Mark Carter | Passport strives to provide quality care

6:32 PM, Oct 14, 2012   | The Courier-Journal

 Written by

MARK CARTER

                               

Over 15 years ago, a group of visionary leaders from the University of Louisville Health Sciences Center, the Family Health Centers, Park Duvalle Health Center and Gov. Paul Patton established Passport Health Plan. Passport was a public-private partnershipthat would, in effect, operate the Medicaid program in Jefferson and 15 surrounding counties known as Kentucky’s Medicaid Region 3.

This public-private partnership was unique in the some important ways: It was governed by a coalition of hospitals, physicians, other clinicians and member advocates. Five local, nonprofit health care organizations provided the financial capital to establish the plan. It was, and still is, a nonprofit Kentucky corporation which allows Passport to focus on medical care without the overriding goal of generating a return for shareholders.

Moreover, the founders of Passport focused on three primary goals. The first was to offer a network of providers that would equal or exceed those provided by commercial insurancecarriers. Second, the plan would focus on quality, including high member and provider satisfaction levels. Finally, Passport would use financial incentives to reward physicians who improve the quality of, and access to, care while reducing the rate of growth in cost.

Interestingly enough, then as now, reducing the cost increases in the Medicaid program was a goal of the Patton administration. His administration was able to gain agreement from the providers in Region 3 to voluntarily help the commonwealth achieve a 5 percent reduction in cost during the first year of operation of the program.

So, how did Passport perform when compared to these initial goals?

First, access to care for Medicaid beneficiaries is unfettered. Ninety-one percent of primary care physicians and every single hospital in Region 3 participate in Passport, with comparable percentages in every other provider category. When it comes to the choice that matters, the member’s choice of his or her doctor, Passport is unequaled.

Second, Passport has achieved national recognition for the quality of care provided to its members, including unusually high levels of member and provider satisfaction. This was achieved because it was the focus of the plan from the very beginning. The sponsoring providers believed that a focus on quality would represent an investment in the future and would lead to lower costs. This required meaningful collaboration with providers, continuing to this day, that experimented with using financial incentives to control cost, something that has gained widespread acceptanceonly recently and is embodied in the Affordable Care Act.

Finally, while it has received little fanfare, Passport was successful in reducing the rate of growth in costs. A recent study commissioned by Passport reports that from 2008 to 2010, the commonwealth’s cost (the amount it paid to Passport) in Region 3 increased by 0.7 percent annually while costs in the other regions of the state increased by almost 8.5 percent annually. Over the 15-year life of Passport, the commonwealth paid Passport $8 billion. Of this $8 billion, Passport has reported an excess of revenues over expenses during that time of only $34 million, or less than one-half of 1 percent. During that same time, Passport spent 91 percent of revenues on medical care in sharp contrast to the level of spending for commercial insurance carriers.

Recently, the commonwealth announced a new approach to managing care for Medicaid beneficiaries in Region 3. Under the new approach, Passport will now be one of four plans competing for Medicaid patients in this region; however, Passport will continue to be unique among the four plans. We will be the only locally controlled, provider-sponsored and community-affiliated plan that is focused solely on improving the health and quality of life of our members. Passport will work in close collaboration with the provider community, the folks who have a direct impact on the lives of our members.

While we question the wisdom of the decision to change the approach to serving Region 3, we will strive to serve all of the Medicaid beneficiaries in this region, either directly through our provider network, or indirectly through collaboration with the commonwealth and the other organizations coming to Region 3. We look forward to continuing our collaboration with the commonwealth, our providers and member advocates as we seek to help Kentuckians lead healthier lives.

 

Chief Executive Officer –

Passport Health Plan –

Louisville 40229 –

Link: http://www.courier-journal.com/article/20121015/opinion02/310150021/mark-carter-passport-strives-provide-quality-care

ACO study reflects cost savings and reduced readmissions

September 17, 2012 | Erin McCann – Contributing Writer and Associate Editor for Healthcare IT News

 

Accountable care organizations (ACOs) can deliver cost savings and reduce readmission rates, according to a recent study from the Dartmouth Institute for Health Policy and Clinical Practice

The study, published in the Sept. 12 issue of The Journal of the American Medical Association, examined the cost savings associated with the Physician Group Practice Demonstration (PGPD), a Medicare program that ran from 2005 to 2010 and closely resembled current ACOs.

Study analysis pegged the overall annual savings from this value-based payment model at $114 per Medicare beneficiary, and the overall annual savings for duallyeligible populations  –  that is, patients who qualify for both Medicare and Medicaid  –  at $532 per beneficiary.

 

Report authors said the cost component findings are significant, as the nation’s 9million dual eligibles comprise 20 percent of the Medicare population but account for 31 percent of its spending, and comprise 15 percent of the Medicaid population but 39 percent of its spending.

