The Medicaid expansion...expanded?

I have a post up at healthinsurance.org that mulls over this forecast from Reed Abelson's article about ACA replacement:

The Trump administration and Congress “are not going to pull out the rug from people,” said Dr. J. Mario Molina, the chief executive of Molina Healthcare, a for-profit insurer. He predicted that the earliest the law could be repealed was 2018, and that it would be replaced with something like a modified version of Medicaid, the government insurance for poor people. “The debate is not around the what, but around the how,” he said.

It's not surprising that the CEO of a Medicaid managed care company would anticipate Medicaid managed care for all who need it. For Trump, it would have the benefit of simplicity. But it would also require commitment, follow-through, and bucking Republican hatred of Medicaid, so we'd have to put it in the "highly unlikely" box.

But I think it would be worth doing. And a suitable "modified version of Medicaid" already exists - as explained in the post, which I hope you'll read.

No, Virginia, ACA administrators do not need to "retain" the prior 8 million signups in 2015

Tis the season for preview articles spotlighting the challenges of signing up more uninsured and retaining the newly insured in Year 2 of the Affordable Care Act. The New York Times' Reed Abelson, in an otherwise excellent overview, repeats a common fallacy:

the Obama administration is expected to try to persuade about five million more people to sign up while also trying to ensure that eight million people who now have coverage renew for another year.

No one can or will try to ensure eight million renewals, because a very large proportion of 2014's enrollees -- perhaps half or more -- will not need to renew their coverage. They will be covered by new employers, or new spouses, or newly employed old spouses, or they will lose income and become eligible for Medicaid, or they will go on disability, or die, or, or, or...

Is there a hole in the heart of U.S. healthcare cost control?

It's a given that the sine qua non of providing universal access to quality healthcare is effective cost control. That's especially true in the United States, where healthcare costs 50% more per capita than in the next most expensive country, Switzerland, and more than twice the OECD average, notwithstanding the fact that the U.S. is the only wealthy country that does not insure all its citizens.

This high-cost starting point is the Affordable Care Act's pre-existing condition, the reality underlying bitter complaints about high premiums for the unsubsidized and narrow networks in exchange plans.  As Yogi Berra might say: if you want to make healthcare affordable to all, healthcare has to be affordable. To be successful, the ACA has to bend the cost curve -- or at least, maintain the windfall spending growth slowdown that seems to have taken hold over the last ten years -- at the same time it's expanding access.

The ACA's main efforts to control costs fall broadly into two categories. First, in Medicare payments, a series of pilot programs seek to move healthcare providers away from fee-for-service, via per-patient and per-episode payments and incentives to reduce costs and meet quality benchmarks. Second, in the exchanges, competition and price pressure induce insurers to reduce costs by a) putting a good deal of the cost burden on patients, via high deductibles and co-insurance payments, and b) offering narrow networks -- that is, limiting covered doctors and hospitals to those who meet the insurer's price (and, theoretically, quality) demands. In the broad category of putting price pressure on payers of all kinds also belongs the ACA's excise tax on the most expensive employer-sponsored plans, which is driving employers too toward both narrow networks and more cost-shifting to employees.

Cost control without cost controls?

Atul Gawande has expressed the hope that by seeding myriad experiments, the ACA will grow a few cost-saving sequoias  -- as an analogous outpouring of experiments and demonstration projects spurred by the U.S. Department of Agriculture revolutionized food production and drove down food prices in the early 20th Century.

I hope Gawande is right. He may be. But it might also be argued that all this experimentation is "designing around" the one cost control element that works in every other wealthy and is lacking in the U.S.: uniform pricing per procedure, imposed or at least overseen by government. (It's "overseen" in Switzerland, where hospital rates in each canton are negotiated by hospitals and insurers acting collectively, subject to approval by the cantonal government. Physicians are paid on a national fee-for-service scale.) Without that core shift in leverage away from healthcare providers, reforms are balkanized and incentives may fly in various directions.

Obama's baby: the Independent Payment Advisory Board for Medicare

In two recent posts, here and here, I noted that Obama's long-range budget thinking tends more toward tax hikes than radical budget cuts -- or more accurately, more toward tax hikes than short-term cuts.

The key to Obama's thinking on the structural deficit, again, is bending the health care cost curve. Two stories in today's Times point toward how that may be done over time -- and why Obama fought so hard to retain a strong Independent Payment Advisory Board (IPAB) for Medicare in the PPACA, along with a host of pilot programs to test new payment systems.

First, David Leonhardt spotlights a not-so-modest proposal:

In the new issue of the journal Health Affairs, two doctors [Dr. Bach and Dr. Pearson], both former Medicare officials, have laid out a plan to do so. It would give expensive new treatments three years to prove that they worked better than cheaper treatments, or their reimbursement rates would be cut to that of the cheaper treatments.

To illustrate the need and possible workings of such a plan, Leonhardt returns to a topic he covered in depth during the health care debate (cited by Bach and Pearson): treatment for prostate cancer. Briefly, three forms of radiation are now available, costing, respectively, $10,000, $42,000, and $50,000 on average (naturally, the oldest is the cheapest; the newest, the most expensive, requiring massive new equipment investments from practitioners). There is no evidence that any of these treatments is more effective than the others. Medicare pays for all three without distinction. Providers' profit margins, needless to say, are much higher on the more expensive treatment.  Under the Bach-Pearson proposal, if the newer treatments were not proved more effective within the three years, Medicare would only reimburse $10,000 for each treatment.

Such proposals might ultimately prove to be within the power of IPAB to implement, though there are severe constraints. James C. Capretta of the Ethics and Public Policy Center explains how IPAB works:

To hit its budgetary targets, the IPAB is strictly limited in what it can recommend and implement.  It can’t change cost-sharing for covered Medicare services.  Indeed, it can’t change the nature of the Medicare entitlement at all, or any aspect of the beneficiary’s relationship to the program.  The only thing it can do is cut Medicare payment rates for those providing services to the beneficiaries. 

This wasn’t an accident.  It reflects the cost-control vision of those who wrote the bill. They believe the way to cut health care costs is with stronger federal payment controls.  They envision the IPAB coming up with new payment models which will push hospitals and physicians to emulate today’s most efficient delivery models.   Call it “government-driven managed care.”