The Oregon Health Experiment: The Gift That Keeps On Taking Away

Be prepared for a barrage of conservative criticism of the Affordable Care Act (ACA) that may be assumed to have negative implications for single-payer health care as well.

As I've noted before, the Oregon Health Experiment is a randomized control group design, far superior to most health care research. In 2008, Oregon hoped to expand Medicaid, but didn't have enough money, so they held a lottery. They invited everyone who was eligible to apply. Of the 90,000 applicants, 30,000 were randomly selected to receive Medicaid, while the losers became eligible for the control group. In previous data analyses, it was found that the Medicaid group spent 35% more on health care than the control group. They visited primary care physicians (PCPs) and were admitted to hospitals more often, and spent more on prescription drugs. They were also healthier and freer of financial worries, although most of the health differences are not statistically significant due to insufficient sample sizes in the study.

A new analysis by the Oregon research group reports that the Medicaid participants were also more likely to visit the emergency room (ER). Specifically, during their first 18 months on Medicaid, they made an average of 1.43 ER visits compared to 1.02 in the control group—a 40% difference.

This should not have been a surprise. If you reduce the cost of a service, people are more likely to use it. However, some ACA proponents claimed that Medicaid expansion would save money by reducing ER use. Although the ER accounts for only 4% of health care spending, an ER visit is more expensive than visiting a doctor. The pro-ACA argument was that if patients established a relationship with a PCP, they would have a place to go for medical care and these doctor visits would prevent potential emergencies. For example, Health and Human Services Secretary Kathleen Sebelius said in 2009:

Our health care system has forced to many uninsured Americans to depend on the emergency room for the care they need. We cannot wait for reform that gives all Americans the high quality, affordable care they need and helps prevent illnesses from turning into emergencies.

It is important to note that these results are not due to the fact that Medicaid provides health insurance for poor people. Private health insurance patients are also more likely to use the ER than the uninsured.

Increased ER use might not be seen as a problem if the visits were real emergencies. However, the study found ER use to be higher even for non-urgent care that should ideally have been treated by a PCP. These results could be used by the opposition to suggest that single-payer might cause an massive influx of people outside the ER waving torches and pitchforks and demanding free care.

There are several considerations that may place these results in clearer perspective.

• The time frame of the study, 18 months, may not have been sufficient to change uninsured people's lifelong habits of going to the ER every time they were sick. A three-year study of Romneycare in Massachusetts found an estimated 5-8% reduction in ER use.

• Medicaid expansion could have been accompanied by education regarding when to go to the ER and when to visit your PCP. Of course, some may argue that education is not enough and should be supplemented by punishment, such as a co-payment, for “inappropriate” ER use.

• Taking a broader view, the problem may be with the health care system rather than the patients. PCPs tend to be available Monday through Friday from 9 to 5—times that are inconvenient for most employed people. You can't always get same-day appointments with a PCP. A 2012 survey by the Commonwealth Fund found that in the US, only 35% of PCPs see patients after hours. In nine European countries and Canada, the average was 80%.

This study is one of a growing number that show that providing health insurance to the uninsured alone does not save money. The ACA contains some cost controls, such as the Independent Payment Advisory Board, which may eventually reduce costs. Single payer eliminates the cost of private insurance, which will save much more. Other changes may be needed. One of them may be asking PCPs to become more consumer-friendly by seeing more patients on evenings and weekends.

You may also be interested in reading:

Big News From Oregon--Not All of It Good

Tom Corbett to PA's Working Poor:  "Drop Dead"  Part 1.  Medicaid Improves Health and Saves Lives

The Coverage Gap: The Real Failure of Obamacare

Right now, the corporate media are focused like a laser on the “scandal” of the malfunctioning of the national health insurance exchange website. Although these glitches reflect negatively on the Obama administration, they are technical problems that will be fixed. They have nothing to do with the substance of the law. A more important failure is the number of people, particularly poor people, who will remain uninsured after the Affordable Care Act (ACA) is implemented. This is not the fault of the act as written, but is the result of the Supreme Court decision on its constitutionality and intractable opposition from Republican politicians.

An October study by the Kaiser Family Foundation (KFF) estimates that 5.2 million non-elderly adults living below the federal poverty level (FPL) will remain uninsured in 2014 because they live in the 26 states that—at the time of the study—had declined to participate in the Medicaid expansion. These states are concentrated in the South and West and are controlled largely by Republican governors and legislatures. About half of Americans, but 58% of America's uninsured working poor, live in those states. Pennsylvania is among them. Our Medicaid expansion status is uncertain, but even if the Corbett administration reaches agreement with the federal government on an expansion plan, it is unlikely to be implemented in 2014.

To review, of the approximately 30 million people who were expected to be insured for the first time under the ACA, fully half of them—the poorest half—were to be insured through Medicaid expansion. Traditional Medicaid is jointly administered by the state and federal governments. Federal law requires that all children be covered if their family makes less than the FPL. Children under six are covered up to 133% of FPL. The eligibility rules for adults are determined by the states. In most states, adults without children don't qualify no matter how poor they are. The income level at which parents with dependent children qualify for Medicaid varies from a low of about 20% of FPL in the least generous states to a high of 133% is the most generous states. (In Pennsylvania, it is 46%.)

