Monday, August 23, 2010

Health Wonk Review Review: Medicaid's Rescissions

Cross-posted from The Agenda on National Review Online.

This fortnight’s Health Wonk Review, hosted by Joe Paduda of Managed Care Matters, is notable for its sober take on the post-PPACA landscape.

John Goodman has an insightful piece on Medicaid’s serious structural problems. He points out that, while advocates of PPACA highlighted first-person accounts of abusive practices by private insurance companies, Medicaid’s practices are far worse:
Yet, in all the episodes of [private insurer] abuse, do you recall even a single instance where an insurer:
  • Arbitrarily dropped coverage for tens of thousands of enrollees with the stroke of a pen — just to save money.
  • Dropped entire categories of care — such as dental care or home health care — because it decided these services were too costly?
  • Arbitrarily reduced the fees it paid to doctors and hospitals, pushing many out of its network, and leaving its enrollees with serious access to care problems?
Probably not. For a private insurer, each of these activities would be a serious violation of contract. There is one insurer that does these things routinely. It’s called Medicaid and about half of all the newly insured people under the PPACA will be enrolling in it.
In response, Jonathan Cohn rose up to defend Medicaid: “[Private-sector] rescission is the product of insurers trying to make money at the expense of people in need. Medicaid cuts are the product of society trying to help people in need, but coming up short.” Except that private-sector rescissions are exceedingly rare, compared to the hundreds of thousands of people affected by Medicaid rescissions.

Jason Shafrin reviews the burdens that states will face in expanding Medicaid. He concludes: “Who are the winners? The poor and near-poor who receive additional coverage. Who are the losers? Providers who must accept lower payment for Medicaid and the rich who must pay higher taxes to cover these individuals.” Except that the rich includes the middle class, and that it’s not obvious that Medicaid really helps people.

Jaan Sidorov of the Disease Management Care Blog thinks that attempting to repeal Obamacare, given that President Obama will veto any such attempt, is a “waste of political energy” and refuses to “vote for any candidate spouting [such] silly rhetoric.” He thinks Republicans should focus on underfunding key elements of PPACA, such as the hiring of new IRS agents, and introducing better reforms. Maggie Mahar is “convinced” that conservatives will fail in repealing PPACA, and rebukes liberals who believe that repeal is a good thing, because it would hasten the advent of a true single-payer system.

Advocates of health insurance price controls have taken to criticizing the reserves accumulated by private insurers. When insurance companies take in more premiums than they spend on health expenses and administrative costs, they often keep the difference in a bank account, in “reserve,” so as to ensure that they can remain solvent in bad times. Price-control advocates have been arguing that these reserves are excessive, and that state governments should force insurers to draw down on their reserves by charging lower premiums. Mike Feehan of InsureBlog responds to one such argument, from Consumers’ Union on not-for-profit Blue Cross and Blue Shield plans.

Joanne Kenen of the New Health Dialogue writes insightfully about the difficulties in managing end-of-life care in the emergency room.

Julie Ferguson of Workers Comp Insider fears that the PPACA regulations that define what a “Cadillac plan” is will force many employers to drop health coverage: “Most large employer plans, so defined, will be subject to potentially expensive penalties, thus strongly incenting employers to relegate employee health care to the soon to be created exchanges.”

Joe Paduda wonders why insurers complain about rising health costs: “Isn’t that your job? In return for getting millions of new members, aren’t health plans supposed to figure out how to manage care and control costs?” David Williams at the Health Business Blog has an answer: it’s not so easy for health insurers to steer people to cost-effective treatments. He discusses a paper in the American Journal of Managed Care about “value-based insurance design,” that describes many of the logistical challenges insurers face in trying to execute on these strategies. Aaron Carroll, newly of the Incidental Economist, isn’t too worried: “Insurance companies are very, very good at what they do. I don’t doubt that they will find ways to remain profitable.”


  1. "In return for getting millions of new members, aren’t health plans supposed to figure out how to manage care and control costs?”

    So insurance companies are the umpires?

    Does Paduda - or anyone - really prefer insurance companies deciding these things, not physicians?

    Of course one of the principal reasons we are where we are is the long-term and continuing absence of physician leadership in health policy.

    Nature truly abhors a vacuum. So we got bureaucrats.

    Private bureaucrats, government bureaucrats. Anyone see a difference? I don't.


  2. Hi Mike,

    I'm a great fan of InsureBlog, btw. I'm not as confident as you are that lack of physician leadership is the big issue. Many of the leading health policy gurus have MDs. Indeed, one could argue that most physicians don't really understand economics (but then again, neither do most economists).

    Physicians do have an extremely important role in helping policymakers understand the real-world consequences of their decisions. But so do insurers, biotech companies, etc. etc.