It’s no secret that the ACA is experiencing growing pains at best and is in crisis at worst. Plagued by website concerns and the fact that many states are not committed to the Medicaid expansion, actually manifesting the increased coverage that is so central to the bill is proving to be much more difficult. Robert Reich recently remarked on his Facebook page regarding the problems with ACA implementation, “…if the problems continue, it won’t be only Democrats in trouble but the entire idea that government can do something complex and well. Yet, ironically, it won’t be the government that determines whether or not the system works as promised; it will be an array of private for-profit contractors and insurers.”
Again we see private industry creating problems but our government taking the blame in the public’s eye.
SCOTUS’ decision to allow states to choose whether to expand Medicaid created a new “donut hole” that’s particularly worrisome – people who do not qualify for Medicaid as it currently stands, but who make less than 138% of the poverty line (and thus do not qualify for the federal subsidies to purchase insurance through the exchange) have absolutely no options for health insurance! Because they were supposed to be covered under the new expanded Medicaid, no other provisions for their coverage were made.
It is extremely important that Medicaid expansion happen in every state, but we need to keep a close eye on how it’s done.
In some previous posts I’ve talked about states’ ideas for implementing Medicaid expansion and how Virginia, like many other states, seems to be leaning in the direction of increasing managed care. This basically amounts to awarding contracts to private insurance companies to handle the administration of Medicaid, with the idea that private companies will know how to better decrease costs as well as increase efficiency. Generally (but not always) this means that private companies are paid a fixed rate per enrollee, which is usually a percentage (usually around 95%) of what patients are costing the state, on average, under the prior fee for service system. Good data exists regarding this tactic in Medicare. Contracting to private companies via Medicare Advantage increases costs because programs have consistently found ways to cherry-pick for the healthiest seniors, thus minimizing risks, and have higher administrative costs than traditional Medicare. It is estimated that Medicare private plans have resulted in overpayments of over a quarter-trillion dollars from 1985 – 2012!
However, the impact of Medicaid Managed Care on cost, access, and quality of care is more difficult to assess on a national level because Medicaid is a state program and significant variability exists between states. The patient population of Medicaid is also significantly different than Medicare. Yet there is some emerging evidence that the impact is negative, especially when for-profit companies handle care:
1) A recent study by McCue and Bailit directly compared publicly-traded with non-publicly traded Medicaid Managed Care plans and found “publicly traded plans that focused primarily on Medicaid enrollees paid out the lowest percentage of their Medicaid premium revenues in medical expenses and reported the highest percentage in administrative expenses across different types of health plans. The publicly traded plans also received lower scores for quality-of care measures related to preventive care, treatment of chronic conditions, members’ access to care, and customer service.”
2) The state of Connecticut recently ended their contracts with multiple managed care organizations (MCOs) after an independent investigation, citing concerns about insufficient transparency regarding allocation of funds and burgeoning administrative costs.
I spoke with a few physicians who provide care to a large population of patients with Medicaid about differences they’ve noticed with the Managed Care companies vs fee for service. These companies seem to increase administrative burden on physicians by ensuring “quality measures” are met. A few examples – reminders to place patients on ACE inhibitors (when many of the patients are already on these medications, but just not registered by the company), or “Members who turned 15 months old during measurement year and had at least 6 well child visits since birth.” While important aspects to consider, it’s easy to see how satisfying them may not necessarily lead to better outcomes (but give the appearance of such to policymakers). It’s even easier to see how these may balloon into huge administrative bloat for already busy doctors.
Still, many states are expected to increase their involvement with private insurance companies in expanding Medicaid. Why? The myth persists that private companies, because they are subject to the invisible hand, will streamline administrative costs and improve quality or risk failure. All available evidence points to the contrary, because healthcare does not function like other markets.
Medicaid Managed Care proponents say that coordinating care of people with chronic diseases/conditions is necessary to help them navigate the confusing system and keep them out of the hospital living longer, healthier lives. How could any multi-payer system possibly do that better, and with less administrative burden, than a single payer one? That would allow for the optimum, most efficient coordination of care, as well as quality evaluation.
Let’s work to keep an eye on further privatization of Medicaid. An example of an organization doing just this is Community Catalyst, a consumer advocacy group that conducts research and writes publications about healthcare reform, including Medicaid Managed Care.
When these market-based experiments fail, we need advocates to step in swiftly with evidence-based explanations in order to prevent the needless suffering of patients and further waste of taxpayer money.
Short White Coat, Inc. 
Interesting. I disagree with most of what you have written here, but I appreciate your point of view.