The ACA expanded Medicaid by making everyone—children and adults—eligible for Medicaid if their family income is 138% of FPL or less. Since this is expensive, the feds agreed to pay most of the cost: 100% in 2014, dropping to 95% in 2017 and 90% in 2020. The ACA required states to implement Medicaid expansion. If they refused, the federal government threatened to withhold its contribution to traditional Medicare—about 57% of the cost. However, this clashed with the conservative majority of the Supreme Court's long-term goal of rolling back federal regulation of the states. In National Federation of Independent Business v. Sibelius, the Supremes decided that the Medicaid expansion rules were coercive and that states may opt out. This denies medical care to many of the Americans who need it most, people who fall into the coverage gap.

The ACA provides subsidies, on a sliding scale, for people individuals and families whose income is between 100% and 400% of FPL. The coverage gap consists of those people, living in states that do not expand Medicaid, who are not poor enough to qualify for Medicaid in their state, but whose income is below 100% of FPL, the level at which the subsidies kick in. This is illustrated in the chart below.

As noted, poor and uninsured Americans tend to be concentrated in the “red states” that are not expanding Medicaid. Twenty percent of the people in the coverage gap live in Texas, and another 15% live in Florida, followed by Georgia with 8% and North Carolina with 6%. At present, 6.8% of the residents of states that are participating Medicaid expansion are poor and uninsured, but 9.1% of the residents of the refusing states are poor and uninsured. The chart below shows the breakdown of the poor and uninsured by race, and shows that Medicaid expansion has a discriminatory impact.

	Live in States Expanding	Live in States Not Expanding
White	40%	60%
Black	32%	68%
Hispanic	51%	49%
Asian	70%	30%
Total	42%	58%

These are America's working poor. By occupation, the folks most likely to be poor and uninsured are (1) cashiers, (2) construction laborers, (3) housekeepers, (4) cooks, and (5) waiters and waitresses.

At the time the ACA was passed, single payer advocates noted that the ACA provided less than universal coverage. The largest excluded group is undocumented immigrants, but the ACA also excludes native Americans and people who are incarcerated, have a religious objection, or can prove financial hardship. To that we must now add 5.2 million working poor Americans, a target group that the ACA was clearly intended to help. These people are being left to die for lack of health care. It will be interesting to see whether they respond at the ballot box when they realize what their state politicians have done to them.

Single payer health insurance is needed now more than ever.

You may also be interested in reading:

A Clouded Vision, Part 1: The Stick  (See both parts)

Tom Corbett to PA's Working Poor: "Drop Dead!"  Part 1  (See all four parts)

The Friday Morning Quarterback

A Clouded Vision, Part 2: The Carrot

Please read Part 1 of this post.

The Carrot

If the Obama administration agrees to the Medicaid "reforms" described in Part 1, then Pennsylvania will accept its gift of virtually free money. However, there is an important catch. People who make up to 133% of the Federal Poverty Level (FPL) will be given this money to purchase private insurance policies through the national health insurance exchange. (Corbett refused to establish a PA exchange, so Pennsylvanians will be using the national exchange.) This means that people who would have been eligible for Medicaid expansion under the Affordable Care Act (ACA) will now be exposed to all the disadvantages associated with the private insurance market, including copayments that are likely to be considerably higher than PA Medicaid's current copayments. An exception is made for people in this income group deemed to be “medically frail,” who will be allowed to enroll in PA Medicaid.

Moreover, there is ambiguity in the meaning of this proposal. Most of you probably know that private health insurance offering comparable coverage is significantly more expensive than Medicaid—about $3000 more per person per year, according to the Congressional Budget Office. It is possible that Corbett is asking the federal government to pay the full cost of these private policies, in which case it will be paying more for Medicaid expansion in PA than in other states. The other possibility is that Pennsylvanians will be given a sum of money comparable to the cost of Medicaid, and they will either have to pay part of the premium themselves or accept less comprehensive coverage. A similar plan proposed by Arkansas asks the federal government to pay the full cost of Arkansans' private insurance, but it's not certain if this is legal. If this is what Corbett is proposing, people from other states are being asked to pick up part of the tab for PA's more expensive private health insurance! Since conservatives claim to be concerned about the high cost of providing health care to poor people, this seems like an odd stance for them to be taking.

Not mentioned is the fact that adding so many low income people to the exchanges will almost certainly drive up the cost of insurance premiums for everyone, since they are likely to be in poorer health than the general population.

There is no timetable for when Corbett's plan will take effect, but since it was not submitted to the Obama administration until now, it's unlikely to be available in January 2014.

People who are committed to health care for all Pennsylvanians will find obvious drawbacks to Corbett's Medicaid “reform” package. It significantly weakens the Medicaid program. It increases costs and reduces benefits for the poorest Pennsylvanians, and is almost certain to result in less actual health care being received. The job search requirements are unnecessarily punitive in an economy that falls far short of providing full employment and seem designed to force Pennsylvanians to accept jobs that fail to provide a living wage.

