#278: Expanding the Medicaid Ghetto

Published June 27, 2011

The AP’s report this week of a “glitch” in PPACA that would allow millions of members of the middle class to jump onto Medicaid is enough to rouse the frustrated objections of Medicare chief actuary Richard Foster:

After initially downplaying any concern, the Obama administration said late Tuesday it would look for a fix.

Up to 3 million more people could qualify for Medicaid in 2014 as a result of the anomaly. That’s because, in a major change from today, most of their Social Security benefits would no longer be counted as income for determining eligibility. It might be compared to allowing middle-class people to qualify for food stamps.

Medicare chief actuary Richard Foster says the situation keeps him up at night.

“I don’t generally comment on the pros or cons of policy, but that just doesn’t make sense,” Foster said during a question-and-answer session at a recent professional society meeting.

“This is a situation that got no attention at all,” added Foster. “And even now, as I raise the issue with various policymakers, people are not rushing to say … we need to do something about this.”

The one hard and fast rule in entitlement policy is this: People go where the money is. If there’s money to be had, someone will put together an industry to train Americans how to get it. According to the actuary’s office, under the scenario in question, a married couple retiring at age 62 in 2014 who “receives the maximum Social Security benefit of $23,500 apiece could get $17,000 from other sources and still qualify for Medicaid with a total income of $64,000.” The upshot: Another 5 million or so people who can jump onboard Medicaid and take advantage of its long-term care benefits.

The real question is what this new population will do to the cost picture. Dan Mitchell of Cato has a solid video here detailing the fiscal case for Medicaid reform, but math may be too hard for the folks at HHS to comprehend–given stories like this, it seems Washington is continuing to shift Medicaid policy in the direction of covering more people for less money, an idea that’s about as feasible as a car that runs on unicorn dung.

Yet 41 Democrat senators stood up to be counted earlier this month, demanding President Barack Obama block any attempts to reform this unsustainable program. They proposed no alternate solution for the program, nor did they outline any feasible alternative plan toward sustainability. Under their approach, Medicaid’s outcomes will continue to worsen, the program will bankrupt budgets, and more and more people will be trapped in the Medicaid ghetto.

Politics is about the application of power and pain. Unless these recalcitrant politicians are compelled by outrage from the people or the hard truth about costs, they are unlikely to change their minds.

— Benjamin Domenech



The New York Times reports on HHS skepticism regarding the increasing access problems for those covered by Medicaid and CHIP, and Medicare to some degree–and their intention to conduct a study of their own on the matter:

Alarmed by a shortage of primary care doctors, Obama administration officials are recruiting a team of “mystery shoppers” to pose as patients, call doctors’ offices and request appointments to see how difficult it is for people to get care when they need it.

The administration says the survey will address a “critical public policy problem”: the increasing shortage of primary care doctors, including specialists in internal medicine and family practice. It will also try to discover whether doctors are accepting patients with private insurance while turning away those in government health programs that pay lower reimbursement rates.

Federal officials predict that more than 30 million Americans will gain coverage under the health care law passed last year. “These newly insured Americans will need to seek out new primary care physicians, further exacerbating the already growing problem” of a shortage of such physicians in the United States, the Department of Health and Human Services said in a description of the project prepared for the White House.

Plans for the survey have riled many doctors because the secret shoppers will not identify themselves as working for the government.

“I don’t like the idea of the government snooping,” said Dr. Raymond Scalettar, an internist in Washington. “It’s a pernicious practice–Big Brother tactics, which should be opposed.”

According to government documents obtained from Obama administration officials, the mystery shoppers will call medical practices and ask if doctors are accepting new patients and, if so, how long the wait would be. The government is eager to know whether doctors give different answers to callers depending on whether they have public insurance, like Medicaid, or private insurance, like Blue Cross and Blue Shield.

Of course, we already have studies from the Journal of the American Medical Association and the New England Journal of Medicine from academic researchers illustrating this problem. We’ll have to see how the Obama administration tries to put its spin on things.

SOURCE: The New York Times


The Wall Street Journal reports on the $300 Billion “dual eligibles” problem:

As the U.S. wrestles with rising health expenses, one group of patients stands out for government-paid care that is both ultra-costly and plagued with problems.

They are the people who receive both Medicare, the program for those 65 and older or disabled, and Medicaid, the one for the poor. Statistics on these 9.7 million “dual eligibles” are stark.

They account for 16% of Medicare’s enrollees, but 27% of its spending. And they make up 15% of Medicaid’s enrollment, but 39% of Medicaid spending, according to the Centers for Medicare and Medicaid Services.

