January 23, 2015

Thoughts on Gov. Nixon’s State of the State Address

The president’s State of the Union address is always filled with lots of pomp and formality. It’s the closest thing we have to a monarch addressing Parliament. On Wednesday evening, we had the mini version of that same spectacle when Gov. Nixon gave his State of the State address at the Missouri Capitol. In it, he outlined his priorities for the upcoming year. You can watch the speech here or read a transcript here.

There were some appealing aspects to his speech, like his thoughts on how to address our transportation infrastructure. Gov. Nixon stated:

One option is a toll road on Interstate 70. The Highway Commission’s recent report showed that this approach could make I-70 better and safer … and free up tens of millions of dollars for other roads around the state. Trucks and out-of-state vehicles that do the most damage to I-70 would have to pay their fair share. That deserves serious consideration. Here’s another option: the gas tax. Missouri’s gas tax hasn’t gone up a penny in nearly 20 years. It’s the fifth-lowest in the nation.  With gas prices as low as they are now, this is worth a very close look.

Kudos to Gov. Nixon for at least considering user fees as a way to finance transportation in the state. My colleague Joe Miller has written extensively about the benefits of tolling and how gas taxes are a better way to fund roads than the sales tax. Tolling is a fair way of financing improvements to Interstate 70 because it can be done in such a way as to get much, or even most, of its revenues from commercial vehicles, which cause the most damage to our roads and highways.

However, not everything in Gov. Nixon’s address was good policy. The governor still insists on expanding Medicaid.

Now I’d like to talk about another challenge … but an even greater opportunity: Strengthening and reforming Medicaid. Let me remind you, a lot has changed since last year. Since I stood here last year, Missouri taxpayers have sent $2 billion to Washington. Those dollars are being used right now, in other states, to reform and improve their Medicaid systems. That’s 2 billion Missouri taxpayer dollars.  And this year, there’s another $2 billion at stake. If we keep standing still, that’s $4 billion Missourians will have lost to other states by the end of this year. Across the country, people are moving past the politics.

To help you decipher politico speak, when the governor talks about reforming Medicaid, he really means expanding Medicaid. Show-Me Institute Senior Analyst Patrick Ishmael has done a tremendous job explaining why expanding Medicaid is a bad idea. Not only would it strain future Missouri budgets by adding billions in new spending (Medicaid already takes up 22 percent of Missouri General Revenue expenditures, up from 17.5 percent just 10 years ago), but the program doesn’t work. The poor should get decent health care; Medicaid fails on that front.

Gov. Nixon raises the point about Missouri taxpayers sending money to Washington, and by failing to expand Medicaid, other states get to spend our money. This is also false. Patrick lays out why this claim is wrong in his most recent Forbes piece. First, Missouri is a net recipient of federal tax dollars. This means that Missouri gets more in federal aid than it sends out in tax dollars. Also, the money for Medicaid expansion is not like some large pie that gets distributed to the states that participate in the expansion. Each state has its own allotment of money to help pay for expansion. If the state doesn’t expand Medicaid, the money isn’t reallocated. That’s why you are seeing the overall cost of Medicaid dropping. Fewer states are signing up for expansion, and thus the actual cost growth of Medicaid is falling below what was projected. If the money was being redistributed, actual cost growth would be closer to projections.

Gov. Nixon’s speech was a mixed bag. The legislature should feel free to ignore the bad ideas. I hope, though, that the good parts mentioned above do more than just receive serious attention. There are serious issues in this state that need addressing, and we need pro-market solutions.

January 7, 2015

What Do Home Care Union Executives Really Want: A Wage Increase for Their Workers or a Union Contract?

residentialworker1On Christmas week, while many Missourians were exchanging presents or grabbing Chinese food, members of the Missouri Home Care Union were hard at work lobbying the governor. Ostensibly seeking higher pay for the home care attendants the union represents, the union placed carolers outside the governor’s mansion singing Christmas songs with lyrics altered to convey their message. Irving Berlin’s “White Christmas” became “I’m Dreaming of a Fair Governor,” and St. Louis Public Radio captured union members singing several bars of “home care workers are coming to town.”

The odd thing about this press junket is that the governor wants to give home care workers the pay increase the union is asking for, but the union objects to the method the governor proposes to give home care workers this pay bump. From the governor’s Office of Administration:

“The governor supports the wage range provision of the labor agreement between the Missouri Quality Home Care Council and the Missouri Home Care Union that provides a pay raise for home health care workers. To ensure the wage range provision of the agreement has the full force and effect of the law, the administration will be implementing the wage range recommendation through an administrative rule.”