The “expansion” component of the package is likely to drive a wedge between progressive groups. On the one hand, it's just more corporate welfare for the private health insurance companies, corporations that are almost certainly among Corbett's and the Republicans' more generous contributors. On the other hand, if the proposal is accepted, 500,000 to 700,000 working class Pennsylvanians who are presently uninsured will receive some health care. It won't be as good as what they would have received under the ACA, but many progressives will argue that something is better than nothing.

Compared to Medicaid expansion under the ACA, the two parts of Corbett's plan represent a significant transfer of wealth from PA's poor and working class citizens to some of its largest and most profitable corporations.

Single-payer health care advocates are faced with a similar conflict to the one they faced with the ACA. Is half a loaf better than none? As the loaf gets progressively smaller, at what point do we withdraw our support and say, “No more!”?

Whether Corbett's plan will be implemented depends on whether it is accepted by the Obama administration. How “flexible” is the President willing to be? Similar plans have been advanced by Arkansas and Iowa, but Health and Human Services has not yet announced whether they will be approved. One feature of Corbett's plan that is unprecedented is the job search requirement as a condition of receiving Medicaid. Some states charge monthly premiums for Medicaid, but only for people with incomes above 100% of FPL. Are there any health care principles that Obama will not compromise? Having already moved pretty far to the right, Corbett's plan may seem to the White House to be just a baby step further.

Watch this space. Further details of the plan and data describing its financial impact are likely to become available soon. I will update this report as soon as they do.

You may also be interested in reading:

Tom Corbett to PA's Working Poor: “Drop Dead!” (Part 1) (See all four parts.)

Medicaid Expansion Update

A Clouded Vision, Part 1: The Stick

With his reelection campaign coming up next year, PA Governor Tom Corbett is apparently no longer able to resist the pressure to accept Medicaid expansion under the Affordable Care Act (ACA). Yesterday he unveiled the bare bones of a plan to expand Medicaid, while claiming that he is not. The plan lacks critical details and leaves many questions unanswered. It has not yet been accepted by the Obama administration, and should they not agree to it, it would fall through. It has, however, been endorsed by two powerful health care lobbies, the Pennsylvania Medical Society and the Hospital and Health System Association of Pennsylvania.

The plan is called “Healthy Pennsylvania,” and is described in official propaganda as “Governor Corbett's vision” for Pennsylvania. Much of the plan is empty rhetoric, referring to health care policies that are already in place, or new initiatives that appear not to be accompanied by any proposed legislation. Some of the new initiatives—such as “reform” of the medical liability system—are not good ideas, but I'll save that argument for another day. Of the four documents the Corbett administration has released, those parts of the plan that refer to Medicaid reform or expansion are described most clearly in this document.

We can think of the plan as having two parts—the carrot and the stick. The stick is “reform” of PA's existing Medicaid program, which Corbett says is too costly. These changes have the effect of reducing Medicaid benefits to healthy adult recipients, and increasing costs for most recipients. The carrot is a flawed version of Medicaid expansion through private insurance, which Corbett insists is not Medicaid expansion at all. (He's right.) He will agree to expand health insurance availability if and only if he gets his way and the feds agree to his “reform” plan.

The Stick

PA's existing Medicaid program is one of the stingiest in the country. Healthy adults only qualify for Medicaid if they earn less than 46% of the Federal Poverty Level (FPL). Children under six are covered up to 133% of FPL, and older children up to 100% of FPL. The aged, blind and disabled are also eligible up to 100% of FPL, but only if they have assets of less than $2000 per individual or $3000 per couple.

Corbett repeatedly refers to PA's Medicaid program as one of the most expensive in the nation. It's true that PA spends 34% more than the national average per enrollee. However, PA has fewer enrollees per capita than most other states. The chart below compares PA's Medicaid recipients to those of the US generally. PA has fewer healthy adults, who are the cheapest to cover, because of its strict eligibility requirements for this group. A higher percentage of its enrollees are seniors and people with disabilities, who require more expensive long-term care. Moreover, only 22% of PA's long-term care budget is spent on community and home-based care. The national average is 40%.

Here is what Corbett is proposing. To avoid confusion, remember that these “reforms” only apply to people who are currently eligible for PA's traditional Medicaid.

1. Changes in benefits. Proposed changes in benefits only apply to healthy adult recipients; benefits for children, seniors and people with disabilities will remain unchanged. Medicaid benefits are to be aligned with the benefits provided by private, commercial insurance available in PA's workplaces. What these benefits will be, of course, depends on what private policies they use as their standard. Will they more closely resemble the corporate executive package or the Wal-Mart package? They don't say. But since the goal of the plan is to save money, it is reasonable to assume that they are planning to reduce benefits below what Medicaid enrollees currently receive.

2. Cost-sharing. Cost-sharing is to be achieved by charging a monthly premium. The premiums begin for people who are above 50% FPL. These minimum premiums are not stated. However, they increase on a sliding scale up to a maximum of $25 per month per individual and $35 per household at 133% of FPL. Although it is not explicitly stated, presumably everyone, including children, seniors and the disabled, will pay these premiums. (Healthy adults are only covered up to 46% of FPL, so there would be no need for this cost-sharing plan if it only applied to healthy adults.) Premiums will be indexed to inflation, so they will go up each year.

3. Copayments. Medicaid copayments, which are not particularly high, are eliminated entirely, with one exception. There is a $10 copayment for “unnecessary” or “inappropriate”—as yet undefined—emergency room use. This latter proposal has long been part of the hospital lobby's wish list.