Readmission rates were also affected in the demonstration, with 30-day medical readmission rates decreasing 0.67 percent overall for both populations, and 1.07 percent for dually eligible beneficiaries. Moreover, surgical readmissions for dually eligible populations decreased 2.21 percent overall. With 990,117 Medicare and/or Medicaid beneficiaries included in the experimental group, and 7,514,453 beneficiaries in the control group, report authors noted that these numbers are statistically significant.

“The study shows promise for the new healthcare delivery system reforms,” said Carrie H. Colla, lead author of the study and assistant professor at The Dartmouth Institute for Health Policy and Clinical Practice. “And these reforms should align incentives for payers, providers and patients.”

Colla pointed out that the study was done to examine the cost savings benefits of a value-based ACO program, and the PGPD was a near perfect match.  “I would say the two fundamental characteristics of the ACO-type contract are pay-for-performance and shared savings,” said Colla. The PGPD and the new Medicare ACO contracts include both these things, she added, and the quality metrics are very similar. 

Physician groups participating in the demonstration could receive up to 80 percent ofsavings they generated. In the new ACO programs, savings are generally lower, between 50 to 70 percent.

Out of 10 participating physician groups, the University of Michigan Faculty Group Practice saved the most money, averaging out to $866 per person, per year for both populations. When examining the dually eligible patients, the practice’s savings were more marked, pegged at $2,499 per person, per year.

The Middletown, Conn.-based Middlesex Health System saw the least savings all around, actually expending $749 per beneficiary for both populations and $598 for the dually eligible.?As far as non-dually eligible beneficiaries, PGPD savings were not as substantial, with some organizations seeing savings of only $59 per person, per year. However, some organizations, such as Wisconsin’s Marshfield Clinic and the University of Michigan Faculty Group Practice, observed savings of more than $500 per patient, per year for non-dually eligible beneficiaries.

Colla emphasized the significant cost and readmission improvements for the duallyeligible population. She said the study results are “a marker for populations that have higher rates of chronic disease,” and really show that “ACOs have the potential to improve healthcare and reduce spending for [the dually eligible] population.”

Overall, Colla said the study supports value-based healthcare for certain groups and can have a marked effect on complex patients in the system.

“The current fee-for-service payment system has contributed to the fragmented, poorly coordinated care that many patients, especially those who are sick, experience every day,” said Elliott S. Fisher, MD, report author and co-principal investigator of the Dartmouth Atlas Project in a Dartmouth press release. “New payment models like ACOs are intended to encourage providers to coordinate care by offering them a share of any savings achieved when they improve care. These results indicate that when organizations really try to adapt to these new models, they can benefit their patients’ lives and theirbottom lines.”

 

Source:

http://www.physbiztech.com/news/aco-study-reflects-cost-savings-and-reduced-readmissions

Dual-eligibles market creates opportunities for physician practices

The managed care market for the Medicare-Medicaid population could range from $86 billion to $183 billion in the next five years, Booz & Co. estimates.

By JENNIFER LUBELL, amednews staff. Posted Sept. 14, 2012. 

Washington- Physicians have new opportunities to partner with health plans to take advantage of the rapidly growing private market for beneficiaries who are eligible for both Medicare and Medicaid, according to a partner at a global management consulting firm.

“There’s been a tremendous interest and appetite around the so-called dual-eligibles population,” said Sanjay Saxena, MD, a partner in the North American health practice at Booz & Co. and co-author of a new Booz report (booz.com/media/uploads/BoozCo_Winning_ in_the_Medicaid_and_Duals_Markets.pdf).

Several years ago, discussions about changes in the private insurance market were all about health insurance exchanges, then about accountable care organizations, and “now it’s about the duals,” Dr. Saxena said.

The Booz report discusses ways in which managed care companies could leverage both the Medicaid and dual-eligibles markets by identifying states that present the best growth opportunities and then defining their operating models or “choosing a way to play” in these markets. Managed care organizations, for example, could enable care delivery by supporting or delegating care management activities to medical groups or hospitals, or going so far as to own or manage networks of hospitals or physician groups in an effort to integrate care management and create incentives to drive care coordination.

As managed care organizations engage in these models, physician groups also should think about how they want to participate in the growing Medicaid and dual-eligibles marketplaces, Dr. Saxena said. He said some medical groups may be proactive and well-positioned enough to reach out to health plans and say, “Look, we build medical homes, we have care coordinators, and have the kind of outreach and relationships with the community where wefeel we could share in the incentives and savings and benefits and high-quality care.”

