The White House Defends Itself, While Planning for the Worst

An interesting new study:

Chapin White looked into this problem by examining the State Children’s Health Insurance Program, or S-CHIP, which was created by Congress in 1997 as a way of expanding Medicaid to lower-income children who were above the income thresholds of traditional Medicaid. He found that CHIP was “not associated with any change in the aggregate quantity of physician services [consumed],” and concluded that “coverage expansions … do not necessarily increase physician utilization.”

The main reason for this non-effect, he surmised, was due to the fact that CHIP paid physicians less for their time and expenses. “Increasing Medicaid fees,” he wrote, “is … clearly related to a reduction in non-[cost-sharing]-related access problems among both low- and high-income children.”

White compared children in states which had undergone large CHIP expansions, and compared them to children in states with smaller expansions. He also examined increases versus decreases in Medicaid physician fees. He found, surprisingly, that physician utilization was lower in the states with the largest CHIP expansions, and that expansions of CHIP led many children to lose private insurance as the government program crowded out the private sector. “Supply-side effects of CHIP–either the use of managed care tools or the relatively low reimbursement rates, or both–may have limited the utilization effect of the coverage expansion,” White concluded.

The New York Times has a preview:

To encourage states to set up the exchanges, federal officials said, they will give state officials broad discretion to decide the operational details. However, the federal officials made clear that they would set up and operate an exchange in any state that refused to do so.

Federal officials said the rules showed how President Obama was moving to expand insurance coverage, even as critics attacked the health care law in Congress, in court and in campaigns for the White House and Congress.

The rules, to be issued within days, were described by two officials: Kathleen Sebelius, the secretary of health and human services, who testified at a Senate hearing on Wednesday, and Timothy B. Hill, a senior official at the department, who provided additional details on Thursday at a conference of America’s Health Insurance Plans, a trade group.

Ms. Sebelius said the exchanges would provide one-stop shopping, allowing Americans to compare the prices and benefits of health plans. Insurers will compete for business, she said, and the increased competition will drive down costs.

In view of regional differences in health care markets, Mr. Hill said, “we want to give states as much flexibility as possible to choose what works for them.”

“We want states to be successful in establishing their own exchanges,” Mr. Hill said. “We are doing everything we can to help states get ready. But we are not naive. There is a likelihood that some states won’t be ready.”

Under the rules, each exchange will certify health insurance plans, operate a Web site comparing costs and benefits, and help consumers enroll. In addition, the exchange will determine who is eligible for federal subsidies, available to people with annual incomes up to four times the poverty level (up to $92,000 for a family of four).

How insurers plan to benefit:

The emerging market poses risks because of high upfront costs and patients’ often significant health challenges. But companies ranging from industry heavyweight UnitedHealth Group Inc. to Medicaid specialist Molina Healthcare Inc. are broadly targeting the market nonetheless, amid a significant chance to add business.

“We do see it as a major opportunity,” said Gail Boudreaux, chief executive of UnitedHealth’s insurance unit, on a recent conference call.

At issue are more than nine million Americans who qualify for both government health programs, yet frequently “receive their care in uncoordinated systems” that can weaken care and boost costs, according to a document from the Centers for Medicare & Medicaid Services. These patients’ health issues trigger substantial costs; dual patients represent just 15% of Medicaid enrollment, for example, but 39% of program spending, CMS said.

A typical dual patient might be on Medicare due to age and on Medicaid because chronic health problems drained the person’s savings, although younger patients with disabilities are also in the system. These are “among the sickest and the poorest” people covered by the government, according to the Kaiser Family Foundation.

The U.S. health-care overhaul law created an office within CMS that aims to improve coverage by streamlining an often confusing system. The agency has given grants to 15 states, including California and New York, to foster more coordinated efforts, and many other states are moving in that direction.

There are open questions regarding how these efforts will work, when exactly they will come on line, and the role managed-care companies could ultimately play in various states. Under one proposed model, health plans would sign contracts giving them a set amount of money for dual patients–with an expectation they will restrain costs while meeting certain patient-care standards.

Citigroup analyst Carl McDonald expects the first batch of states to create at least $25 billion in new revenue for health plans next year, with the potential for revenue to double in 2014. Over the long term, there could be at least $300 billion in revenue up for grabs.

Bloomberg’s editors endorse Sen. Tom Coburn’s FAST act.

The government estimates that improper payments, which include error and fraud, in the fee-for-service element of Medicare equaled $28.8 billion last year. Medicare Advantage, a supplemental program offered by private insurers, accounted for an additional $12.4 billion – four times the annual budget of the National Park Service, which has 21,000 employees.