Jeff Mazur, executive director of the union, responded by calling the governor’s proposal to enact the pay raise “unnecessary and unwise.” It appears union executives like Mazur are really after a governor’s order implementing a collective bargaining agreement. We’ve seen this before in other states.

Home health care unions, like the Missouri Home Care Union, formed to represent home care attendants who received Medicaid funding for acting as a personal assistant of a person in need of care. In many states, such as Illinois and Michigan, once home care unions were formed, they negotiated a union contract that forced all home care workers to pay a portion of their check to the union, whether or not the worker wanted union representation.

Imagine you’re enrolled in Missouri’s home care program and you’re getting a check from the government to help offset the cost of taking care of a disabled relative. Now imagine that the state bound you to a union contract against your will, and a portion of your check is going to union executives and their pet political causes.

Governor Nixon is right to be cautious of the union’s demands. If Missouri is better off increasing payments to people enrolled in the home care program, it can do so without entering a collective bargaining agreement. Such collective bargaining agreements can have bad consequences for the home care assistants subject to them, who often cannot afford to have their benefits tapped into by a union that they do not support.

December 11, 2014

Obamacare’s Medicaid Expansion as “Job Creator”? Not So Fast

One of the Left’s favorite talking points for why states should expand Medicaid is that doing so will mean more jobs at Missouri’s hospitals. That argument is attractive, at least superficially; if the government spends more money on health care, the assumption could be that more people will be hired by hospitals. In other words, it’s “the stimulus” debate all over again: If you spend it, there will be jobs.

But is it true that Medicaid expansion actually leads to hospital job growth? So far, it sure doesn’t look like it (emphasis added).

U.S. healthcare employment began to accelerate after the first three months of the year and the uptick caught the attention of economists with the Altarum Institute, who conducted the analysis to determine whether hiring grew faster in Medicaid expansion states. It did not, they found. In fact, growth was faster in states that did not expand Medicaid, said Ani Turner, deputy director of Altarum’s Center for Sustainable Health Spending.

Proponents of expansion have touted the economic benefits of increased Medicaid enrollment, as they make their case to reluctant state governors and lawmakers. Indeed, hospitals in states that expanded eligibility are seeing less bad debt and fewer uninsured patients. But it might become harder to argue that Medicaid expansion is a jobs engine if the numbers don’t bear it out.

Healthcare averaged 14,271 new jobs a month from April to October in states that did not expand Medicaid, up 117% from the preceding 12 months. The healthcare employment increase in Medicaid expansion states over 2013, meanwhile, was 92%.

You can find one of Altarum’s briefings on the subject here. Missouri is fortunate that by rejecting the expansion it can carefully watch the experiences of other states who did expand their Medicaid programs—decisions oftentimes based on the specious promises of special interests and ambitious politicians. As the numbers come in and oft-cited expansion states like Arkansas consider reversing course, the Show-Me State’s hesitance to jump into the Medicaid expansion pool looks all the more appropriate.

December 9, 2014

Gruber on Arkansas Private Option: “Mathematically Impossible” to Be Budget Neutral

November was a bad month for Obamacare. Over just a few weeks, voters not only handed a series of punishing defeats to Obamacare at the ballot box, but the Supreme Court unexpectedly granted a hearing to the lawsuit King v. Burwell, which poses a serious threat to the future of the law.

Those setbacks haven’t quite kept Missouri’s Obamacare supporters from pushing ahead with their Medicaid expansion plans. In fact, some Missouri politicians have tried to use Arkansas’ Medicaid “transformation” as a reason to expand Medicaid in Missouri. But recent video revelations confirm that the state’s decision not to follow Arkansas’ lead was the right call.

In April 2013, Arkansas passed a Medicaid expansion more commonly known as the “Private Option.” The expansion uses federal Medicaid dollars to pay for Obamacare exchange health care plans for newly eligible Medicaid beneficiaries. Supporters claimed that the plan would save Arkansas money, but as it turns out, that was likely never going to be the case. Indeed, Obamacare architect Jonathan Gruber, who hailed his law’s lack of transparency, said as much . . . in October 2013, in a video only now coming to light:

The video is only the latest setback for Arkansas Obamacare supporters. After losing his State Senate primary, Arkansas’ chief Obamacare Medicaid architect won’t be returning next year to the legislature, largely due to his support of the expansion. And after last month’s general election, Arkansas might actually roll back its Obamacare expansion.

