April 3, 2014

Inexcusably, Medicaid Expansion Proposal Omits More Than $1 Billion In New State Costs

The leading “Medicaid Transformation” proposal in the Missouri House purports to deliver a Medicaid expansion that effectively makes the state money. Suffice to say, that’s a highly questionable claim, and I don’t even have to cut apart any of the bill’s dubious calculations to reach a very different conclusion. Why? The issue is startlingly simple: The bill’s proponents simply did not account for more than half of the new costs of the Medicaid expansion.

Let me explain how that happened. There are two populations that we discuss regarding Obamacare’s Medicaid expansion. The more obvious of the two is the population that would become “newly eligible” under the law — those who, by virtue of the law’s passage, would now qualify for Medicaid coverage up to 133 percent of the federal poverty level. The Kaiser Family Foundation (KFF) estimated that had Missouri expanded its broken Medicaid program after the law passed, the newly eligible population would have cost the state more than a billion dollars from 2013 to 2022. The House expansion bill’s hypothetical budget only really integrates that group into its calculation starting in 2015.

It’s the second population, however, that is an even bigger budgetary concern, and it is substantively ignored in the expansion bill. That group is the “currently eligible” population: those who currently qualify for Medicaid but only become enrolled as part of the expansion’s enrollment push. The phenomenon is sometimes called the “woodwork effect,” as this population that has always been eligible emerges and begins leveraging the Medicaid entitlement for the first time. KFF estimated that over that same period, Missouri would pay $1.6 billion for those new enrollees. That’s more than a doubling of the expansion’s total costs. Without even addressing any of the other problems in the bill’s budgetary forecast, how would the state pay the currently eligible cost of the expansion? I haven’t heard an answer to that question for years now.

You can read more about the issue here. So far without expansion, Medicaid enrollment in Missouri has actually declined; under the circumstances, it is reasonable to suggest that implementation of the expansion itself would initiate the uptick in woodwork costs that KFF forecasted. It is inexcusable that these costs have not been accounted for in the House proposal, but rest assured, this isn’t the first Medicaid expansion proposal I’ve read that failed to integrate these expenses.

Spending is no substitute for reform of a thoroughly broken Medicaid program, especially when the forecasted costs are so woefully understated. If it wasn’t clear before, it should be now: reform is where the legislature should focus its attention, particularly this late in the session.

March 12, 2014

Hospital Price Transparency Bill A Bold And Necessary Reform

In the coming days, the Show-Me Institute will release a policy brief about what Missouri can do to improve access, cost, and quality of care for Medicaid patients. Authored by yours truly, the paper outlines five serious reform ideas, and one of those ideas focuses on price transparency from hospitals.

One of the biggest obstacles to greater competition and lower prices in the health care arena is the absence of readily accessible and easily comparable pricing information for common medical procedures. For as many things as the Affordable Care Act got wrong, it got right its requirements for greater price transparency. A review of the data last year by the U.S. Department of Health and Human Services hammers this point home.

For example, average inpatient charges for services a hospital may provide in connection with a joint replacement range from a low of $5,300 at a hospital in Ada, Okla., to a high of $223,000 at a hospital in Monterey Park, Calif.

Even within the same geographic area, hospital charges for similar services can vary significantly. For example, average inpatient hospital charges for services that may be provided to treat heart failure range from a low of $21,000 to a high of $46,000 in Denver, Colo., and from a low of $9,000 to a high of $51,000 in Jackson, Miss.

There are numerous reasons costs can vary wildly from hospital to hospital, and quality of care is almost certainly a component. But if you’re from California and could travel to Oklahoma instead to pay less than 3 percent of the cost of a joint replacement, wouldn’t you want to know that? If you could travel across town to another hospital to pay one-fifth the cost for a procedure, wouldn’t it be important to have that information? With few exceptions, state transparency requirements for hospital pricing are pretty awful nationwide, and consumers are hurt when that information is effectively withheld.

