Category Archives: Health Care

Medicaid Reforms Could Save Tens of Millions

Massey Whorley, policy adviser to Governor McAuliffe

A new forecast of Virginia’s $10 billion Medicaid program supposes that the implementation of managed-care reforms will slow runaway costs, reducing growth in spending to 2.5% in the first year and 3.4% the second year, down from an 7.8% increase in the current fiscal year. While the program still will cost an additional $670.6 million over three years, that’s a lot less than it would have been, reports the Richmond Times-Dispatch.

The McAuliffe administration is expanding the number of people, primarily elderly and disabled, who will receive services through managed-care contracts with private insurers.

“A huge part of [the reduction] is the effect of reforms and the amount of money being moved from fee-for-service to managed care,” said McAuliffe policy adviser Massey S.J. Whorley. The number will swell from about 30,000 people under managed care to almost 200,000. Explains the T-D:

Fee-for-service has been the traditional way of reimbursing providers for services to Medicaid patients in an uncoordinated fashion. Managed care allows the state to shift the risks of serving patients to insurers who are paid a fixed amount per person, per month to coordinate their care. 

“The plans are taking a very substantial risk,” said Doug Gray, executive director of the Virginia Association of Health Plans, which includes five of the six companies that are providing managed care to more than 216,000 elderly and disabled Virginians. “These are very sick people who could have very high costs. The commonwealth has protected themselves from costs over and above the contract amount.”

The attraction for insurers is the potential to lower the cost of care and keep the difference, while saving the state money, but Gray cautioned against expecting an immediate windfall as the state expands managed care to riskier populations. “We are hopeful and optimistic there will be savings, but I wouldn’t want to be overly aggressive about promising,” he said.

House Appropriations Chairman S. Chris Jones, R-Suffolk, said the reforms are working, but he would hesitate to read too much into the initial forecast. “This is the right step to have taken. … There is no doubt the reforms are starting to have an impact.”

Bacon’s bottom line: Everybody cross your fingers and hope this works. Out-of-control Medicaid spending has soaked up a disproportionate share of new tax dollars generated by the state, forcing legislators to under-fund other critical priorities like K-12 schools and higher-ed. The shift to managed care may ease the fiscal pain for the next biennial budget.

Bringing Data Analytics to Virginia Healthcare

Beth Bortz, CEO of the Virginia Center for Health Innovation

A big reason the healthcare debate in Washington has gone nowhere is that it’s all about who pays for healthcare, not how to create better outcomes at lower cost. For every winner, there’s a loser, and that’s a recipe for gridlock. Meanwhile, medical costs continue climbing. Ultimately, everyone loses.

The business of figuring out how to improve outcomes and reduce costs gets a tiny fraction of the media attention, but if there’s ever going to be a solution to the healthcare crisis, it will come from stretching healthcare dollars, not redistributing them. As it happens, Virginia is taking the lead in an initiative that may help “bend the cost curve.”

Five Virginia health plans are taking part in a pilot program funded by private foundations and led by the Catalyst for Payment Reform (CPR), a nonprofit group that seeks to measure “which strategies are having the desired impact in the market,” reports Virginia Business magazine. Virginia will be one of only three states selected to participate, says Beth Bortz, CEO of the Virginia Center for Health Innovation, which coaxed Virginia’s five insurance companies into sharing their data. (Two other insurers have yet to commit.)

Each of the participating companies — Aetna, Anthem, Optima, UnitedHealthcare and Virginia Premier — possesses vast quantities of data on healthcare expenditures and outcomes. But data residing in five silos isn’t as valuable for analytical purposes as a database encompassing all five. Reports Virginia Business:

The key goal is to identify health-care payments in commercial and Medicaid sectors that are “value oriented,” which CPR defines as effective treatments combined with a reduction in unnecessary spending. That means the project’s intent isn’t just to find effective treatment. “We’ve been about advancing value,” Bortz says. “It’s not quality at any cost.” …

Involvement with CPR will help a project VHCI has already begun. It is a data-based measurement of health care called the Virginia Health Value Dashboard. Its purpose “is to prompt action for improving the value of health-care services,” says VHCI.