4. Work search requirements. Healthy adult recipients will be treated just like people who apply for unemployment. All working age, unemployed recipients will be required to engage in a job search through PA JobGateway program. There is a premium reduction—amount unspecified—for people participating in job training and work search.

5. Wellness programs. There is also a premium reduction—amount unspecified—for people who participate in wellness programs. Research has so far not shown wellness programs to result in measurable health improvements.

Corbett says his Medicaid “reform” package will result in “significant cost savings.” Will it actually save money? The monthly premium seems to be the only financially significant part of the package. Most of the rest of the plan only applies to healthy adult recipients, which limits its ability to save money, since so few current enrollees fall into this category.

Please read Part 2 of this post.

You may also be interested in reading:

Tom Corbett to PA's Working Poor: “Drop Dead!” (Part 1) (See all four parts.)

Medicaid Expansion Update

No Medicaid Expansion = Higher Health Insurance Premiums

The Rand Corporation has published a study of the predicted effects of the Affordable Care Act (ACA) on private insurance markets in 2014. Like several other recent reports, they conclude that the claims of ACA opponents that insurance premiums would increase dramatically are not justified. However, one aspect of their report is of special interest to Pennyslvanians. It concerns the effect of Governor Tom Corbett's decision not to expand Medicaid on the costs to those Pennsylvanians who purchase their health insurance as individuals—that is, who do not purchase health insurance through their employer. First, let's review a few facts.

• The ACA expands eligibility for Medicaid to all legal residents whose income is less than 138% of the federal poverty level (FPL). Medicaid is administered by the states. However, the federal government will pay the full cost of Medicaid expansion in 2014. The feds' share declines to 90% by 2020.
• The Supreme Court ruled that the ACA's Medicaid expansion was coercive, and that states can decide whether or not to expand eligibility for Medicaid beyond their current limits. Governor Corbett has announced that Pennsylvania will not participate in Medicaid expansion.
• Pennsylvania is currently one of the least generous states in providing Medicaid. Adults only qualify for Medicaid if they earn less than 46% of FPL. Children under six are covered up to 133% of FPL, and older children up to 100% of FPL.
• To encourage people to buy private insurance, the ACA provides subsidies, known as advance premium tax credits, to people making between 100% and 400% of FPL. The lower their income, the greater the subsidy.
• This means that Pennsylvanians making between 46% and 100% of FPL are screwed. No Medicaid and no subsidy means that most of them will be uninsured. They will simply die at a higher rate than they would if Medicaid were expanded. (See my earlier series of four posts for estimates of the effect of Corbett's decision on mortality in Pennsylvania. Here's part 1.)
• However, people making between 100% and 138% of FPL will be eligible for fairly generous subsidies. Many of these folks are currently uninsured. It is anticipated that most, though not all, of them will purchase private insurance.

The Rand study looked at the effect of the entry of this group—people between 100% and 138% of FPL—into the non-group private insurance market. They analyzed it in three states, Florida, Louisiana and Texas, chosen they said because these states were least likely to expand Medicaid. Rand estimates that the effect of rejecting Medicaid expansion in these will be to increase private insurance premiums by 8-10%. There are two reasons for this:

1. Extensive research shows that there is a positive relationship between income and health. The higher your income, the healthier you tend to be. Thus, people between 100% and 138% of FPL are sicker than the average adult and will require more medical care. This will drive up insurance premiums for everyone in the risk pool.
2. Not all of the people between 100% and 138% will try to buy insurance. Some will decide they can't afford it, even with the subsidy. When not everyone purchases insurance, adverse selection occurs. Adverse selection refers to the fact that sicker people are more likely than healthy people to buy health insurance. This adds further to insurance costs.

Rand is confident that premiums will go up, but admits that their estimate of 8-10% is uncertain, primarily because it's hard to predict what percentage of the people between 100% and 138% of FPL will purchase insurance. Unfortunately, they didn't include Pennsylvania in their analysis. My guess is that our premium increase will be less dramatic because we have a slightly lower percentage of poor people than the three states they analyzed.

You may also be interested in reading:

Tom Corbett to PA's Working Poor: “Drop Dead!” (Part 1) (See all four parts.)

Medicaid Expansion Update

Big News From Oregon--Not All of It Good

There is study in progress with a randomized control group design—the gold standard of evaluation research—to evaluate the effects of Medicaid expansion in Oregon. The second wave of results from that study were published yesterday. To summarize briefly, Oregon wanted to expand Medicaid but didn't have enough money. They invited anyone who was eligible to apply, and 90,000 people applied. They then randomly selected 10,000 of them to receive Medicaid, while the others became eligible for the control group. The first wave of results, with about 6000 adults in each group, showed that the Medicaid recipients were more likely to rate themselves in “good” or “excellent” health, were less likely to report a recent decline in their health, had more doctor and hospital visits, more preventive care, and fewer unpaid medical bills.

Unfortunately, the second wave study, published in the New England Journal of Medicine, is gated, so I am relying on the abstract and a summary by Aaron Carroll and Austin Frakt in The Incidental Economist blog.