That is why I am very much a fan of Missouri Senate Bill 684, sponsored by Missouri Sen. Jason Holsman (D-Jackson County), which would help deliver precisely that sort of information. Coincidentally, the bill will be heard in a Senate committee later this week — right about the time we release my policy brief. I intend to submit testimony on the bill.

SB 684 would be a great stride forward for Missouri health care consumers. I hope Sen. Holsman’s colleagues take the proposal very seriously.

March 7, 2014

‘Right To Try’ Bill Heard In Missouri House

Last week, I testified on Missouri House Bill 1685, known as “Right to Try” (or as Garrett Haake of KSHB 41 in Kansas City calls it, “the Missouri Buyers Club bill.”) This legislation would allow terminally ill patients to use experimental medications that have not yet completed Food and Drug Administration (FDA) testing, but have passed “Phase One” of the FDA’s approval process. As KSHB explained:

Phase one refers to the first phase of FDA approval in which a drug has been proven to be safe for human consumption, but not thoroughly tested for overall efficacy, appropriate doses or possible side effects – a process that could take years.

Not every investigational drug is effective, and it takes time for new drugs to complete the FDA trials. But for terminally ill patients, unfortunately, that’s time they do not have. HB 1685 stands for the proposition that terminally ill patients should have the opportunity to try all reasonable means to fight for their health and their lives.

I do realize there are FDA obstacles to the implementation of this reform. Missouri can institute a law that conflicts with the federal law, but the federal law will still take precedence. That doesn’t mean, however, that Missouri can’t change its law to anticipate movement at the federal level, whether those changes would come in the way of statutory revisions, waivers, or non-enforcement.

I think HB 1685 is a compassionate and reasonable response to a very real problem that American families and their loved ones face today. It’s time to talk about how we can give those families hope by making more treatment opportunities available where that’s possible; I’m glad Missouri is discussing it.

February 21, 2014

Medicaid Expansion Proponents Should Be Faithful To Missouri’s Values

One of the bigger news items this week was the introduction of a Medicaid expansion proposal. Along with instituting some work requirements, the latest bill would raise the Medicaid eligibility level for many adults to 138 percent of the federal poverty level and implement what some call the “Arkansas model” for those between 100 percent and 138 percent of poverty, who would get state-supported health insurance.

The cost of the expansion would be enormous. Obamacare’s 90/10 “enhanced match” — that is, how much the federal government pays for Medicaid versus how much the state pays — only kicks in for newly eligible enrollees, not currently eligible enrollees. A 2012 study by the Kaiser Family Foundation suggests the cost to the state of that new population would be well north of a billion dollars over the next decade; the added cost of the currently eligible population, due to the Affordable Care Act, would be closer to $2 billion. It’s still not clear yet how the state would pay for any of this new spending.

The bill would also adopt a variation of the Arkansas expansion plan to try and use Medicaid funds to pay for private insurance for those between 100 percent and 138 percent of poverty. Again, the plan would be very expensive to the state. However, as often as Arkansas comes up in Missouri’s Medicaid conversation these days, what if I told you that even Arkansas is second-guessing the Arkansas model?

The State House for a second day in a row defeated a compromise plan to expand Medicaid by using federal Medicaid funds to buy private insurance for low-income residents. The program was approved last year as an alternative to expanding Medicaid’s enrollment under the federal health law. The House speaker, Davy Carter, has said the House will keep voting on the measure until it passes.

Reform must precede any proposed expansion in Missouri. Arkansas’ plan — which despite current opposition could still end up getting passed in that state by year’s end — isn’t so much a reform as it is a grab for federally financed deficit spending, which is why the expansion is alluring to politicians nationwide. That might fit with the way elected officials think, but that isn’t the way Missouri families try to run their households day-to-day.