As high utilizers of care, dual-eligibles have complex health needs and rack up roughly $300 billion in costs annually to Medicare and Medicaid. These challenges notwithstanding, many health plans have been viewing government-subsidized markets as very attractive opportunities, Dr. Saxena said. “For physicians, whether we like it or not, those are the markets that continue to grow in size.” In looking at future avenues for growth, analysts have seen that employer-sponsored insurance markets have been declining steadily, and while the individual market is expected to expand through theAffordable Care Act’s insurance exchanges, that’s going to be a difficult market to navigate as well, he said.

WellPoint’s recent acquisition of AmeriGroup and Aetna’s purchase of Coventry Health Care are two developments that illustrate a growing interest in Medicare and Medicaid managed care, Dr. Saxena said. InAetna’s case, “the major driver was greater exposure in the government market. For WellPoint and AmeriGroup, it’s a very similar story.” WellPoint and its competitors have shown recent interest in managing care for the dual-eligible population.

The health system reform law’s expansion of Medicaid, moves by states toward Medicaid managed care to get budgets under control, and a series of new federal demonstration projects that aim to find more efficient ways to manage the dual-eligible population “are three separate but related things that are creating this opportunity,” Dr. Saxena said. During the next five years, Booz & Co. estimates that the managed care market size for dual-eligibles alone could range from $86 billion to $183 billion.

http://www.ama-assn.org/amednews/2012/09/10/gvse0914.htm

Copyright 2012 American Medical Association. All rights reserved.

Most employers signal they will keep offering health insurance

Beginning in 2014, companies can move workers to health insurance exchanges, but a recent survey shows that few plan to do so.

By BOB COOK, amednews staff. Posted Sept. 10, 2012.

In the first few years after the Affordable Care Act is in full effect, physicians are unlikely to see many of their patients’ insurance status change as a result of employers dropping coverage in favor of employees buying individually through health insurance exchanges. Instead, those employed, insured patients will continue to be more responsible for the cost of their care.

Those conclusions came from a report issued by Towers Watson, a global human resources consulting firm. On behalf of the National Business Group on Health, Towers Watson surveyed 440 companies representing 6.6 million employees. The survey was conducted in July and released Aug. 27.

A month after the U.S. Supreme Court had affirmed the constitutionality of the Affordable Care Act, 88% of employers told Towers Watson they had no plans to terminate their health care plans for those working 30 hours or more a week — up from 71% in 2011. Also, 77% of companies said health care benefits were central to rewarding and retaining employees, and 72% said they were not confident — with only 4% saying they were very confident — that health insurance exchanges would provide a viable alternative to employer-sponsored benefits.

Under the ACA, companies that move their insured employees to exchanges, which are designed to provide people with a choice of individual coverage, in 2014 would pay up to a $2,000-per-employee penalty after the first 30 employees if at least one worker receives federal subsidies for the coverage. The exchanges are scheduled to begin in 2014, and the penalty would rise in future years. The Congressional Budget Office has predicted that about 7% of workers in 2014, the year exchanges go into effect, would lose employer-sponsored coverage and buy it from exchanges.

In theory, employers could stop offering coverage now with no penalty at all. Towers Watson, though, said companies don’t consider dropping coverage as a good human relations move. “Affordable health care remains a top priority for employers and a key component in the employee value proposition,” said Randall Abbott, senior health care consulting leader at Towers Watson.

Moving insured employees to exchanges will cost companies $2,000 per employee after the first 30 employees.

 

What companies are doing instead, according to the survey, is continuing to review the coverage they offer to see where they can save money, including by increasing employee contributions as part of a strategy that equates more spending on their part as an incentive to improve their health.

The percentage of employers offering consumer-directed health plans — a high-deductible plan eligible to be paired with a health savings account or health reimbursement arrangement — will increase to 61% in 2013 from 59% in 2012. But the big jump comes after the ACA is in place, with 80% of employers expecting to offer it by 2015. About 57% of employees will see an increase of one or more percentage points in their contribution in 2013, down from 66% in 2012, but still considered a reflection of companies’ desire to offload some costs onto their workers.

“Due to the increased costs of medical benefits and the additional burden of compliance, business leaders need to keep the pressure on to control costs, increase work force accountability and engage workers to lead a healthier lifestyle,” Abbott said.

Overall, health insurance spending per employee is expected to be $11,507 in 2013, of which employees will pay $2,596. The overall total is up 5.3% for 2013, a decline from 5.9% for 2012.

Other strategies companies are using to cut health insurance costs include discontinuing plans for retirees, with 28% saying it is very likely they would do so, up from 20% in 2011. Also, companies are looking at changing their plans to avoid paying a 40% excise tax beginning in 2018 for any plan with an aggregate value of more than $10,200 in individual coverage and $27,500 for family coverage.

Copyright 2012 American Medical Association. All rights reserved.

