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December 28, 2015 Economic Forecast 2016 - Health Care

Andrews: Medicaid's progress and fragility

Ellen Andrews, Executive Director, Connecticut Health Policy Project
By Ellen Andrews, Executive Director, Connecticut Health Policy Project

Medicaid’s progress and fragility

The best-kept secret in Connecticut’s health care landscape is our Medicaid turnaround. In the last four years access to care is up, quality is improving, and costs are under control. Things are far from perfect and there is lots of room to improve, but Medicaid is moving in the right direction.

Provider participation is up 32 percent, which is very timely as we added over 100,000 people to the program that now covers one in five state residents. Fewer Medicaid members rely on the emergency department for routine health problems and more people are getting preventive care.

The total-cost-of-care per person has consistently trended down, by 4.1 percent just last year. Total state spending on Medicaid dropped 4.2 percent last year. We didn’t just bend the cost curve, we nailed it. We can thank federal largesse and the Affordable Care Act for part of that trend.

But the sustainable downward trend came the old-fashioned way -- by coordinating care in person-centered medical homes, targeting high utilizers with high touch supports, and a single data source combined with intelligent analysis and planning. Other states are taking notes on our success. But progress like that is always fragile.

It will be important in the year ahead to ensure that Medicaid payment reform efforts are thoughtful and build on what is working so well.

Payment reform requires political will

No one disagrees that the way we pay for health care needs change. It’s no surprise that paying for volume with no regard to quality doesn’t work. Along with unsustainable cost growth, this payment scheme rewards overtreatment and waste that is harming our health. Change is imperative, but if we don’t learn from our history we will repeat it. Managed care in the 1990’s failed because care wasn’t really managed. Despite evidence it wasn’t working, policymakers were slow to regroup and fix the problems.

Consumers and advocates grew increasingly concerned about underservice – the inappropriate denials of care. We were assured that health plans had no incentive to deny needed care, as people would end up in more expensive care. Unfortunately it didn’t work out that way. Like the rest of the country, Connecticut is reforming the way we pay for healthcare. The latest plan is now to shift financial risk onto providers in large networks hoping that is the key to lowering costs – and it may be.

It makes sense that providers control the vast majority of health care spending.

There are two ways to generate savings. The old way is to deny people care, regardless of value. The right way is to reduce duplication and low-value care while helping people with tools to keep themselves healthy. Giving providers resources to sort out what care we really need and what is wasteful makes sense. They should be compensated for that hard work; sharing the savings is the least we can do.

New data and analytical tools offer the potential to target resources where they are needed and to see problems earlier. But that is only half the solution – we also need the political will to make changes to the system when needed. Change is hard, especially in Connecticut.

Insiders craft rules that suit them

One person’s waste is another’s bottom line, especially in health care. Connecticut spends over $30 trillion on our health every year. We can debate whether that is too much and crowds out other important spending, or it reflects what our society values and adds to our quality of life. 

But most agree that we aren’t spending it as well as we should. One area of deep concern, all too common in Connecticut, is when resources are directed to insiders. Many attempts at past reforms in our state failed, at least in part, because self-interested parties dominated policymaking and implementation. Health care is complicated, and the reforms we’ve chosen have only added to the complexity. The state budget crisis means that policymakers charged with implementing reforms, have few independent, internal information sources to rely on. This vacuum is usually filled

by industry insiders who dominate the process, too often crafting the rules to suit their needs, not ours. We really don’t have extra money or extra time to spare for insiders, the stakes are too high. Insiders don’t need to be included at policy tables as voting members to get their input.

There are plenty of successful models of ethical and inclusive policymaking from other states and at the federal level. In the next year, policymakers need to be vigilant about choosing the right standards and the best groups to implement new models, not just familiar faces.

The impacts of consolidation on Connecticut’s healthcare system

Like the rest of the country, Connecticut’s health care markets are concentrating. If recently proposed mergers are approved, one insurer will control two thirds of enrollment in our state.

Twenty years ago all of Connecticut’s hospitals were independent, but soon eight in ten inpatients will be cared for in a large, multi-hospital system. There is good evidence that mergers raise prices and reduce competition. The impact on quality is mixed at best and there is no question that mergers reduce consumer choice.

State and federal policymakers have few levers to hold down costs or protect people in mergers. Perhaps more troubling than these horizontal mergers is the rush into vertical health care mergers such as hospitals combining with private practices, and provider networks combining with or starting their own insurance businesses. As consumers advocate for needed care, we often have doctors on our side arguing with insurers to cover the service.

With mergers that balance is lost, as the provider is too often at financial risk for the cost of the treatment. There is very little evidence that these corporate mergers enhance care coordination. Too often merged entities still use multiple information systems that don’t talk to each other, groups within the system continue to accept only the payers they choose, often excluding Medicaid members, and nothing changes in patient care.

Mergers are both a symptom and a driver of the problems in our health system; patient choice, competition, and truly coordinated care are the solutions.

[See what others are saying on HBJ's Economic Forecast 2016 page]

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