That brings us back to Missouri’s sensibilities. Missouri’s motto (and the name of this Institute) stem from a saying that W.D. Vandiver popularized many years ago.  While the origin of the saying – “I’m from Missouri; you’ll have to show me” — is subject to some dispute, Mr. Vandiver described its meaning thusly in a letter published in 1922 (emphasis mine):

“The public has not seemed to care for any prepared formula and has apparently accepted the ‘Show Me’ as properly indicative of the inquiring spirit and the cautious habit, about as given by the Literary Digest and the dictionary which defines it as the attitude of ‘one not easily taken in.’ “

Prudence: it’s one of Missouri’s hallmarks. And that’s why if we recognize that Medicaid is a failed program, expanding without first fixing it is a fool’s errand — one lacking in prudence. It is clearly irresponsible to set into motion a new entitlement whose foundation is in substance the current Medicaid program; that’s what this new bill seems to do.

February 16, 2014

Missouri Needs Fewer Legal Restrictions On Nurses

couple of important bills will be considered in a Missouri Senate committee next week involving Advanced Practice Nurses (APRNs, or nurses with particular advanced nursing degrees and certifications). Currently, Missouri has unnecessary legal impediments to allowing them to serve patients without a doctor’s supervision. The fact is that many parts of rural Missouri have limited access to doctors and hospitals, and allowing nurses to fill that void is a sensible, low-cost way to serve many (but not all) of rural Missouri’s medical needs.

The two bills would address these needs by loosening the restrictions on APRNs so that they would be more able to open clinics and otherwise serve patients without the unnecessary supervision (in most cases) of doctors. Yes, there are issues that nurses need to refer to doctors, but I trust nurses to be able to know that difference. Opponents of these measures would have us believe that nurses will all of a sudden start doing major medical procedures without these restrictions. (That’s not a straw man argument; I’ve heard opponents say that at prior hearings on related issues.) I trust that nurses will know when to bring in doctors and refer out patients. In any case, the choice in rural Missouri is usually not between an APRN and a doctor. It is between an APRN and no medical care.

I hope these bills allowing nurses to have more freedom and authority to serve patients are given serious consideration. I think they would be a positive change for health care in our state.

January 23, 2014

One Last State Of The State Post-Mortem

This week, Missouri Gov. Jay Nixon delivered his sixth “State of the State” address to the Missouri Legislature, where he set out his agenda for 2014. We all want to make this state a better place to live, but taxpayers should have serious concerns about the plans the governor detailed. (I commend to you James Shuls’ and Michael Rathbone’s blog posts for more.)

First, the governor is moving in precisely the wrong direction on tax policy. In his speech, the governor congratulated the legislature for creating nearly $2 billion in refundable tax credits for Boeing last year. “We didn’t win the biggest prize,” the governor said of the state’s failed bid, “but we competed at the highest level.”

By and large, tax credits are ineffective and inefficient to promoting substantive growth — risky experiments, if you will — and last year, the governor said about as much. In his 2013 address, the governor railed against the state’s out-of-control, multi-billion dollar tax credit system for six paragraphs. In 2014, he devoted all of 18 words — one sentence — to the issue, and held up what could have been the biggest giveaway of taxpayer money in state history as an example of progress, not regression.

But that’s what it was: regression. Why should the state support corporate handouts like the one for Boeing, but actively deny tax relief to the family businesses in our communities?

Second, substantive Medicaid reform should be the top health care issue in Missouri, not a costly expansion. The governor’s proposal would lock the state into billions of dollars in new Medicaid spending over the next decade without a plan to pay for it, and that’s a bad deal for taxpayers.

Not only is the current Medicaid program wasteful, but the access and quality of care available to Medicaid enrollees is simply deplorable. We should be reforming this multi-billion dollar program, not making it bigger.

Even the education proposal is beset by the same “spend first, ask questions later” mindset. Missouri education funding has marched upward over the last few decades, and yet in terms of student achievement, our children remain stuck in the middle. From 1992 to 2008, Missouri saw an increase in per-pupil spending of 40 percent . . . and yet student achievement has remained basically flat.