 

http://www.ama-assn.org/amednews/2012/09/10/bisc0910.htm 

 

Pediatricians call for uniformity on kids’ essential benefits

CHIP and Medicaid trump other state benchmark options for the minimum pediatricsbenefits that plans must cover under health reform, a report says.

By JENNIFER LUBELL, amednews staff. Posted Sept. 10, 2012.

 

Washington Citing inconsistencies between state plan options for upcoming minimum coverage standards, the American Academy of Pediatrics is urging the federal government to designate a public insurance program as the benchmark for children’s essential health benefits.

In 2011, the Dept. of Health and Human Services issued guidance that gave states the latitude to choose from one of several existing health plans to serve as the “benchmark” plan for their essential health benefits package under the Affordable Care Act. The healthsystem reform law mandates that these minimum coverage standards be offered by all plans on health insurance exchanges and by some additional plans outside of the exchanges. Starting in 2014, plans will be required to cover 10 broad categories of essential health benefits services.

The HHS guidance specified that a state could look at some of the largest health plans operating in its jurisdiction and then select a benchmark plan from one of four plan types: small-group, federal employee, state employee or commercial HMO. Public insurance options, however, were not included in the mix.

In an Aug. 28 report, the AAP found wide discrepancies among some of these plans in terms of what they offer to children — and that none of them met the expansive coverage options of either Medicaid’s standard benefits package for children or of packages offered by individualstate CHIP plans. The report focused on the largest federal employee, stateemployee and small-group plans in five states, then judged how well they covered the 10 categories of essential health benefits compared with each other and public insurance programs.

Public insurance programs covered more than 31% of all U.S. children in 2010, up from 26% in 2008.

 

CHIP and Medicaid trumped other plans on cost-sharing protections and breadth of coverage, the association concluded. Outside of public coverage, federal employee plans were found to have the most comprehensive pediatric benefits, whereas small-group plans offered the least expansive options. Coverage gaps in the small-group plans “were mostly found for rehabilitative/habilitative services and especially for pediatric, oral, vision and hearing services,” the report stated, although these plans provided more generous coverage in other areas, such as ambulatory and emergency services.

The AAP said its findings run counter to what HHS concluded in its guidance: that these benchmark options did not vary significantly in terms of the range of services they provided. “We can’t allow children to have different health benefits depending on where they live,” said Robert W. Block, MD, the AAP’s president.

Even with variations in public coverage among the states, establishing a public insurance option such as CHIP or Medicaid as the benchmark for children’s essential health benefits would provide a broader, more robust range of benefits than some of these other plans, Dr. Block said. Over the long run, this approach would save more money by keeping children healthier, he said.

The AAP and the American Medical Association previously had expressed concerns about the benchmark-setting process. In letters to HHS earlier in 2012, the organizations observed that a majority of the benchmark plans did not cover some benefits that were medically necessary for children. In reading the AAP’s latest findings, other pediatric organizations, such as the Children’s Hospital Assn. and Voices for America’s Children, recommended that states use the CHIP program in particular as thebenchmark for children’s benefits.

Applying just one insurance product uniformly across states as the minimum coverage benchmark does make sense, said Chantel Sheaks, a principal in government relations with Buck Consultants in Washington who specializes in health reform issues. It would level the playing field on benefits, she said, adding that many observers were surprised when HHS decided to defer to the states on choosing benchmark plans instead of just selecting one essential benefits plan for the country.

The situation may get more complex, however, if a program such as CHIP becomes the benchmark just for children while a range of other options applies to adults, Sheaks said. She said oneplan should set the bar on essential benefits for all age groups.

At this article’s deadline, HHS had not responded to calls seeking comment.

The AAP released its report shortly before the Robert Wood Johnson Foundation came out with its own results on the impact of public insurance on closing health care access gaps for children. The ranks of uninsured children are decreasing due to more CHIP and Medicaid coverage despite a recent rise in the number of those living in poverty, the study found. Public insurance programs covered more than 31% of all children in the U.S. in 2010, an increase of more than five percentage points from 2008. In most states, these increases more than offset a drop in the portion covered by private insurance, resulting in an overall decline in kids’ uninsurance rates.

These findings “are no surprise,” Dr. Block said. “As the economy tanks, you have more people who are at the lower end of middle class who are now dumped into poverty. So, where they weren’t eligible for Medicaid and CHIP before, they are now,” meaning the public safety net is doing exactly what it’s designed to do, he said.

 

 ADDITIONAL INFORMATION: 

CHIP, Medicaid lower ranks of uninsured

A study from the Robert Wood Johnson Foundation found that Medicaid and the Children’s Health Insurance Program helped to shrink the numbers of uninsured children in the U.S. As the numbers of publicly insured children have increased over the past few years, the numbers of those with private insurance have declined.