Missourians are being sold a bill of goods on Obamacare’s Medicaid expansion, just like Arkansas was before them. We deserve better than tired, old political strategies, and rather than look at Arkansas as an example to be followed, Missouri should look at it as a cautionary tale to be avoided.

October 29, 2014

Indebting Missouri’s Children and Expanding Government? That’s Just Wimpy

Although the Popeye the Sailor cartoons were made long before I was born, I was a connoisseur of the VHS copies I had as a kid. Along with Popeye, the shows typically featured his nemesis, Bluto, and his love interest, Olive Oyl, but perhaps the most memorable character from the series outside of Popeye himself was his companion J. Wellington Wimpy. Unfortunately, he’s memorable for all the wrong reasons.

Wimpy is soft-spoken, very intelligent, and well educated, but also cowardly, very lazy, overly parsimonious and utterly gluttonous. He is also something of a scam artist and, especially in the newspaper strip, can be notoriously underhanded at times.

In the animated cartoons, Wimpy comes off as someone who not only is unreliable in his words but, ultimately, self-aggrandizing in his behavior. His signature phrase, “I’ll gladly pay you Tuesday for a hamburger today,” hints that Wimpy will never pay you at all.

Even as a kid, Wimpy’s character was troubling because, like most children, I was well-acquainted with the idea of “fairness.” Wimpy was always willing to make others worse off for his own immediate benefit, and because of Wimpy’s generalized character issues, it was just hard to like him.

Wimpy would make you worse off . . . and he’d do it with a smile. When I think about how government and its politicians operate, that is, unfortunately, one of the images that comes to mind.

Perhaps this Wimpy image is most appropriate when it comes to the Obamacare debate in Missouri. On the one hand are the true believers who, despite evidence to the contrary, believe that government health care is the best health care. On the other hand are the Wimpys of the debate, whose support of Obamacare’s Medicaid expansion has more to do with their near-term interests than the long-term consequences of their actions. Those consequences include billions of dollars in new spending and debt saddled on future generations to fund a failing and flailing health care program, meant to explicitly benefit the well-connected and highly profitable hospital industry. So before we pick up the Obamacare expansion fight in 2015, let’s be clear: that’s just wrong.

I have no problem disagreeing with and debating folks who have a worldview that expanded government is better policy than small government. We can win that debate on the facts. But I have a serious problem with those out there who have concluded that expanded government is better politics—the contingent that’s calculated that they won’t be paying for their hamburger when the bill comes due.

That’s just Wimpy. Missouri needs genuine Medicaid reform. Fix Medicaid. Don’t expand it.

October 22, 2014

Missouri’s Medicaid Program Striking Out Intended Beneficiaries

In baseball, getting a hit three out of 10 at-bats could make you an All-Star, and maybe even a Hall of Famer if you do it consistently enough. But while batting .300 is pretty good for the National Pastime, in most other contexts succeeding only three out of 10 times won’t get you accolades.

That point was hit out of the ballpark over the past few days.

Last week mid-Missouri’s ABC 17 reported on the story of a pregnant woman who had been trying to sign up for Medicaid benefits, only to have her paperwork lost and her calls unreturned by the Department of Social Services (DSS). When the issue came up at a House hearing, the DSS admitted it had to do better, but it also admitted something astonishing (emphasis mine).

The Department says thirty percent of its callers are having their needs met, which Campbell acknowledges is too low. She says staff are being reassigned to taking calls and other changes are being made to improve that percentage, but [State Rep. Sue] Allen says the situation remains frustrating.

“In a company, in a private business, people would be gone,” observes Allen.

Missouri’s Medicaid program is deeply broken, and yet some of our politicians think now is the time to expand it with Obamacare. It isn’t. In baseball and business, step one would be to fix what is wrong and then build upon successes, not to double-down on a bad system and bad players. That’s what Missouri should be doing: fixing Medicaid, not making an already bad situation worse—especially for the patients the program was supposed to help.

Missouri’s Medicaid system is institutionally well below the Mendoza line. It’s time to rethink the program.

