Mars and Venus on MedicaidCommentary by John R. Graham
October 16, 2014
I will be covering Medicaid Health Plans of America’s annual conference in Washington, DC from October 26 to 28. So, I thought I’d prepare for it by reviewing the research on health outcomes for patients on Medicaid. What a tangled web!
According to evidence cited by Forbes opinion editor and Manhattan Institute Senior Fellow Avik Roy, “patients on Medicaid have the worst health outcomes of any insurance program in America – far worse that those with private insurance and, strikingly, no better than those with no insurance at all. “ On March 10, 2011, the Wall Street Journal published a column by Forbes contributor and American Enterprise Institute Resident Fellow Scott Gottlieb, MD, which concluded that “Medicaid coverage is worse than no coverage at all.”
Yet, others resist these conclusions. The federal and state governments spent $460 billion on Medicaid last year. Is it really feasible that this buys nothing? Gottlieb’s article prompted two scholars affiliated with the Kaiser Family Foundation to publish a paper “setting the record straight on the evidence.” Julia Paradise and Rachel Garfield conclude that “…… the Medicaid program, while not perfect, is highly effective…… Furthermore, despite the poorer health and the socioeconomic disadvantages of the low-income population it serves, Medicaid has been shown to meet demanding benchmarks on important measures of access, utilization, and quality of care.”
Can these differences be reconciled? The evidence cited by Roy and Gottlieb shows poor outcomes for various cancers, major surgical procedures, coronary angioplasty, and lung transplants. The evidence cited by Paradise and Garfield emphasizes preventive and primary care (including blood pressure and PAP smears), birth outcomes, heart attack, congestive heart failure, diabetes management, and pneumonia.
Although there is some overlap in the cardiovascular area, Roy and Gottlieb focus on catastrophic illnesses and procedures, whereas Paradise and Garfield focus on non-catastrophic care. If one only had recourse to these sources, one would be tempted to over generalize that Medicaid is ineffective for very sick people, but okay for people who are not very sick.
What does not come out is that Medicaid is not a health plan. To describe it as a “program” is accurate insofar as it is a budgetary item in federal and state accounts, cocooned in mind-numbing regulations. However, Medicaid dependents do not enroll in some national, or even state, health plan. Most are enrolled in private health plans, which contract with the states. These are categorized as either managed-care organizations (MCOs) or primary-care case management (PCCM). The Government Accountability Office (GAO) sorts states into four categories, reporting that 18 states use PCCM, 16 use both MCOs and PCCM, 12 use MCOs, and 5 could not be categorized.
According to the Kaiser Family Foundation, over 300 MCOs provide comprehensive Medicaid benefits for a capitated fee, bearing the financial risk of excess costs. About half of Medicaid MCO enrollees are in for-profit plans. Dependents generally have a choice between at least two plans. (I doubt most readers with employer-based benefits have a choice of at least two plans!)
In 2012, over 26 million Medicaid dependents were enrolled in MCOs and 8.8 million PCCM. However, enrollment is not randomly distributed among the Medicaid population. Although comprising two thirds of Medicaid dependents, they only account for one fifth of Medicaid spending, “because disabled and elderly beneficiaries, who account for most Medicaid spending, largely remain in fee-for-service (FFS)……” This means that MCOs and PCCMs mostly cover pregnant women, children, and their parents.
States have been using private plans to provide benefits to healthier Medicaid dependents, and leaving sicker ones to the FFS system, where governments pay providers according to bureaucratically determined fee schedules. That seems to be the wrong way around, and may explain why outcomes are very bad for the sickest Medicaid dependents, as discussed by Roy and Gottlieb. Paradise and Garfield, on the other hand, are likely discussing evidence from private health plans serving Medicaid patients. So, we should not be surprised that some outcomes are similar as they are for privately insured persons.
Where do we go from here? Reformers who want to increase patient choice and reduce the power of the federal government over health care recommend block grants, vouchers, or refundable tax credits for Medicaid dependents to buy their own private coverage. These will be positive reforms, but are not going anywhere for the next few years. Medicaid managed care, on the other hand, is an open door that is swinging wider.
Avalere Health estimates that 75 percent of Medicaid dependents will be enrolled in MCOs by 2015, up from 63 percent in 2012. The Kaiser Family Foundation anticipates that a “sharpened focus on high-cost/high-need beneficiaries” will lead states to enroll more of the sickest Medicaid dependents into private plans.
If done properly, this should improve outcomes for those patients. Medicaid managed care blurs the line between the Medicaid “ghetto” and private choice. When the opportunity for post-Obamacare health reform arises, Medicaid managed care’s success will make patient-centered reforms to the whole system easier to bring about.
Investors’ Note: Although most health insurers have Medicaid managed-care business units, pure-play Medicaid plans include Molina Healthcare, Inc. (NYSE: MOH), Centene Corporation (NYSE: CNC), and WellCare Health Plans, Inc. (NYSE: WCG).