Year

Public

Private

Uninsured

2008

25.8%

64.5%

9.7%

2009

29.1%

61.9%

9.0%

2010

31.4%

60.1%

8.5%

Source: “Keeping Kids Covered: Number of Children with Health Coverage Increases During Economic Downturn,” Robert Wood Johnson Foundation, August (rwjf.org/coverage/product.jsp?id=74768)

New Medical Care Networks Show Savings

By ABBY GOODNOUGH
Published: September 11, 2012
The New York Times
  
 

A new model for delivering medical care, one promoted by the federal health care law, holds promise for slowing the cost of treating the sickest, most expensive patients, according to a new study.

 

The sweeping law, enacted in 2010 and upheld by the Supreme Court this summer, encourages the creation of “accountable care organizations” — networks of hospitals, doctors groups and other health care providers that collaborate to keep a defined group of patients healthier. The groups share in the savings if they meet quality and cost targets.

The study, which is being published Wednesday in The Journal of the American Medical Association, found that a predecessor to accountable care organizations achieved particular savings in caring for patients eligible for both Medicare and Medicaid.

Many of those patients have multiple, severe health conditions and are especially expensive: The nation’s nine million “dual eligibles,” as they are known, make up 15 percent of the Medicaid population but account for 39 percent of the program’s spending.

In the predecessor program, a Medicare experiment that ran from 2005 to 2010, 10 doctors groups from around the country received bonus payments if they met quality targets and achieved lower cost growth compared with Medicare spending on other patients in their region.

The study, conducted by researchers from the Dartmouth Institute for Health Policy and Clinical Practice, found that the growth in spending per “dual eligible” patient slowed by $532 a year, or 5 percent, after doctors groups joined the demonstration program.

Over all, spending on dual eligibles in the program grew at only 60 percent of the rate of the control group.

“The fact that they saved any money at all is a pretty significant finding,” said Carrie H. Colla, the study’s lead author. “It shows promise in that they did significantly improve quality while modestly improving spending.”

The study found that for dual eligibles, the savings came largely from reducing hospital stays.

Savings for the overall patient population in the experiment was more modest: Spending per patient slowed by $114 a year after the 10 doctors groups joined the demonstration program.

The groups varied significantly in how much they spent per patient and how much they slowed the growth of spending over time. The doctors group that spent the most before joining the program — the University of Michigan Faculty Group Practice, based in Ann Arbor — also saved the most, an average of $2,499 per dual eligible patient annually.

But the group that spent the least on such patients before entering the program — Marshfield Clinic, in Wisconsin — also achieved notable savings, the study found, slowing the growth of spending per dual eligible patient by an average of $987 per year.

The findings come as accountable care organizations are forming around the country. According to the Department of Health and Human Services, morethan 150 such groups now serve about 2.4 million Medicare patients.

In the predecessor program, the Medicare Physician Group Practice Demonstration, participating doctor groups were eligible for up to 80 percent of any savings they generated if they could also show improvement on 32 quality measures.

http://www.nytimes.com/2012/09/12/health/policy/medical-care-networks-show-savings-study-finds.html?_r=1

(A version of this article appeared in print onSeptember 12, 2012, on page A22 of the New York edition with the headline: New Medical Care Networks Show Savings.)

Passport Health Plan Selects McKesson VITAL Nurse Advice Line Services

McKesson’s nurse advice will help 170,000 Medicaid members in Kentucky access the right health care at the right time

Business Wire | 12 Sep 2012 | 08:00 AM ET

BROOMFIELD, Colo., Sep 12, 2012 (BUSINESS WIRE) — Passport Health Plan, a provider-sponsored, community-based Medicaid managed care plan based in Louisville, Kentucky, has selected McKesson to provide nurse advice line services to approximately 170,000 Medicaid members. Available 24/7, the McKesson VITAL Nurse Advice Line service will play a pivotal role in directing callers to the appropriate level of care, helping members navigate the health care system, and improving access to doctors and other health care providers.

“At Passport Health Plan, we are committed to our mission, to improve the health and quality of life of our members. The McKesson VITAL Nurse Advice Line will help us live our mission by giving our membersimmediate access to speak with a registered nurse when they need medical advice.

This will give our members the information they need to get the right care at the right place and time,” said Dr. Steve Houghland, Chief Medical Officer for Passport Health Plan.

Averaging 25 years of experience, McKesson nurses use patented algorithm-based clinical assessment tools that help accurately direct callers to the right level of care. “The McKesson VITAL Nurse Advice Line delivers top-rated customer service, with a 94% user satisfaction rate and an average speed to answer a call of less than 30 seconds. By offering health plan members immediate access to experienced, highly trained nurses, we can helpfacilitate better health outcomes,” said Naoise Colgan, Vice President, Care Management Solutions at McKesson.