Chronic diseases and heavy use of nursing homes in this older population account for much of its outsize cost. But these aren’t the whole story. How the bills are split between the two payers causes the federal government and the states, who share in the cost of Medicaid, to mismanage care and waste money on inefficient treatment, federal officials and health-care professionals say.

While it is impossible to quantify how much of the cost of dual eligibles’ care reflects this imperfect coordination between Medicare and Medicaid, the effect is significant, according to the consensus of many who have studied the issue.

SOURCE: The Wall Street Journal


The Hill reports on what’s becoming a sustained bipartisan chorus united against IPAB:

All told, some 270 stakeholder groups signed a letter to members of Congress urging them to repeal the Independent Payment Advisory Board. The IPAB is a panel of experts, appointed by the president, that will have the power to cut Medicare payments.

The organizations represent doctors, other healthcare providers, employers, drug and medical device manufacturers and some disease-specific advocates–in short, a robust cross-section of the groups that stand to lose as a new and powerful body looks for Medicare savings.

“While we all recognize the need for more sustainable healthcare costs, we do not believe the IPAB is the way to, or will, accomplish this goal,” the organizations wrote.

Although the IPAB will technically only produce recommendations, those recommendations take effect automatically unless Congress votes to block them–and comes up with equivalent savings elsewhere in the budget.

“We believe that the IPAB sets a dangerous precedent for overriding the normal legislative process,” the opponents wrote. “Congress is a representative body that has a duty to legislate on issues of public policy. Abdicating this responsibility to an unelected and unaccountable board removes our elected officials from the decision-making process for a program that millions of our nation’s seniors and disabled individuals rely upon.”

For more, here’s Dick Gephardt’s column at the Huffington Post.

SOURCE: The Hill


Michael Mandel of the Progressive Policy Institute writes on how the FDA’s structure impedes innovation:

A device such as MelaFind, if approved, could be a very useful tool, since melanoma is easy and cheap to treat when caught early, and expensive and difficult to treat if detection is delayed. MelaFind would provide an immediate second opinion for dermatologists, and a dermatologist working long hours in an inner city or rural clinic could use MelaFind’s expert system to provide consistent advice. This availability of this tool is especially important as cost pressures force doctors to spend less time with each patient.

In order to get approval, Mela Sciences, the company that created MelaFind, did a multi-year study of the accuracy of the device compared to a panel of dermatologists. The company claims that it passed the test that the FDA had agreed to. Indeed, on some dimensions of the study the device did better than the panel of dermatologists.

Nevertheless, the FDA staff deemed the device “not approvable,” saying that MelaFind “puts the health of the public at risk.” Despite the strong negative response from the FDA, the company requested that the device be assessed by a panel of dermatologists, statisticians, and other medical experts. The advisory panel met in November 2010 and voted narrowly to recommend approving MelaFind.

Nevertheless, the FDA has not yet approved the device.

Paul Howard has more on the lessons to take from this incident.

SOURCE: Progressive Policy Institute


I spoke in a recent podcast about the ludicrous nature of the Medicaid system. An excerpt:

Jackson: Let’s move on to Medicaid. There are a few things to talk about, but I want to start with something that Avik Roy had in Forbes, “The New England Journal of Medicine found that two-thirds of Medicaid children were denied a doctor’s appointment versus 11% who were privately insured.” The Medicaid quote also includes people on, kids on CHIP. I want to relay a personal story on this. My dad is a pediatric cardiologist and he always notes that in the pediatric field that these doctors often talk about how awful Medicaid is at paying them the cost of the children actually visiting and getting all these treatments. So, this number actually doesn’t surprise me. I guess the level of the number, the 66% is a little surprising to me, but the fact that there is a big disparity is not.

But Ben, this has to lead to a lot of just poor health care services for these kids.

Domenech: You know, what your father is telling you is, of course, completely true. And I guess the question that I ask, you know, for any listener who is trying to understand this problem is imagine somebody comes to you and says, here’s what’s going to happen. I’m going to give you a client list and that client list is going to consist of people for whom I am going to pay. I’m only going to pay you a third at most of what you make servicing other clients. And it’s going to take forever for me to pay you, and you’re going to have to fill out a lot of forms, and you’re going to have to put up with a ridiculously difficult client community in order to receive this money. Would you like to participate?

Jackson: Absolutely not.

Domenech: And I think that, you know, the vast majority of people would respond to that by saying, of course not. I’m going to compete within the open market place with my product and I’m going to give it to consumers who are going to pay me on time. Who I know are going to be less difficult. And whose problems I’ll be able to solve. And I don’t want to put up with this, you know, ridiculousness. Why should I have to? It’s exactly what’s happening with Medicaid. It’s a simple way to put it, but when you drill down to it that’s exactly the reason that you see these kinds of studies.

SOURCE: New Ledger