medicaid Directors. “[The federal government is] going into deficit reduction mode now,” he says. “They’re not going to want to do increased spending.”

So, there is the possibility that in 2015, the primary care rates might drop to the levels that prevailed in past years, and that could affect whether doctors decide to take on new Medicaid patients in the interim. Why increase the number of Medicaid patients in your practice when you suspect your compensation for their care will plunge in 2015?

“If I choose to increase the number of Medicaid patients, and two years down the road that payment drops back to two-thirds, all of a sudden I’m going to have an awful lot of trouble keeping my doors open,” says Reid Blackwelder, a Tennessee family practitioner and incoming president of the American Academy of Family Physicians. That group supported the increased fee provision and is now lobbying to make it permanent.

SOURCE: Stateline


CAPPING PRESCRIPTION DRUG PROFITS?

Another rule incoming:

An Affordable Care Act-initiated rule striking at the heart of some health insurers’ profit margins has landed at the White House for review. The provision involves medical ratio loss requirements -- insurer-speak for the amount of money healthcare plans must devote to medical expenses versus what they can take for overhead costs and profit.

Drafted by the Department of Health and Human Services (HHS), the proposed rule covering Medicare Advantage plans and prescription drug benefit programs was submitted Thursday to the White House’s Office of Information and Regulatory Affairs (OIRA).

The proposed regulation is considered economically significant in that it would carry an economic impact of more than $100 million. The measure’s actual cost will depend on its details.

“It’s being anxiously awaited,” said Bobby Guy, a Nashville-based lawyer specializing in healthcare.

Since 2011, general health insurers have been required by the landmark healthcare law to spend either 80 percent or 85 percent of their revenue on medical expenses, depending on their size. The proposed rule will extend that to the prescription drug programs and Medicare Advantage, which will have to cap its overhead and profits at 15 percent beginning next January.

SOURCE: The Hill


DON’T EXPECT MUCH FROM ACOs

Lowered expectations:

Spurred by the Affordable Care Act, hundreds of pilot programs called Accountable Care Organizations have been launched over the past year, affecting tens of millions on Medicare and many who have commercial health insurance …

We believe that many of them will not succeed. The ACO concept is based on assumptions about personal and economic behavior--by doctors, patients and others--that aren’t realistic. Health-care providers are spending hundreds of millions of dollars to build the technology and infrastructure necessary to establish ACOs. But the country isn’t likely to get the improvements in cost, quality and access that it so desperately needs.

The first untenable assumption is that ACOs can be successful without major changes in doctors’ behavior. Many proponents of ACOs believe that doctors automatically will begin to provide care different from what they have offered in the past. Doctors are expected to adopt new behavior that reduces the cost of care while retaining the ability to do what’s medically appropriate. But the behavior of doctors today has been shaped by decades of complicated interdependencies with other medical practices, hospitals and insurance plans. Such a profound behavior shift would likely require re-education and training, and even then the result would be uncertain.

To give one example, if ACOs are to achieve their cost-saving goals and improve medical care, most doctors will need to change some of their approaches to treating patients. They’ll need to employ evidence-based protocols more often to determine optimal treatment--for instance, in prescribing medication or deciding whether certain kinds of surgery are necessary. Doctors will also have to find ways to move some care to lower-cost sites of service, such as more surgery in ambulatory clinics instead of a hospital. ACOs aren’t designed or equipped to transform physician behaviors on the scale that will be needed.

The second mistaken assumption is that ACOs can succeed without changing patient behavior. In reality, quality-of-care improvements are possible only with increased patient engagement. Managed care, as formulated in the 1990s by the HMO model, left consumers with a bad taste because the HMOs acted as visible gatekeepers to patient access to care. ACOs, seemingly wary of stirring a similar backlash, allow Medicare patients to obtain care anywhere they choose, but there is no preferential pricing, discounting or other way for ACOs to steer patients to the most effective providers.

SOURCE: Wall Street Journal

Benjamin Domenech

Benjamin Domenech (bdomenech@heartland.org) is a senior fellow at The Heartland Institute. Domenech... (read full bio)