October 15, 2014

Increasing the Health Care Supply to Meet Health Care Demand

Robert Graboyes is a senior research fellow for the Mercatus Center. Later this month Dr. Graboyes will release a report about health care innovation, which I intend to talk about at some length on this blog. In the meantime, I want to re-up the Reason video from earlier this year. The video features Dr. Graboyes talking about a wide array of reforms that would get care to the neediest among us. If you’ve read our work before, you’ve probably heard of many of the recommendations he talks about, including regulatory, Medicaid, certificate of need, and scope of practice reforms. I highly recommend the video, particularly the section about prosthetics and 3-D printing, which captures well how quickly the market for health care could change in the coming years.

October 14, 2014

Free-Market Health Practitioners Get a Group

Late last month, supporters of the newly established Free Market Medical Association (FMMA) converged on Oklahoma City for the organization’s first ever annual conference. As the name suggests, the organization is intended to bring doctors and providers together to share ideas and defend “the practice of free market medicine without the intervention of government or other third parties.” Given the sorts of reforms American health care needs these days, the FMMA’s entry onto the national stage is a welcome one.

Along with noting the FMMA’s existence, there’s also a reason worth teasing out for why the FMMA held its first conference in Oklahoma City. The short answer is “it’s where the FMMA’s organizers are based,” but a more complete answer is it’s where some very interesting free-market business models are being put into practice.

Advocacy of free market health care is the longtime passion of Dr. Keith Smith, co-founder of the Surgery Center of Oklahoma [and the FMMA]. The center began to post fixed prices for common medical procedures years ago, and has provoked widespread admiration within the medical profession for efficiency, reasonable cost and frequent support for those who are less fortunate.

At the Surgery Center, Dr. Keith Smith and Dr. Steve Lantier have established an operational structure and market-oriented billing as explicit alternatives to the third-party payer systems that now dominate U.S. health care.

The center posts online an up-front price for medical procedures in diverse areas of practice, including orthopedics, ear/nose/throat, general surgery, urology, ophthalmology, foot and ankle, and reconstructive plastics. In all, a total of 112 procedures are listed.

Translation? Transparent pricing plus direct pay works out to a pretty good business model premised on competition and service. Price transparency is huge because it’s generally pretty difficult to price shop in the U.S. health market, in part because the third-party payer system disincentivizes it, and because many providers aren’t willing to publish those prices. That makes it difficult to force prices down through competition. Posting prices should be common practice in the industry; unfortunately, it’s not.

It’s good to see folks in the movement getting organized when it comes to demonstrating that, yes, free-market reforms to health care do exist and can work. In the coming months, Show-Me readers will hear a lot more about free-market health care alternatives. Stay tuned.

August 1, 2014

Show Me Better (Part 4): Certificate Of Need And Market Power

How far are you from the nearest hospital? Maybe you wonder why there is a single mega-hospital 10 miles away but aren’t any smaller ones nearby. Part of the explanation may be certificate of need (CON) regulations.

A 2004 report by the U.S. Department of Justice and Federal Trade Commission found that CON programs “pose serious anticompetitive risks that usually outweigh their purported economic benefits.” So far, I have written about how CON regulations can limit access to care and have been shown to not effectively control costs. CON regulations have the potential to stifle competition and grant existing hospitals monopolies over certain regions. Some existing hospitals may even attempt to use these regulations to prevent competition from entering the market.

How does this play out in Missouri?

In the past, any time a new hospital wanted to open up in Missouri, it had to apply for a CON – irrespective of its size and cost. A revision to Missouri’s CON rules changed the criteria for review from every new hospital to every new hospital whose cost is at least $1 million.

In April 2010, Patients First Community Hospital expressed its intent to build a small hospital in Saint Louis County that did not meet the new threshold for certificate of need review. Shortly thereafter, a regional rival, St. John’s Mercy Health System, filed a lawsuit against the Missouri Health Facilities Review Committee and Patients First. St. John’s challenged the legitimacy of the new $1 million amendment and construction of the new hospital. In 2012, the Missouri Supreme Court ruled that the new criteria for review was perfectly legal, thus giving Patient’s First the green light for the project.

Despite the ruling against St. John’s, this is an excellent example of a hospital using the legal system in an attempt to stomp out the competition, all under the pretense of CON regulation. It took about two years for Patients First to have its plan approved. These sorts of delays can deprive patients of new, much-needed medical facilities.

The state should not allow such an environment to exist.