Examples of “low-value” care that the dashboard project is targeting include: avoidable emergency-room visits, hospital readmissions and the use of high-cost service sites when less expensive options are available. The “high-value” care examples include: up-to-date vaccinations, smoking cessation programs, better screening for cancer and improved management of chronic conditions such as diabetes.

The goal is to have in place by January a dashboard tool for groups that provide, buy or fund health-care services to use in evaluating various costs. Being part of the CPR’s project is a big step toward that goal. “It costs money to get good data,” Bortz says.

Bacon’s bottom line: It would be great if Virginia could bend the cost curve. Households could find some relief from the relentless squeeze on their pocketbooks. More people could afford afford insurance coverage. And, to the extent that healthcare is a big chunk of employee compensation, Virginia businesses could gain a competitive advantage.

There is a gap, however, between knowing what the best practices are and actually putting them into place. The political economy of healthcare in Virginia is riddled with special interests that benefit from laws and regulations that stifle change. Many regulations — mandated benefits, medical licensure, the Certificate of Public Need process — create incentives for perverse behavior. The best data in the world won’t do much good if health care providers don’t do anything with it. So, while the CPR initiative is a positive development, Virginia has much work ahead to create the conditions where healthcare insights will be acted upon.

How Medicaid Is Cannibalizing Virginia’s Budget

Source: JLARC

Three big trends are worth noting from the Joint Legislative Audit and Review Commission 2017 state spending update, a review of state spending over the previous 10 years.

First, General Fund spending has been constrained by limited revenue growth resulting from Virginia’s weak economy. The increase in spending has averaged 2.0% per year. Adjusted for inflation and population growth, General Fund spending actually declined 1% over the decade.

Second, the Medicaid program has crowded out spending for other priorities. Medicaid hogged 60% of all General Fund revenue growth over the decade. Medicaid’s share of the General Fund pie increased by 73%.

Third, the healthy growth in non-General Fund spending was driven in large part by tuition increases at Virginia’s colleges and universities. In other words, when faced by stagnant revenue and untouchable Medicaid spending increases, legislators cut what was cuttable. They reduced state support for higher education knowing that colleges and universities could fall back upon the expedient of raising tuition.

Cheerful thought of the day: As Virginia’s population ages, Medicaid spending will go one way — up — and it will continue to squeeze other spending categories. Here’s the spin that Republican legislators put on the JLARC report:

House Speaker William J. Howell, R-Stafford: “Once again, this annual report from JLARC shows that the increasing cost of Virginia’s current Medicaid program is crowding out needed funding for our public schools, colleges and universities, roads, and law enforcement officers. We consistently argued that Virginia can barely afford its existing Medicaid program, let alone the massive cost of expansion, and this report vindicates that position.”

Speaker-designee Kirk Cox, R-Colonial Heights: “It’s a simple proposition: if you cannot afford your mortgage payment, you don’t build a new addition to your house. Virginia’s current Medicaid program covers around 1 in every 8 Virginians, and as this report shows, the costs are staggering and continue to climb, despite ongoing reform efforts. It would be financially irresponsible to ask taxpayers to fund the massive expansion contemplated under the Affordable Care Act.”

Del. S. Chris Jones, R-Suffolk: “Even as we instituted major reforms aimed at bending the cost curve, and controlled spending growth in other areas of state government, Medicaid costs continue to increase dramatically. This growth eats into funding that could be used for our teachers, law enforcement officers, and hard working state employees.”

Bacon’s bottom line: Yeah, the Republican leaders are stingy bastards for not expanding Medicaid. But the alternative is worse. Latest news on the Boomergeddon front: The state of Illinois, which expanded its Medicaid program in 2013, incidentally, and now has to cover 10% of the expanded costs not funded by the federal government, has $16.5 billion in unpaid bills. The state also has $200 billion in total liabilities, including pension debt. Meanwhile, pundits are asking if debt-ridden Chicago will become the next Detroit. One good recession, and it will be.