The corporate media are spinning the second wave study as showing Medicaid expansion to be a failure. For example the New York Times says:

It found that those who gained Medicaid coverage spent more on health care, making more visits to doctors and trips to the hospital. But the study suggests that Medicaid coverage did not make those adults much healthier, at least within the time frame of the research . . .

Later the article notes that Medicaid expansion under the Affordable Care Act will be costly. “Health economists anticipate that new enrollees to the Medicaid program will swell the country's health spending costs by hundreds of billions of dollars over time,” it warns. If you go online and check the comments following any article about the study, you'll find that it has unleashed a torrent of criticism from the political right claiming that providing health care for the poor is a waste of money. The study is certain to be used by Republicans such as Pennsylvania Governor Tom Corbett to justify their opposition to Medicaid expansion.

So what does the second wave study actually show? First, the bad news. The three objective indicators of physical health, blood pressure, cholesterol and blood sugar level, were all lower in the Medicaid group than the control group, but the differences were not statistically significant. Here are the data. (HDL is “good” cholesterol, so the fact that there are fewer people with low HDL cholesterol in the Medicaid group is a good outcome. High hemoglobin A1c is high blood sugar.)

Now the good news. Medicaid reduced the incidence of depression by 30%, which was statistically significant. It also significantly increased preventive care, including a 50% increase in cholesterol monitoring, a doubling of mammograms, and an increased likelihood of being diagnosed with diabetes.

Finally, the economic news. Health care spending was 35% higher in the Medicaid group. Of course, Medicaid practically eliminates catastrophic medical costs. As a result, the Medicaid recipients were significantly less likely to report borrowing money or skipping other bills in order to pay medical expenses.

There are several reasons we should not accept the conservative rush to judgment that this study shows that Medicaid is not helpful.

• Medicaid recipients were healthier on all three measures of physical health. The problem is that the differences were not statistically significant. There are several reasons why that might be the case, but the most likely is that the sample sizes were too small to detect the effect. The authors state:
  
  
  [O]ur power to detect changes in health was limited by the relatively small numbers of patients with these conditions; indeed, the only condition in which we detected improvements was depression, which was by far the most prevalent of the four conditions examined. The 95% confidence intervals for many of the estimates of effects on individual physical health were wide enough to include changes that would be considered clinically significant . . .
  
  
• These data were collected only two years after the program began. The significant differences in preventive care suggest that greater differences in health might emerge in later waves of the study.
  
  
• Mental health is also health, and significant differences in depression should not be dismissed as unimportant. Financial hardship also matters, and its absence may be related to the lower incidence of depression in the Medicaid group.
  
  
• There is no comparable study of the health effects of private health insurance, so these data should not be used to infer that Medicaid is any more expensive or less effective than private insurance.
  
  

Let's do a thought experiment. Suppose you had a private health insurance policy, researchers did a study to evaluate its health effects that was comparable in size, duration and design to the Oregon study, and obtained identical results. That is, the policy holders' health was better, but not significantly better than people without insurance. Would you cancel your policy? One of the reasons people buy health insurance may be that they think it will make them healthier, but it is my guess that the primary reason people in this country buy health insurance is to guard against the financial consequences of catastrophic illness.

You may also be interested in reading:

Tom Corbett to PA's Working Poor: “Drop Dead!” Part 1. Medicaid improves Health and Saves Lives.

Tom Corbett to PA's Working Poor: “Drop Dead!” Part 3. What Medicaid Expansion Would Mean to Pennsylvania

Medicaid Expansion Update

Medicaid Expansion Update

On Thursday, the Pennsylvania Health Access Network and Families USA issued a report on the economics of Medicaid expansion in Pennsylvania. The report and the reaction of Governor Corbett's spokesperson address some previously unanswered questions.

The cost of Medicaid expansion. The Governor estimated that Medicaid expansion would cost PA $4.1 billion over 10 years while the nonpartisan Kaiser Family Foundation put the cost at $2.8 billion. Department of Public Welfare spokesperson Anne Bale stated three items that went into the Governor's estimate.

• Staffing and administrative costs to serve 800,000 new Medicaid recipients.
• The woodwork effect: This refers to the possibility that people currently eligible for Medicaid in PA who have not signed up will do so because of the publicity surrounding Medicaid expansion and the individual mandate requiring everyone to have health insurance. If their income is below 46% of the Federal poverty level, the state would have to cover 46% of their Medicaid costs. However, the woodwork effect will occur regardless of whether PA expands Medicaid and should not be counted as a cost of expansion.
• The possibility that people currently eligible for Medicaid but who have either private insurance or are insured through their employer might drop that coverage in favor of Medicaid. However, in order for PA to be responsible for 46% of their costs, they would have to be making less than 46% of the poverty level. How many Pennsylvanians who are that poor have private insurance or are insured through an employer?

The "flexibility" issue. The Governor has stated that he opposes Medicaid expansion because it does not afford PA the flexibility it needs to design a Medicaid system that is financially sustainable, and that he would like Medicaid to include incentives for recipients to seek employment. I previously speculated that he might want PA to provide less coverage than required by the Affordable Care Act, or to place some time limit on coverage.