As someone who believes that everyone should have access to health care but is skeptical of government’s ability to effectively run a health care system, I think I have the same ultimate goals that you do with a very different idea of how to get there. I think your assumption that health care is not like other goods — despite what Krugman might have to say about it — is not nearly as much of a “given” as you’d lead us to believe here. Here’s a much more nuanced article about some of the issues surrounding the idea of health care and its similarities and dissimilarities to other industries: http://www.forbes.com/sites/robertszczerba/2013/10/31/attention-walmart-shoppers-dont-look-for-healthcare-answers-here/
What is your explanation for why the state-based exchanges have been so much more successful than the federally-run exchange? In my view, it’s evidence for exactly what you are arguing against — that the federal government simply is not capable of designing and effectively administrating a system that will serve all patients in our extremely diverse country in an efficient and effective manner. Smaller, state-based initiatives are likely to be much more effective. Do you think that the federal government simply had the bad luck of choosing a bad contractor, while all of the state exchanges were lucky enough to have good ones? I would argue that is unlikely.
Don’t get me wrong. I don’t think there is anything inherently evil about government. I don’t think there is anything inherently evil about business, either. I think that both are neutral organizations that are capable of having both good and bad effects on our society.
I also don’t think the argument that everyone should have access to something necessarily translates to the idea that the government needs to be responsible for controlling and rationing that thing. I think everyone should be able to eat, but I don’t think that the government should take over all of the grocery stores so that people who can’t buy food can gain access. In fact, that would probably be a terrible idea.
I feel the same way about health care. I think government has a role to play in subsidizing health care for those who cannot afford it. I don’t think that should come in the form of a government-run health care system. Health care is a fast-changing, ,incredibly complex field, and I don’t think that a bureaucracy such as the federal government deals very well with fast-changing or complex issues.
Thanks for letting me say my piece! Though I disagree with you fundamentally on almost every point you make, I find this to be a well-written essay and I appreciate your compassion for those who are less fortunate.
Hi there! Thanks for reading and your thoughtful and very respectful comment. It seems like these things can easily get very heated and emotional quickly and I appreciate having a chance to discuss this in a civil manner.
My assertion that healthcare doesn’t operate like other markets (and never will) isn’t based just off the Krugman article. It is a very complicated issue and one that Dr. John Geyman in his book “Corporate Transformation of Healthcare: Can the Public Interest Still Be Served?” discusses much more thoroughly. http://www.amazon.com/The-Corporate-Transformation-Health-Care/dp/0826124666 I do look forward to reading the article you linked to, though.
Basically, healthcare costs are driven by a combination of acute and chronic illness, and a substantial proportion of the acute illness cannot be predicted and thus the “consumer” can never accurately predict what type of services they will require. Also, the markets are far too small for any type of meaningful competition in all but a very few regions; a few large insurance companies and hospital corporations (both for- and non-profit) dominate different regional markets, thus limiting bargaining power that would theoretically drive down prices.
But more simply, I think of it as this – our national strategy is to rely on for-profit businesses to REDUCE the total cost of healthcare. That is a fundamental conflict of interest that will never be addressed with a market-based solution.
I think the argument that state-based exchanges have been more implemented with fewer glitches thus far than the federal exchange is missing one key piece of the puzzle. It is pretty well summarized in the Robert Reich quote I put at the beginning of the blog entry. We are allowing government to take the fall for the problems that private companies have created.
The exchanges are not a good example of government flexibility because they are a bizarre public-private partnership that is part of a law that forces citizens to buy a private product of questionable value and with little evidence to reduce cost.
A better example would be the quality of our current Medicare program.
What would be your explanation for why Medicare, when administered by the government, has such low overhead (about 2-3%) compared to investor-owned insurance (anywhere from 10-20%, and more before the limiting of the medical loss ratio)? And the fact that the Canadian Medicare system produces better outcomes than our fragmented multi-payer system at far lower costs?
Not only do we spend more on healthcare than the rest of the developed world, we spend more PUBLIC money (when you consider contributions to premiums that government workers receive as part of their benefits, the VA system, and other publicly funded healthcare like Medicare and Medicaid), yet we don’t have the same quality. That is because we are relying on a system that is primarily concerned with increasing the wealth of its shareholders than providing streamlined, efficient, patient-centered care.
Thanks again for commenting/reading. It is clear that you also care about these issues and I appreciate the chance to discuss policy with you!
Oh – I meant to mention. Speaking of state-based initiatives, Vermont has a form of single payer that will take place in 2017 when the ACA allows for state innovation waivers. Though their method is imperfect, I think they will be the model that other states will follow when the exchanges inevitably fail to contain costs and improve quality.