To see what it’s like to operate a government bordering on insolvency, watch Puerto Rico flail as it tries to recover from Hurricane Maria. It’s not a pretty picture. It’s easy to be compassionate when you’re paying with other peoples’ money. When other peoples’ money runs out, everything goes all to hell.

Uh, Oh, Optima Retracting Its Obamacare Coverage

First Aetna pulled out of Virginia’s Affordable Care Act insurance exchange. Then United Health did. Then Anthem cut back. Now Optima, a division of the Sentara Health Care system, is retracting to core markets in Hampton Roads plus the Harrisonburg, Charlottesville and Halifax-Mecklenburg areas. Oh, and it’s increasing rates on average by 81.8%.

“For now,” sums up the Daily Press, “it appears as if 48 Virginia counties and 15 cities have no insurer offering Obamacare coverage through the federal health care exchange. … The three insurers’ cuts leave 350,000 Virginians needing to find new coverage.”

While the health exchanges implode, a dysfunctional government in Washington, D.C., appears unable to devise either a patch to Obamacare or an alternative to it. Republicans are saying, in effect, “See, we told you that Obamacare was melting down.” Democrats are responding, “It’s melting down because you sabotaged it.”

As the system collapses, the issue of whom to blame will dominate the public discourse. It seems clear to me that Obamacare was melting down on its own, but the political uncertainty created by Washington dysfunction has accelerated the downward spiral. There’s so much flak and so much smoke, however, that Americans have no idea what to believe. In the meantime, Virginians will suffer.

Carilion Wants It Both Ways

by Michael W. Thompson

The Roanoke region needs more health care availability according to Carilion, the area’s mega hospital. It now recognizes a problem that other health care providers have long known – the Roanoke area is under-served and has inadequate access to many important health care services. And, of course, Carilion wants to fill this need.

Yet, for years Carilion has fought against allowing competing health care providers to expand or add services. It has lobbied against reforming current Certificate of Public Need (COPN) laws that favor hospital monopolies and have it has used this outdated law to stifle competition. These COPN laws require state approval for additional health care facilities and services and hospitals have an undue influence in stopping competition. The Federal Trade Commission has urged states to get rid of these anti-competitive laws.

Carilion’s approach to blocking competition even garnered the attention of the Federal Trade Commission (FTC). Several years ago, the FTC challenged Carilion’s acquisition of two competing outpatient clinics in the Roanoke area – the Center for Surgical Excellence (CSE) and the Center for Advanced Imaging (CAI), stating in a unanimously-passed administrative complaint on July 24, 2009 that this acquisition would result in a “violation of federal antitrust laws,” higher health care costs, and reduce incentives for those facilities to maintain quality care.

Ironically, before Carilion tried to buy these two competing clinics, it worked to block their COPN applications. Carilion’s eventual acquisition of CAI occurred five years after that competitor opened an advanced imaging center offering services similar to Carilion, but at a lower price. CAI’s quality, convenience, and low cost presented a serious threat to Carilion’s business. The mega-hospital recognized this threat when opposing CAI’s application for additional MRI equipment, noting that “CAI’s introduction of a second scanner threatens the viability of our [hospital] system.”

After success with its first facility, CAI sought to open an independent outpatient surgical center that it subsequently named CSE. The facility was finally awarded a highly-contested Certificate of Public Need (COPN), an outpatient surgical hospital license from the Commonwealth of Virginia, and an ambulatory service center (ASC) certification from Medicare. But despite the clear need for this facility, Carilion opposed this expansion.

The FTC concluded in 2009, that “Carilion acknowledged that it would increase post-acquisition prices for CAI and CSE services” and “the acquisition will directly and substantially harm patients by increasing their out-of-pocket costs.” They cited Carilion’s plan to increase out-of-pocket costs for a brain MRI as high as 900% – from $40 to $350. Carilion eventually agreed to divest from the clinics that restored them as viable, independent competitors to settle the FTC charges.