Yet neither Congress nor the Obama administration – professed enemies of waste, fraud and abuse – has taken up the cause with the urgency it requires. Overhauling Medicare’s payment system is a daunting task, in part because of the way it’s structured. The system was designed to correct errors, not root out fraud. Hospitals and doctors, politically powerful and perennially peeved at low Medicare reimbursement rates for their services, demand prompt repayment and minimal administrative hassles. The system largely delivers – at least on the first part. But the cost of routine payment for service may be unsustainable. More scrutiny, inevitably resulting in more payment delays, is necessary to safeguard the public’s money.

In recent years, the Centers for Medicare & Medicaid Services has begun addressing the epidemic, gradually adopting more aggressive fraud detection efforts. The CMS says it is dedicated to supplanting its “pay and chase” model, by which it first pays the bills and later chases down overpayments and irregularities. Predictive technologies similar to those used in the credit-card industry now hunt for patterns of suspicious behavior and flag them for analysts. Private contractors who uncover fraud win a bounty.

These advances, while encouraging, remain unequal to the task. The vast data systems used by CMS are not coordinated across regions and functions, and integration with law- enforcement data is far from complete.

Meantime, old habits persist. For example, the way in which CMS corrects errors inadvertently shows criminals how better to exploit the system. If a fraudulent provider submits a claim for a patient who is already dead, for example, the system automatically denies the claim, flagging the error for the crook, who then knows to delete the name from a list of bogus patients. Thousands of phony claims can be promptly paid provided they conform to billing protocol; some frauds extend for years.

What can be done? We like legislation by Senators Tom Coburn of Oklahoma and Tom Carper of Delaware, which directs the government to increase its data integration by sharing information across federal and state law-enforcement agencies and including Medicaid data in the CMS Integrated Data Repository, among other efforts. The bill would also expand prepayment review of Medicare claims and mandate such reviews for claims for durable medical equipment, such as power wheelchairs.

A concern for privacy advocates:

The Missouri House passed legislation Thursday that could allow the government to track everyone’s prescription drug purchases through an electronic database – a move embraced in most other states as a public safety tool but considered an infringement on individual liberties by some.

The legislation would direct the state health department to develop a means of monitoring prescription medications, but it would require the funding to come exclusively through grants or private donations.

Supporters say the database could prevent cases of doctor shopping and drug abuse and, ultimately, thwart fatal drug overdoses. They point to instances in which people are getting prescriptions from multiple doctors to feed addictions or sell the drugs on the black market.

As other states are learning, a rebounding economy means less money from the feds:

Medicaid is expected to be a recurring topic as the West Virginia Legislature completes a new state budget this week. Meeting in extended session, a House-Senate committee will review Gov. Earl Ray Tomblin’s bid to keep pace with the state-federal health care program by banking funding for future use.

The governor’s $11.6 billion spending plan for the budget year that begins July 1 includes $132 million in new state funds for Medicaid, said Budget Director Mike McKown. But around $32 million of that is meant to serve as surplus for the following budget year.

Tomblin updated his proposed budget twice since first delivering it to the Legislature in January, and added money for Medicaid each time. During the just-completed regular session, the Democrat also had lawmakers add at least $27 million to the current budget. Officials expect those funds to roll over unspent into the upcoming budget.

“Medicaid’s funded all over the place,” McKown said of the governor’s spending proposals.

The goal is to draw down federal funds under the current matching rate of nearly $3 for each $1 budgeted by the state. As personal incomes improve in West Virginia, its matching rate declines. The drop in the matching rate, which is projected to continue, is one of several factors behind Medicaid’s growing share of the state budget, McKown said.

It could be coming, says the Wall Street Journal:

Shopping for long-term-care insurance? You should expect higher costs and a tougher approval process as a growing number of household-name insurers quit selling the policies.

Prudential Financial said Wednesday it plans to stop taking applications as of March 30 for individual long-term-care policies, which help pay for nursing-home, assisted-living and home care. That will make it the 10th of the top 20 insurers by sales to announce that it is leaving that market in the past five years, according to Limra International, a research firm. Others include MetLife, which in 2010 said it was halting coverage, and Unum Group, which said last month it would stop selling the coverage through employers.

Prudential Vice President Malcolm Cheung says the company decided to stop selling long-term-care coverage to individuals because of the uncertainty surrounding future claims and persistently low interest rates. The insurer plans to continue offering group long-term-care coverage through employers.