On Wednesday, Florida's Governor Rick Scott accepted Medicaid expansion after negotiating an agreement with the Feds to allow Florida to privatize Medicaid by placing recipients in private, for-profit HMOs and managed care plans. This plan could, in theory, cut costs by reducing the incentive for unnecessary medical treatments. Florida has already embarked on a pilot program of Medicaid privatization. It has not yet been evaluated, but it is said to be filled with exactly the kinds of problems that already plague for-profit health insurance:

Critics worry for-profit providers are scrimping on patient care and denying medical services to increase profits. Some doctors have dropped out of the pilot program, complaining of red tape and that the insurers deny the tests and medicine they prescribe. Patients have complained they struggled to get doctor's appointments.

Gov. Scott's agreement with the Feds requires that the program be evaluated in real time.

Given Governor Corbett's devotion to privatization, it seems possible that he is negotiating to bring a similar disaster to PA's working poor. We might at least want to be aware of that possibility.

The Families USA report allows us to give better answers to two financial questions about Medicaid expansion in PA.

How much is Medicaid expansion actually worth to PA's economy? I previously indicated that PA will receive $37.8 billion in health insurance from the Federal government over ten years, and that this money will benefit the economy. Families USA hired Regional Economic Model, Inc., an economic think tank, to estimate the direct and indirect effects of this cash infusion in a target year, 2016. Direct effects would be new money spent on health care. Indirect effects would be items like the construction of new hospital facilities or the money spent by new health care workers on groceries and entertainment—the so-called multiplier effect. The estimate was that these federal dollars would support 41,200 new jobs in 2016. They also estimated that the $3.3 billion in additional health care spending that would occur in 2016 would, through the multiplier effect, bring $5.1 billion additional economic activity to PA in that year. Some of this money would come to the state in the form of additional taxes.

What is the financial cost of not expanding Medicaid, and who would bear it? As you know, hospitals must treat people without health insurance (“forced charity”) and that someone must pay for this uncompensated care. The report gives the following estimates of how this uncompensated care will be distributed between 2013 and 2022.

• $878 million will be paid by state and local governments, and ultimately by taxpayers.
• $891 million will be absorbed by hospitals and medical facilities.
• $1017 million will be added to the cost of health insurance paid by Pennsylvanians who have private insurance.

None of these things matter as much as the 4000 lives per year that would be saved by Medicaid expansion. However, it's possible that the Governor and his cronies will find these economic arguments more persuasive.

You may also be interested in reading:

Tom Corbett to PA's Working Poor:  "Drop Dead!" (Part 1)

Tom Corbett to PA's Working Poor:  "Drop Dead!" (Part 2)

Tom Corbett to PA's Working Poor:  "Drop Dead!" (Part 3)

Tom Corbett to PA's Working Poor:  "Drop Dead!" (Part 4)

Tom Corbett to PA's Working Poor: "Drop Dead!"

Part 4. What We Can Do

On Tuesday, February 5, PA Governor Tom Corbett stated that at this time he cannot recommend accepting $38 billion in federal funding to expand Medicaid, thereby denying medical assistance to more than 700,000 Pennsylvanians. So far, I've discussed empirical studies demonstrating that Medicaid improves health and saves lives, the costs and benefits of Medicaid, how those costs and benefits are distributed in Pennsylvania, and the governor's stated reasons for rejecting Medicaid expansion.

The conclusion to this series has proven to be the most difficult to write. I've already had to change the “tomorrow” in part 3 to “next time.” It's time to tie the loose ends together.

First, let me try to justify the rude title of these posts. As previously noted, the Sommers, et al, study contains an estimate of the number of lives saved by Medicaid expansion.

Results correspond to 2840 deaths prevented per year in states with Medicaid expansions, in which 500,000 adults acquired coverage. This finding suggests that 176 additional adults would need to be covered by Medicaid in order to prevent one death per year.

Granted, this is just an estimate. The real number may be somewhat higher or lower, but both mortality and Medicaid enrollment statistics in this country are usually pretty accurate. Corbett's decision will deny health insurance to 719,000 Pennsylvanians whose income is between 46% and 100% of the Federal poverty level. This too is an estimate based on 2010 census data. Using these two estimates, we can compute the number of lives per year that would be saved by Medicaid expansion.

719,000/176 = 4085

I think we can safely estimate that Corbett's decision sentences approximately 4000 Pennsylvanians to death per year, at least for the first five years (the duration of the Sommers study). These lives will be lost in order to save the state (by Corbett's estimate) $4.1 billion over eight years, while simultaneously turning down $37.8 billion in Medicaid funds from the Federal government.

Gov. Tom Corbett

As if to add insult to injury, Corbett has been extremely generous to Pennsylvania's corporate class. His budget projects that corporate tax revenues will drop $311 million (-5.9%) in 2013-14, due mostly to rate cuts in the capital stock and franchise tax beginning in 2014. He proposes to gradually phase out this tax. He also proposes to gradually eliminate the corporate income tax beginning in 2015. Corbett has pledged $1 billion in corporate welfare to Shell Oil to attract a $5 billion ethane cracker plant to Western Pennsylvania. (These are not saltines; they are dirty petrochemicals.) This plant will create hundreds of jobs, far fewer than Medicaid expansion. And Act 13, which imposes a minimal “impact fee” on natural gas drillers, has been described as “the nation's worst corporate giveaway.” Meanwhile, the Governor is not proposing to close tax loopholes, such as the Delaware loophole, which allows two-thirds of Pennsylvania corporations to completely avoid income tax.