Another example of the results of Carilion’s use of the COPN law is the 2012 tragedy where a mother, 24 weeks pregnant, went to a hospital in Salem after she experienced a placental eruption. Much to her shock, doctors informed her that they were unable to treat her because they lacked a neonatal intensive care unit (NICU). They quickly called a special ambulance to transport her six miles away to the nearest NICU at Carilion Medical Center.

However, the ambulance to take her to Carilion was out on another trip and, as a result, her child died.

The hospital in Salem had tried twice for approval to build a NICU and had garnered widespread community support. But, they were denied each time in large part, according to those who are familiar with this case, due to Carilion’s opposition. In fact, this writer is told that Carilion was the only voice to oppose this needed NICU during public hearings.

Now Carilion wants to expand Roanoke Memorial because they’re currently turning away patients. Could this be because it has, for years, blocked serious competition in its own back yard? A strong case can be made for exactly that.

Luckily, reform of our COPN laws is gaining steam and could happen next year. One bill, House Bill 2337 sponsored by Dr. John O’Bannon of the Richmond area, would eliminate the burdensome COPN process for operating rooms, NICUs and other important facilities and services. As noted by the FTC, that would mean quality care at lower out-of-pocket costs.

Let’s hope our state legislators get serious about COPN reform and remember that a supposedly nonprofit system like Carilion shouldn’t be able to fight against patients and other health care providers by using COPN laws to stifle competition and then want to expand services that are needed in the area.

Michael W. Thompson is the President of the Thomas Jefferson Institute for Public Policy. The opinions expressed here are his and do not necessarily reflect those of the organization or its Board of Directors. Mr. Thompson can be reached at [email protected]

Rural Virginians Will be Really Old by 2040

Image credit: StatChat. Click for more legible image.

Like every other state in the union, Virginia’s population is getting older. The trend is particularly pronounced in rural jurisdictions, as seen in these maps compiled by Shonel Sen with the Demographics Research Group at the University of Virginia and published in the StatChat blog.

Everyone seems so focused on immediate problems that localities have given little attention to what things will be like in 23 years when the 65+ demographic comprises more than 20% of the population across most of the state. Given the inability of most Baby Boomers to accumulate much wealth, how many of these elders be poor? Given the tendency of young people to move away, will the rural elderly have caretakers? Given the pressures on rural hospitals and the increasingly acute shortage of doctors, will the elderly have adequate access to health care?

I suppose it’s human nature to ignore distant problems until they become immediate problems, so I’m guessing nothing will be done until these issues reach crisis proportions. This is America. That’s how we roll.

The Terrifying Power of the Media to Shape Opinion

Only 18% of Americans support the U.S. Senate healthcare bill to replace Obamacare, says one poll. Only 12%, says another, and only 8% says yet another. Given the slow-motion collapse of Obamacare, that’s remarkably low. With numbers that low, even a majority of Republicans must oppose the bill.

Could the public’s negative opinion be shaped by the fact that the media has overwhelmingly portrayed the bill in overwhelmingly negative, even apocalyptic, terms?

A big drawback of the bill is that health care insurance would be more expensive for older Americans. I Googled the phrase, “Senate healthcare bill more expensive for older adults.” Every article cited on the opening page stressed the harm that the bill would do to seniors. Seventy-five percent of Googlers never go past the first page of results. To find countervailing analysis, searchers would have to dive way deeper into the results.

An offsetting benefit is that the bill would make health care insurance cheaper for young adults and free them from the Obamacare mandate of purchasing insurance. So, I Googled the phrase, “Senate healthcare bill cheaper for young adults.” The opening page was a mixed bag. Some results were balanced and some negative. None were positive. Here are the headlines:

9 Things To Know About The Senate Health Care Bill (NPR). The article notes, “The oldest people under 65 can be charged five times more than the youngest, and maybe more depending on state rules.” It says nothing about young adults paying less.