July 29, 2014

Show Me Better (Part 3): Certificate Of Need And The Cost Of Care

As consumers, we like to get more for less – especially when it comes to our health. Usually we feel ripped off if we receive a lower-quality service for the same (or higher) cost of a better service. In a previous blog post, I discussed how, in some cases, certificate of need (CON) programs can be the very reason patients are forced to receive inferior care from less-skilled doctors. Additionally, CON regulations likely do not save patients much money, if any.

In a world of limited resources and virtually unlimited wants, we are forced to make trade-offs. A decrease in the quality of health care might be acceptable if CON led to lower costs. Proponents of CON argue that this regulation does contain the cost of care by preventing the “duplication of services” in a given geographic area. To illustrate this chain of reasoning, let’s say that Barnes-Jewish Hospital and Saint Louis University Hospital buy “too many” MRI machines – as a result, many of the new MRI machines go unused. Because of the outlay, CON proponents assume the two hospitals will probably charge higher prices for MRI scans to make up for the mistake.

There is evidence to suggest that theory is not well founded. One evaluation of Illinois’ CON program found that “there is little direct broad proof that overcapacity duplication leads to higher charges.” CON regulations may result in “tangible savings on the actual costs of specific medical technologies” but these programs tend to “redirect expenditures to other areas.” In other words, CON may actually prevent hospitals from spending too much on a certain type of medical technology, but any savings will be spent on other items instead of being passed onto patients. One study even suggests that strict CON programs may actually increase health care costs by as much as 5 percent.

What use is a program that can be delivering sub-optimal health care without cutting costs?

July 22, 2014

Show Me Better (Part 2): Certificate Of Need And Access To Care

One of the benefits of free markets is their ability to match buyers with sellers. Potential customers assess the supply of goods and services, the parties agree to the prices, and, generally speaking, purchases are efficient – delivering comparable value to both parties.

Unfortunately, Missouri’s certificate of need (CON) program may be erecting barriers to the market functioning efficiently when matching care providers and care consumers. A recent working paper by the National Bureau of Economic Research examined how hospital entry deregulation in Pennsylvania affected the market for cardiac revascularization. Because Pennsylvania eliminated its CON program in 1996, economists were able to compare clinical outcomes before and after the program’s repeal — the ideal conditions by which to conduct an experiment. The researchers found that “free-entry improves the match between underlying medical risk and treatment intensity” and “improved access to care.”

Another study conducted in the same state, on the same topic, found that the post-deregulatory market did a better job at matching the appropriate procedure to the appropriate risk level. After deregulation, better doctors also saw an influx in demand for their services.

Removing the CON program in Pennsylvania empowered patients to attain better care from better doctors. Certainly, a market uninhibited by cumbersome regulations does a better job at matching the right patient to the right procedure, performed by a better doctor, than a nine-member regulatory board. Missouri could follow Pennsylvania’s lead in doing away with the micromanagement and creating a system conducive to competition and innovation.

July 21, 2014

Show Me Better: Assessing Certificate Of Need In Missouri

One of the most obvious examples of a massive government burden on our health care system is the Affordable Care Act (Obamacare), but Obamacare does not have a monopoly on onerous government regulations in Missouri. In fact, some state-run regulatory programs, such as certificate of need (CON), may also play a role in increasing the cost of care and decreasing access to care for some of the state’s neediest patients.

A certificate of need is a legal document the state issues to allow a health care provider to expand, modify, or construct certain health care facilities. In Missouri, a nine-member committee reviews applications for certificates of need and administers them in accordance with its own rules. For example, last year, the Lafayette Health Center received a CON to construct a new $40 million hospital. Based on the committee’s rules, Lafayette likely paid the review committee a hefty $40,000 application fee.

One of the original purposes of the program was to guarantee health care access by limiting competition in a particular region. Proponents assert that, with less competition, the likelihood of a hospital going out of business will be reduced, hopefully ensuring a sufficient level of care for citizens near the health care provider. Yet, empirical evidence suggests that CON programs neither control costs nor improve health outcomes. Indeed, they may actually hamper access to care and patient choice, at least under some circumstances.

If the certificate of need law could be hurting the people it was intended to help, should it be reformed? Abandoned? These questions are central to why we, as Missourians, ought to take a serious look at the necessity and efficacy of the state’s CON program. In future posts, I will review how CON regulations impact health care costs, access to care, and clinical outcomes.

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