That isn’t a spending problem. Our kids deserve to have the best education, and one of the best ways to achieve that is through school choice and competition. The governor’s address made no mention of such reforms — his focus was on simply spending more. That’s wrongheaded.

Wide-ranging reform, not wide-ranging new spending, should lead the state’s agenda in 2014. I hope that is what we will see.

Having It Both Ways

In his State of the State address, Missouri Gov. Jay Nixon offered profuse thanks to the General Assembly for passing a massive tax break for one company (Boeing) in their December 2013 special session. This is the same governor who spent much of last year railing against a broad-based income tax cut. The governor continues to argue that Missouri is one of the least-taxed states in the country. “Missouri is a low-tax state — sixth lowest in the nation — and we like it that way,” he said on Tuesday night. So Missouri is a low-tax state, but our taxes are too high for Boeing? Or are taxes too high for Boeing, but just fine for everybody else?

Missouri, in fact, is not a low-tax state, not in the taxes that matter most for a state’s economy.

The governor also laments that our taxpayers are forced to pay for health reform in other states through our federal taxes. He says that by expanding Medicaid, we could get some of that money back. This is a strange argument for a governor of Missouri to make considering that over a 20-year period, Missouri received more in federal spending than it paid in taxes. That means Michiganders and New Yorkers have been paying to improve our schools and our health care. Does the governor think they are entitled to a refund?

The truth is that there isn’t much evidence showing that Medicaid actually improves the health of poor people.

The legislature is in a new session and the state is facing serious challenges. But instead of spending more money (and the governor wants to spend a lot more), the state should focus on significant reform.

January 22, 2014

Video: What To Expect During The 2014 Missouri Legislative Session

Last week in Columbia, Columbia Tribune Columnist Bob Roper and I delivered a presentation at the Show-Me Institute’s Show-Me Forum. We talked about what we expect will be the big legislative issues of the new year. We discussed taxes, labor issues, health care, and whole lot more. If you’re interested, you can watch the event in the video below.

January 16, 2014

Missouri Leading On At Least One Health Care Reform

Earlier this month, I had the honor of presenting at this year’s State Health Policy Summit, a meeting that the Cato Institute annually hosts to bring together health policy experts from around the country. The topic of my presentation was last year’s passage of the Volunteer Health Services Act (VHSA), a medical licensing reform which I often pointed out was needed in Missouri. Reforms such as the VHSA have been discussed at free-market events like this for a while, but it was great to be able to speak about something that actually went from just talk to action. One Missouri health care reform down, many more Missouri health care reforms to go.

Many thanks to Cato for the invite and continued support. And if you’re not familiar with Cato, check out the institute here.

January 13, 2014

No, Kansas City Star, The Legislature Should NOT Expand Medicaid

I guess all of the big battles are the ones that are fought over and over again. In “A good year to beat low expectations in the Missouri Legislature,” the Kansas City Star editorial board renewed its call for the legislature to expand Medicaid. I could not possibly disagree with the Star more. There is growing evidence that expanding Medicaid will not improve people’s health and will stick taxpayers with even more bills to pay.

A recent study published in the New England Journal of Medicine found that people on Medicaid fared worse health-wise than people with no insurance. This study joins others from the University of Pennsylvania and University of Virginia that found that health outcomes for Medicaid patients are worse than those without health insurance.

Nor will expanding Medicaid clear up congested emergency rooms. A recent study published in Science found that after Medicaid expanded in Oregon, emergency room visits increased 40 percent. The vast majority of these visits were for procedures that could have been taken care of outside a hospital.

If it expanded Medicaid, the legislature would add billions of dollars in expenditures to a state that cannot afford it while doing little to actually improve people’s lives. It should ignore the Star’s appeals and say “no” to expanding Medicaid.