How the Senate’s Health-Care Bill Would Cause Financial Ruin for People with Preexisting Conditions (Atlantic). The headline speaks for itself. The article doesn’t even address the issue of how young people are impacted.

Winners and Losers of the Senate’s Health-Care Bill (CNBC). This article does acknowledge that young adults would benefit: “The Senate plan, like the House bill, would give insurers greater flexibility to charge younger enrollees much lower premiums and to offer skinnier plans in states that opt out of ACA’s essential health benefit requirements.”

The Senate health care bill: What’s in it and what to watch for in the CBO report (Politifact). This article provides a balanced statement: “Today, companies can’t charge older customers more than three times what young adults pay. The Senate bill increases that to five to one. This change reduces premiums for the young and increases them for those in their 50s and early 60s.”

Senate health plan falls short of promise for cheaper care, experts say (New York Times). The Times article presents a uniformly dismal view of the bill, noting no positives of any kind.

Senate Health Bill Includes Deep Cuts to Medicaid (New York Times). This Times article tells how older Americans would be disadvantaged under the bill but ignores the offsetting advantages to younger Americans. “Older people could be disproportionately hurt because they pay more for insurance in general. Both chambers’ bills would allow insurers to charge older people five times as much as younger ones; the limit is now three times.”

The Senate health bill is brutal on older Americans (Slate). The first paragraph in this Slate article is as balanced as it gets: “One of the expressed intentions of Republicans’ efforts to repeal and replace Obamacare is to undo some of the age-related distribution inherent in the system. Today, healthy young people pay more so that older, less-healthy people don’t have to pay quite as much.” Then Slate goes relentlessly negative for the rest of the article.

Comparing the Senate health care bill to Obamacare and the House proposal (CNN). This CNN article does note that the Senate bill will repeal the mandate for adults to obtain health insurance or pay a penalty.

Senate health care bill would lower deficit, increase number of insured, estimate says (FOX). The Fox article addresses pros and cons of the bill, but nowhere does it mention how the bill would lower premiums for young adults.

The Senate health-care bill’s subsidy cuts hurt low-income, older Americans (Washington Post). While the headline is negative, the article itself is more balanced, acknowledging that young people would benefit from allowing insurers to base rates on age. “Both [the House and Senate] bills include changes that would mean older people pay more and younger people pay less.”

Summary: The results on a search inquiring about a negative aspect of the bill brings up uniformly negative and critical articles. The results on a search inquiring about a positive aspect of the bill brings up a mix of negative and balanced articles — but no positive articles. Continue reading

Would U.S. Senate Bill Devastate Virginia’s Medicaid Program?

In a preliminary analysis, the McAuliffe administration estimates that the U.S. Senate’s proposed Obamacare replacement bill would cost Virginia’s Medicaid program at least $1.4 billion over seven years. “The legislation currently up for a vote in the United States Senate would blow a hole in Virginia’s budget and severely impair our ability to offer health coverage and long-term care to the people who need them most,” said Governor Terry McAuliffe in a statement released yesterday.

The per capita caps in the Better Care Reconciliation Act of 2017 affect almost every population covered by Medicaid, and would cost Virginia’s program almost double the $708 million that the House-proposed American Health Care Act (AHCA) was estimated to cost over the same time frame, stated the governor’s office.

The difference between the impact of the House and Senate proposals on per capita caps lies in the “annual growth factor” – the estimation of how much costs will increase in the future over a baseline estimate of Medicaid spending. The Senate bill uses a growth factor that estimates lower growth than the House bill – and both houses use a growth factor that is arbitrary. DMAS estimates costs will outpace the growth factor of both bills; that change becomes more pronounced in later years. Provisions in the BCRA that provide safety net funds to providers and eliminate Disproportionate Share Hospital allotment reductions would not directly make up for the losses Virginia would experience from per capita caps.

