December 18, 2013
When Leaders Don’t Lead on Medicaid
by John Torinus
The private sector has developed proven, audited, beyond-debate ways to cut health-care costs that could be applied to Medicaid.
The big debate across the states over the expansion of Medicaid only deals with half of the equation.
The first half of the equation is political: who gets added to the entitlement rolls and who doesn’t. Wisconsin’s Gov. Walker, for example, decided to: turn down federal funds for expanding coverage; add 80,000 adults who are below the poverty line; and move some 70,000 residents who are above the line to the new federal exchange and subsidies.
But Wisconsin, like other states and the federal government, has ducked the rest of the issue: the staggering cost increases. Medicaid expenses, for which the states pay about 40% and the feds 60%, are crowding out funding for just about every other priority: K-12 education, the university system, environmental advances and economic development.
It’s the same story on health costs at the federal level. Medicaid, Medicare and the health bill for federal employees are the biggest driver of the crushing federal deficit. One recent secretary of defense said the department spends more on health costs than on weapons.
The void in the debate is the deafening silence on how to get the costs under control, with the exception of cutting people off the rolls.
It’s especially sad because there are solutions. Leading-edge employers in the private sector have put together a new business model for the delivery of health care that drastically lowers costs while improving health. Their best practices are applicable in the public sector, as some units of local government have discovered to great advantage.
Here are some proven, audited, beyond-debate cost-cutting moves that could be made with Medicaid plans:
- Consumer-Driven Health Plans (CDHP) — Indiana has received a waiver from the Obama Administration to install Health Savings Accounts and to set higher deductibles for Medicaid recipients. Such CDHP plans cut costs by 20-30%. School districts and counties have deployed HSAs, as has Indiana for state employees and Purdue. Medicaid is rife with utilization abuse, because of an absence of such incentives and disincentives.
- Reference Based Pricing (RBP) — CALPERS, the giant California pension fund that buys health care for 1.3 million members, has installed caps on procedures, such as $1,500 for colonoscopies and $30,000 for joint replacements. It’s easy to pay twice those maximums or more. But why do it? Why not RBPs for Medicaid? Note: A good number of providers have accepted the maximum prices.
- Medical Homes — Another 20-30% can be cut from medical costs by offering proactive primary care. Many companies have set up on-site clinics to provide holistic care and keep people out of expensive hospitals. Why not set up medical homes where there are concentrations of Medicaid patients? Primary care is a lot less expensive than specialty care, the main offering of large hospital corporations. It’s also less expensive by far than care from emergency rooms, to which Medicaid entitlees often default. Obamacare provides some funds for community health centers, so there is a start for such medical homes.
The biggest problem for introducing aggressive and innovative management into Medicaid dynamics is the joint ownership of the program by federal and state governments. Differing agendas produce stalemate in most states. And, in the void, the costs scream upward.
Gov. Walker turned down the new federal dollars for a larger Medicaid program because of skepticism about the long-term availability of federal dollars. The soaring, unsustainable cost increases give substance to his position.
But his worry should be redirected to the costs. His concerns could be mitigated if the overall charges were sharply reduced.
He would look presidential if he followed the lead of private sector payers. That, again sadly, is in the political arena, so he probably wouldn’t get a federal waiver from the Obama administration for innovations, even if Indiana did.
Who loses in the managerial paralysis, when leaders don’t lead? In the case of Medicaid, it’s the taxpayers and poor people.