January 7, 2014

Oregon Study: Medicaid Expansion Increases Emergency Room Use

One of the big arguments for expanding the Medicaid program in Missouri has been the notion that by doing so, wasteful emergency room use would decline. In fact, Missouri Gov. Jay Nixon released a statement on New Year’s Eve that suggested this precisely (emphasis mine):

Tomorrow, businesses in these states [that expand Medicaid] will have a significant competitive advantage – because as more people get health coverage, fewer people show up in emergency rooms, putting downward pressure on private health premiums.

But a “gold standard” study out of Oregon — released just two days after the governor’s statement — suggests that’s not true: that rather than decrease emergency room usage, a Medicaid expansion may actually make the problem worse. (Emphasis mine.)

Writing in Science, the Oregon Health Insurance Experiment researchers found that Medicaid did increase the use of preventive and primary-care services, but emergency-room use rose as well. Over an 18-month period, 100 low-income, uninsured adults in the Portland area would visit the ER about once each, on average. When Medicaid made health care “free” [for] these households, they made an additional 40 visits over that period — a 40-percent increase.

The increase was entirely comprised of people using the ER either for non-emergency medical needs, or for emergencies that could have been prevented with primary care. “Emergency department use increases even in classes of visits that might be most substitutable for other outpatient care,” the authors wrote, “such as those during standard hours (on-hours) and those for ‘non-emergent’ and ‘primary care treatable’ conditions.”

It’s irresponsible to expand a broken Medicaid program. That irresponsibility is accentuated when expansion proponents push arguments — like, “Medicaid reduces emergency room use” — that tend to fall apart when investigated. We all agree that Medicaid is in dire need of reform. It would be nice for policymakers to start recognizing reform as its own, superseding good, rather than just as a convenient rhetorical tool with which to repackage a Medicaid expansion.

November 27, 2013

What Would A Free-Market Medicaid Reform Look Like?

With all the discussion about Medicaid reform, transformation, and (an unwise) expansion, it’s worthwhile to remind ourselves what “success” for both Medicaid patients and taxpayers should look like. Patients should have access to health care that can be tailored to their needs. Taxpayers should be able to rest assured that Medicaid dollars aren’t being wasted. Unfortunately, Medicaid is failing on both of these fronts, delivering poor health outcomes to enrollees and terrible results to taxpayers.

What would be a better way to deliver this care? Here are some ideas:

  • The state currently spends (roughly) between $3,000 and $5,000 on each child and adult enrolled in the Medicaid program. Split the current level of Medicaid spending into the equivalent of state-held health savings accounts (HSA) that the beneficiary controls. After the purchase of at least a catastrophic insurance plan, the enrollee could decide what additional health services he or she needs to spend money on, if any. Leftover money could be rolled over year to year, meaning beneficiaries wouldn’t feel compelled to use or lose those health dollars unnecessarily.
  • Give enrollees a reason to leave the Medicaid program on their own. If a Medicaid patient complies with the regulations of the program — high among them, to not use emergency room services unnecessarily — then the patient could take the bulk of the leftover money when he or she exits the program, either as an HSA or as a reduced amount in cash. Indeed, beneficiaries would have something to gain by leaving Medicaid.
  • Health insurance is insurance first, not a health plan. One of the few benefits found in an Oregon study on Medicaid was that enrollees felt financially secure after they joined the program. Not only can Medicaid reform of the nature described above provide that security, it can do it at a lower cost and with greater flexibility for the patient.
  • Sow the seeds of even wider, positive health care reforms. A market-based reform of the kind articulated here would inject thousands of cost-conscious consumers into the health care marketplace who are not only empowered to negotiate for the services they need, but have the incentive to negotiate.

That’s where I would start Medicaid’s reformation. You can call these ideas a free-market solution or a transformation, but most importantly, I think you could call it a vast improvement over what we have now. Medicaid needs to be reformed first and foremost, and failure to do so will hurt all of its stakeholders. Patients and taxpayers deserve better than the status quo; I think these proposals would help to move the reform discussion and the Medicaid program in the right direction.

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