About Passport Health Plan Passport Health Plan is a unique public private partnership with the Commonwealth of Kentucky as a provider-sponsored, community-based, member-focused Medicaid health plan that serves more than 170,000 members in 16 Kentucky counties. The Plan has operated successfully over the past 15 years.

The counties of service include Breckinridge, Bullitt, Carroll, Grayson, Hardin, Henry, Jefferson, Larue, Marion, Meade, Nelson, Oldham, Shelby, Spencer, Trimble and Washington. Passport Health Plan is sponsored by the University of Louisville Medical School Practice Association, University of Louisville Hospital, Jewish and St. Mary’s Healthcare, Norton Healthcare, and the Louisville/Jefferson County Primary Care Association, which includes the Metro Louisville Department for Health and Wellness and Louisville’s two federally qualified health centers, Family Health Centers and Park DuValle. For additional information, please visit

.

About McKesson McKesson Corporation, currently ranked 14th on the FORTUNE 500, is a healthcare services and information technology company dedicated to making the business of healthcare run better. We partner with payers, hospitals, physician offices, pharmacies, pharmaceutical companies and others across the spectrum of care to build healthier organizations that deliver better care to patients in everysetting. McKesson helps its customers improve their financial, operational, and clinical performance with solutions that include pharmaceutical and medical-surgical supply management, healthcare information technology, and business and clinical services. For more information, visit

.

SOURCE: McKesson Corporation CONTACT: McKesson Health Solutions Michelle Malgesini, 303-664-6410 michelle.malgesini@mckesson.com Copyright Business Wire 2012 -0- KEYWORD: United States

Forbes OpEd – Medicaid Gambit

 

Op/Ed
|
8/23/2012 @ 12:13PM |359 views

Fools’ Gold Rush: Obamacare And The Medicaid “Opportunity”

 

Senate Passes Insurance Industry Aid Bill

(Photo credit: Mike Licht, NotionsCapital.com)

By J.D. Kleinke

You know we’ve gone through the looking glass when the hottest health care money on Wall Street is chasing Medicaid.

No, I didn’t mean Medicare, the $560 billion per year federal program for insuring the elderly that has launched a thousand IPOs. The current darling of health care investors is Medicaid, the hybrid federal-state program for insuring the poor that now dominates, and often overwhelms, state government budgets.

Last month, Wellpoint agreed to pay $4.5 billion for Amerigroup, a Medicaid managed care company, representing a nearly 50% premium over Amerigroup’s market price.  Not to be outdone, Aetna this past week purchased Coventry for $5.7 billion, which also services Medicaid populations. These deals and several others like them rumored to be in the pipeline have driven up the share prices of Amerigroup’s competitors – other Medicaid managed care companies like Centene and Molinas – in anticipation of the latest round of monkey-see, monkey-acquire deals by health insurers.

Why the gold rush into Medicaid, the poorest, toughest segment of our health care system? Are there really fortunes to be made squeezing margins out of the pittance – $4,314 per year for adults, $2,717 for children – spent on the most destitute Americans? Wellpoint, Aetna, Independence Blue Cross, and other major insurers rushing in seem to think so, for two reasons.  First, those pittances roll up: analysts estimate that the enrollment of an expected 16 million new Medicaid beneficiaries under Obamacare could generate $40 billion in potential revenue. Second, buried in Obamacare is a forced migration of as many as nine million Americans, currently eligible for both Medicare and Medicaid, from richer Medicare plans into threadbare Medicaid programs – a transfer of the most costly and complex patients worth some $300 billion in potential annual revenue.

Big numbers, big money, and big profits, right? An inflow of the uninsured poor into the nation’s most financially sssed insurance program, combined with a systemic downgrading of benefits for the poor and disabled, will surely translate into great, uncontested corporate riches. Why shouldn’t the nation’s now largest insurer spend shareholders’ cash on what amounts to 18.4 times Amerigroup’s forward earnings on forays into the most economically distressed quarters of American medicine?

Because they will fail miserably. Unless they succeed.  In which case they will be driven, by a coalition of government budget-minders and populist scolds, into failure, thanks to a political process ever more hostile to profiteering on the sick.

In normal businesses, with willing buyers and sellers and functioning marketplaces, enormous revenue opportunities do not necessarily translate into commensurate opportunities for profit. And Medicaid is about as far from a normal business as one can imagine. It is the emergency room for our worst chronic social problems. Illiteracy, drug addiction, broken families, migrant labor, illegal immigration, teen pregnancy – you name it, and Medicaid gets to deal with it. Medicaid programs attempt, mostly through heroic individual efforts, to serve a desperately needy population of the poor, chronically ill, mentally unstable, and recklessly pregnant. They do so by overworking and underpaying the nation’s most aggrieved providers, gouging drug companies, and transferring costs wherever they can to the rest of the system.