I would argue that the humanitarian and economic arguments in favor of Medicaid expansion are overwhelming. In addition, Medicaid expansion would be easy to incorporate into a single-payer system, should the state or the nation move in that direction. I suggest that as health care advocates we immediately begin to lobby for Medicaid expansion with all the enthusiasm we can generate.

The economic logic of Medicaid expansion is so strong, and there are so many powerful economic interests that support it, I think that we will ultimately find ourselves on the winning side of this debate. Here are some of the reasons to be optimistic:

• Governor Corbett's announcement rejecting Medicaid expansion contained the hedge words “at this time,” suggesting that he may be open to changing his mind.
• He will face serious pressure from hospitals that, instead of gaining new customers, face financial losses as a result of having to provide medical services to the uninsured (“forced charity”). Other segments of the health care industry, such as pharmaceutical and medical equipment companies, are also seeing dollar signs disappearing.
• Since Medicaid expenditures ultimately circulate throughout the economy, it's likely that Chambers of Commerce and other business interests will come out in favor of expansion.
• Public opinion data collected last Summer showed 49% of Americans favor of Medicaid expansion in their state and 43% opposed. The number in favor should increase as the costs and benefits become more clear.
• The fact that several other Republican governors who initially opposed expansion, such as Govs. Brewer of Arizona, Kasich of Ohio and Snyder of Michigan, have decided to accept it has cast Corbett in the role of an ideological extremist.
• Since Pennsylvania Democrats who have spoken out so far seem to be unanimous in their support of Medicaid expansion, it may take only a few high profile Republican defectors to convince the Governor that he doesn't have majority support.
• I hedged my statement by saying “ultimately.” Even if it isn't decided to expand Medicaid this year, there is nothing to prevent Pennsylvania from accepting it in the future, should Gov. Corbett not be re-elected and the political balance of power in Harrisburg change.

However, there is no justification for complacency. The stakes for Pennsylvania's working poor are too high.

I've previously reviewed research showing that wealthy people have the greatest influence on political decisions in this country, the influence of the middle class is much less, and the influence of the poor is virtually nonexistent. This suggests that the occasional successes progressive activists have are usually due to our interests temporarily coinciding with those of much more powerful economic forces. For example, passage of the Affordable Care Act itself may have had little to do with providing health care to uninsured Americans, except insofar as this provided the cover story for a massive transfer of wealth from the government to health insurance, pharmaceutical, and other health care corporations.

Medicaid expansion is another instance in which our preference coincides with that of important segments of the economic ruling class. Our support may make a difference; we will never know for sure. But even if Medicaid expansion occurs for reasons having nothing to do with anything we say or do, this is an excellent opportunity for health care advocates to renew their faith in the effectiveness of progressive activism.

I expect more sophisticated analyses of the costs and benefits of Medicaid expansion to become available soon. Meanwhile, if you would like to reprint this analysis or if you want me to edit it down to meet your needs, please let me know.

You may also be interested in reading:

Tom Corbett to PA's Working Poor:  "Drop Dead!" (Part 1)

Tom Corbett to PA's Working Poor:  "Drop Dead!" (Part 2)

Tom Corbett to PA's Working Poor:  "Drop Dead!" (Part 3)

Tom Corbett to PA's Working Poor: "Drop Dead!"

Part 3. What Medicaid Expansion Would Mean to Pennsylvania

On Tuesday, PA Governor Tom Corbett stated that at this time he cannot recommend accepting $38 billion in federal funding to expand Medicaid, thereby denying medical assistance to more than 700,000 Pennsylvanians. This series of posts will consider the implications of that decision. My first post presented evidence that Medicaid improves health and saves lives. The second examined the costs and benefits of Medicaid expansion under the Affordable Care Act (ACA). This time, I'll look at how these costs and benefits apply to Pennsylvania.

I attended a webinar on Corbett's budget sponsored by the Pennsylvania Budget and Policy Center on February 6. Some of the figures in this post come from that discussion. If it becomes available on the web, I will add a reference to it.

First of all, let's look at the 719,000 Pennsylvanians who will be denied coverage. Pennsylvania is one of the least generous states in the country when it comes to providing Medicaid coverage for adults. To qualify for coverage you must make 46% of the federal poverty level or less. For a family of three, that's less than $8781 per year. (You'll recall that children under six are covered up to 133% of the poverty line, and older children up to 100%.) If the governor had agreed to Medicaid expansion, all adults (and children) would have been eligible for Medicaid if they made up to 133% of the poverty level—$25,390 for a family of three.

This is where it gets complicated. Under the ACA, people who make between 100% of the poverty level ($19,090 for a family of three) and 138% are eligible for subsidized health insurance purchased through the federal exchange. (Pennsylvanians will be using the federal exchange because Corbett has refused to implement a state exchange.) This subsidy should, in theory, reduce the cost of private insurance to approximately what they would pay in Medicaid premiums and co-payments. However, this leaves a huge coverage gap for Pennsylvanians making between 46% and 100% of the federal poverty level. They will not be eligible for either Medicaid or subsidized private insurance.