According to Michael Martz with the Richmond Times-Dispatch, the estimated loss in federal support in Virginia would jump from $117.2 million in fiscal year 2024 to $327.9 million the next year, and then to $493.5 million the year after that.

Bacon’s bottom line: If this is a fair summary of the impact of the Republicans’ proposed health care reform legislation, then it’s a big deal. It would blow a nearly $500 million hole in the state budget for a Medicaid program that is already one of the most austere in the country.

But let’s look a little closer. The McAuliffe administration says that the Senate and House GOP “annual growth factors” are arbitrary. And perhaps they are. But I would like to know what the McAuliffe administration’s cost escalator is, and what assumptions it is based on. How do we know that it is any less arbitrary? As I understand the Republicans’ logic, the Senate bill would generate savings by giving the states more latitude in how they administer Medicaid. Is it inconceivable that Virginia could run the program more cost effectively than it’s being run at present?

I’m not saying that the McAuliffe estimate is wrong, but I do think we need to subject it to some scrutiny before we accept it as valid.

Bacon Bits

I’m on jury duty today, so I won’t have time for blogging. But very quickly, a couple of articles worth noting….

Fraudulent graduation rates. In Prince George’s County, Md., four members of the school board have asked the governor for an investigation into what they allege is a systemic effort to fraudulently boost graduation rates in the Maryland school district, reports the Washington Post. “Widespread, systemic corruption” has inflated graduation rates since 2004, they say.

Of course, that’s Maryland, not virtuous Virginia. Such institutional chiseling could not possibly happen here! The steady increase in graduation rates in Virginia schools is due entirely to the extraordinary efforts of teachers, administrators and students!! Still, citizens and school board members should be alert to the possibility, as remote and implausible as it sounds, that similar chiseling occurs in our own school districts.

Health system profits still healthy. We’ve been hearing for years how the profits of Virginia hospitals, though hefty today, are subject to erosion by the buffeting storms of Obamacare and other forces. Yet the profits of our health systems seem to be holding up nicely. The latest evidence comes from Carilion Clinic in Roanoke.

“Carilion Clinic on Monday released financial statements showing continued improvement for both its operating margin and bond ratings that could soon prompt it to make public its plans to expand Carilion Roanoke Memorial Hospital,” reports the Roanoke Times.

After losing $131 million between 2008 and 2011, Carilion earned $69 million on $1.65 billion in revenue during fiscal year 2016, giving it a 4.2% operating margin. Moody’s affirmed an A1 rating and upgraded Carilion’s outlook from stable to positive. Standard & Poor’s moved Carilion’s rating upward from A+ to AA-.

Carilion provided $67 million worth of services to people who could not afford them during 2016. This was up about $15 million over 2015.

The Obamacare Death Spiral Proceeds as Predicted

Who knows whether or not Republicans will get their repeal-and-replace of Affordable Care Act through Congress. From the commentary I’ve seen (mainly on “Morning Joe”), the odds seem remote that the Senate will approve whatever the House of Representatives sends their way. In the meantime, we are left with the Obama state exchanges.

The picture just turned more ominous here in Virginia. Innovation Health, which health insurer Aetna created through a joint venture with Inova in 2012, is dropping out of the Virginia market. In addition, United Health has declined to file with Virginia’s insurance department to offer any policies next year, reports CNN Money.

That leaves six insurers remaining, but 27 counties will have only one choice in 2018.

The death spiral is corkscrewing away. Less competition means higher prices. Higher prices drive healthier people out of the market. A higher percentage of sick people runs up costs. Insurers raise rates or drop out. Less competition means higher prices….

There’s not much we can do here in Virginia to affect the outcome of Congressional debate. But there is plenty we can do to make health care more affordable, improve outcomes, and to bring price transparency to the health care system. If we want to make health care coverage affordable for Virginians, lawmakers should focus on ways to improve productivity and innovation. I know I sound like a broken record… broken record… broken record… So I’ll leave it at that.