This is why states offload these programs to companies like Amerigroup and Coventry, and why many states do not want the programs expanded under Obamacare.  Medicaid is a hybrid federal/state program because the fed does not want to manage; the states manage it only because the fed blackmails with just enough money to keep them hooked.  Obamacare attempted to double-down on this blackmail by threatening to withhold all Medicaid funding to any state unwilling to accept the expansion – a provision so coercive the Supreme Court struck it down while giving the rest of Obamacare a pass.

Despite the ruling, Obamacare proceeds apace, trying to jam between 8 and 16 million more people into the same system. (The estimate varies by a factor of two because Florida, Texas, South Carolina and Louisiana, emboldened by the Court’s decision, are just saying no.)  And the horses dragging the nine million duals into Medicaid, which will entail massive disruptions in their medical care, have also left the barn. But with $340 billion in combined potential annual revenue going into play, it would be hard for companies – starved for growth and squeezed by the profit-regulation rules in Obamacare – not to rush in with their picks and shovels.

Those Pesky Implementation Details

So how might the Medicaid gold rush actually pan out? It is difficult to imagine anything but a disaster, if you know where the miners are actually headed. There is encyclopedic health services literature documenting Medicaid’s chronic economic desperation, yawning unmet medical needs, and horrific outcomes, but a more visceral illustration of the challenge comes with a simple stroll through the waiting room of a typical Medicaid provider.  On my last visit to one, I watched a morbidly obese patient die, while slumped over in his wheelchair, among the 30 patients lined up that morning to see the doctor.  It took that doctor almost ten minutes to find his way to the waiting room to declare the patient dead, and an hour for the paramedics to show up and haul him away.

Such human misery, multiplied by tens of millions of people, rolls up into a bureaucratic colossus of breathtaking complexity. Running a Medicaid program involves coping with a jungle of paperwork, cacophony of regulations and, worst of all, sanctimony in nearly every conversation with every stakeholder. It requires constant vigilance against scam clinics, crooked providers, rogue labs, pill mills, vaporware vendors, and a scuzfest of health care bottom-feeders.  A successful day in the Medicaid “business” is measured not by goals achieved but catastrophes averted.  I have been involved in restructuring one of the Medicaid disasters the commercial health plans are suddenly so hellbent on turning into shareholder gold; from under every rock we rolled over, out would crawl something slimy, and its lawyer.

Wellpoint, Aetna, Independence, and the other insurers rushing into this business no doubt believe they have a magic formula for turning this misery into a profitable growth engine.  But such growth cannot come from the top-line: the federal and state governments funding Medicaid are already under intense political pressure to reduce deficits and spending, while expanding coverage, meaning total funding available per Medicaid enrollee – and the “duals” switched from Medicare to Medicaid – will inevitably shrink, fast. As a result, the profits needed to justify these acquisitions and the ongoing tie-up of capital needed to support them must come from cost-takeouts, from the squeezing of the Medicaid turnip.

The insurers have obviously convinced themselves there is much in the turnip to squeeze. That may certainly be true for the duals, who could benefit from coordinated case management and the other bells and whistles of “managed care.” But the real money will come in the form of arbitrage margins, as the duals are switched to Medicaid doctors and hospitals, who are paid a pittance compared with Medicare. This will work fine – for a time – if these “duals” happily tow the line and change doctors.  But history shows otherwise. People do not like to have their benefits downgraded, and they do not like  being forced to switch to cheaper doctors, especially if there are no doctors to switch to – overwhelmingly the case in Medicaid. Their doctors’ lobbyists may also have something to say about it.

As for the general Medicaid population, the single greatest medical demand placed on the program, in terms of volume if not dollars, is pregnancy and childbirth. It is the reason for half of all Medicaid hospitalizations; seven of the ten most common procedures performed during those hospitalizations are related to pregnancy, childbirth, and newborns. If cost-takeouts are the only road to profitability, are the insurers prepared to deal with pesky little matters like the public funding of birth control, abortion, home births and c-sections, i.e., with arguably health care’s ugliest culture wars?  My own experience working with insurers on the least incendiary of these issues – the silent epidemic of c-sections – is not encouraging.  C-sections account for more than 30 percent of all deliveries in the US, at roughly 1.5 times the average costs of a normal delivery, when the medically indicated rate is easily less than half that.

This would be the first place for an insurer to step in to reduce Medicaid costs, yes?  One little technical problem: aside from captive provider systems with electronic medical records like Kaiser, not a single insurer I know of in the US has any ability to affect this scandalously high rate of often unnecessary, always expensive, high-volume surgery.  Two major insurers have admitted to me that they have no systematic way of knowing who in their population of millions of covered women are even pregnant, until after they have delivered, the probably unnecessary c-section has been done, and the claims are coming in.  This might be an example of why the insurers are acquiring the Medicaid managed care companies – because they may have this expertise.  If so, no one is talking about it, because companies cannot even bring up the subject of pregnancy and childbirth among the poor without triggering the worst landmines in the health care policy debates, as we have witnessed since the daylighting of the Obamacare birth control mandate.

No Good Implementation Goes Unpunished

Let’s give the Medicaid gold rushers the benefit of the doubt, and assume they pull off something like this. A few managed care type miracles, they lower costs for Medicaid patients without actually harming them and, in the case of unnecessary surgeries, actually help some of them.

Imagine also they pull off the trick of shuttling the “duals” from Medicare to Medicaid.  These highly motivated patients and their doctors somehow don’t scream bloody murder, and the insurers earn arbitrage margins on the switch. How long will financially stressed governments fund these margins, before putting the turnip squeeze on the insurers themselves? For those insurers who find Medicaid gold, what happens next? They will be vilified by the public as corporate, profiteering, care-denying murderers of the poor, and their margins will be mowed down with the stroke of the legislative pen.

Every health care sector has been on the receiving end of this at some point – hospitals, dialysis, home health, the list goes on – usually right after its own gold rush.  The government programs that represent an ever larger share of health care purchasing in the US do not overtly regulate profitability – that would be transparent and at least manageable. Instead they regulate profits implicitly, line-item by line-item via reimbursement adjustments, selective and punitive enforcements of providers, a whole gamut of bureaucratic tricks designed to avoid honest political debate about the role of money and medicine.

The health insurers already got a face full of cold water with this under Obamacare: new administrative cost and profit margin regulations set at completely arbitrary numbers. Those numbers will appear generous when the Medicaid gold proves to be nothing more than a very big flash in a very broken pan.

J.D. Kleinke is a Resident Fellow of the American Enterprise Institute and a former health care executive.  His latest book is Catching Babies, a novel about the training of obstetrician/gynecologists.

Centene Deal with Ohio Moves Forward

Ohio to move forward on Medicaid deal with Centene

August 19, 2012 11:38 am  •  ASSOCIATED PRESS

COLUMBUS, OHIO • A judge dismissed a lawsuit Thursday that had blocked Ohio from moving forward with certain Medicaid contracts, including one with Clayton-based Centene Corp., clearing the way for the state to proceed with the tentative agreements it has with five health plans, state officials said.

Aetna Better Health of Ohio had sued the Ohio Department of Job and Family Services in a dispute over the scoring of the contract applications. But in a ruling from the bench, a Franklin County Common Pleas judge dismissed the case during a hearing on the issue, Kasich administration officials said. The judge’s office did not immediately respond to a call for comment.

The eventual contract winners will provide health care services to more than 1.6 million poor and disabled people, or roughly two-thirds of the state’s Medicaid population. The contracts provide billions in government work to the companies.

State officials had tentatively selected Aetna for a contract in April and then revoked the decision in June. Aetna claimed the state retroactively changed the definition of certain requirements in its request for contract applications, and the company wanted its contract reinstated.

An Aetna spokesman on Thursday wouldn’t address whether the company planned to appeal the court decision, but said it was disappointed.

“Aetna has a substantial presence in the state and we remain committed to doing business in Ohio,” said spokesman Scot Roskelley.

Ohio health officials praised the lawsuit’s dismissal.

“The Court’s decision confirms what we’ve believed all along: we reached the right decision and we did it the right way,” Ohio Medicaid Director John McCarthy said in a joint written statement with Greg Moody, director of the Governor’s Office of Health Transformation.

The health plans chosen were said to be the highest-scoring applicants in the state’s Medicaid contract process. But five of six companies that lost bids for the contracts filed formal protests with Ohio officials in April, claiming flawed and inaccurate scoring.

A state review of the contract applications changed how points were scored. And on June 7, state officials said Aetna Better Health of Ohio and Meridian Health Plan of Ohio would no longer get the contracts.

Instead, Molina Healthcare of Ohio Inc., a subsidiary of Molina Healthcare Inc., and Buckeye Community Health Plan, a subsidiary of Centene, were picked.

Ohio has also selected CareSource, Paramount Advantage and United Healthcare Community Plan of Ohio.

The state review found that Meridian should have been disqualified because it didn’t have a necessary health-insuring corporation license or an application pending for one at the time of its bid. And Aetna lost many points because the state said the company did not provide evidence of full liability for certain plans with other states.

The contract awards to the five plans remain preliminary. The managed care organizations must first pass an assessment, in which they must prove that they will be ready and able to provide care when enrollment begins in January.

State officials said they were still reviewing whether the timeline for enrollment could change because of the lawsuit.