These are the 719,000 adult Pennsylvanians who will be denied health care coverage as a result of Corbett's decision. In effect, Corbett has created a new “doughnut hole” for Pennsylvanians making between 46% and 100% of the poverty level. Most of them fall into the category of the working poor. These are the people who work at Walmart or McDonald's. The graph below illustrates this problem. You can click on it to expand it.

The Kaiser Family Foundation has estimated that Medicaid expansion is worth $37.8 billion in health care coverage for Pennsylvanians to be paid by the federal government between 2014 and 2022. The governor gave as his main reason for refusing the coverage that it will cost Pennsylvania $4.1 billion to implement the program between now and 2022. Most of this is backloaded, when the state is required to cover 5% (in 2017) or 10% (in 2020) of Medicaid costs. This $4.1 billion figure is contested. Kaiser puts it at $2.8 billion. The governor has not realeased any data to show how he arrived at his figure. However, even if it turns out to be accurate, the governor is turning down $38 billion in order to save $4 billion.

Furthermore, this neglects other costs to Pennsylvania if it rejects Medicaid expansion. For example, it is estimated that, if Medicaid is not expanded, Pennsylvania hospitals will be faced with $1 billion per year in uncompensated costs for the care of uninsured people. Some of these costs are shifted to people with insurance through higher premiums, or are paid for by state and local taxes.

In Governor Corbett's letter to Health and Human Services Secretary Kathleen Sibelius, he gives two other reasons for rejecting Medicaid expansion in addition to the alleged $4.1 billion cost.

He refers to the current Medicare as a “broken system” plagued by waste and fraud, and states that it makes no sense to expand such a system. He claims that in 2009, $43 billion “could not be traced directly back to Medicaid beneficiaries.” He does not cite a source and I'm unable to evaluate this claim.

He also calls for granting states greater flexibility “to successfully reform and build a system that works for them.” He calls for aligning benefits “to meet individual needs and closer (sic) resemble coverage provided by employers.” He calls for a Medicaid program that “promotes personal responsibility” and provides “appropriate incentives for participants to seek and retain employment.” This is vague, but bear in mind that Pennsylvania is already one of the country's stingiest Medicaid states. It appears that Corbett wants the flexibility to reduce coverage below the amounts specified in the ACA, or to place some time limit on Medicaid enrollment.

Next time, I'll speculate a bit about the politics of Medicaid expansion in Pennsylvania, and what health care activists can (and cannot) do to persuade the governor to change his mind.

You may also be interested in reading:

Tom Corbett to PA's Working Poor:  "Drop Dead!" (Part 1)

Tom Corbett to PA's Working Poor:  "Drop Dead!" (Part 2)

Tom Corbett to PA's Working Poor:  "Drop Dead!" (Part 4)

Tom Corbett to PA's Working Poor: "Drop Dead!"

Part 2. Medicaid Expansion is a Huge Bargain for the States

On Tuesday, PA Governor Tom Corbett stated that at this time he cannot recommend accepting $38 billion in federal funding to expand Medicaid under the Affordable Care Act, thereby denying medical assistance to more than 700,000 Pennsylvanians. This series of posts will consider the implications of that decision. Yesterday, I wrote about the evidence that Medicaid is effective in improving health and saving lives. Today, I will look at Medicaid's costs.

I have previously discussed the circumstances which caused Medicaid expansion to become a political issue. To summarize: Medicaid expansion is a critical part of the Affordable Care Act (ACA). Of the approximately 30 million people who were scheduled to be insured for the first time under the ACA, fully half of them—the poorest half—were going to be insured through Medicaid expansion.

Traditional Medicaid is jointly administered by the state and federal governments. Federal law requires that all children be covered if their family makes less than the federal poverty level. Children under six are covered up to 133% of the poverty line. The eligibility rules for adults are determined by the states. In most states, adults without children don't qualify for Medicaid no matter how poor they are. The income level at which parents with dependent children qualify for Medicaid varies from state to state. In the least generous states, parents only qualify if they make less than 40% of the federal poverty level—$4850 a year for two parents with a single child. The most generous states cover all adults making up to 133% of the poverty level. But on the whole, Medicaid is not much of a safety net for the poor. Right now the federal government pays on average 57% of the cost of traditional Medicaid—between 50% and 75% depending on state eligibility rules.

The ACA expands Medicaid by making everyone—children and adults—eligible for Medicaid if their family income is 138% of the poverty level or less. This is expensive, so the Feds agreed to pay most of the cost. In 2014, they will pay 100%. This drops to 95% in 2017, and 90% in 2020. States whose current Medicaid eligibility rules are relatively stingy stand to gain more money per capita from Medicaid expansion than states whose current eligibility rules are more generous.

The ACA required states to implement the Medicaid expansion. If they refused, the federal government threatened to withhold its contribution to traditional Medicare. The Supreme Court, in National Federation of Independent Business v. Sebelius, ruled that this was coercive, and that states may opt out of Medicaid expansion. The numbers change every day, but as of this writing 21 states have announced that they will expand Medicaid, 11 states have decided not to, and 18 are undecided. To the extent that states refuse to expand Medicaid, they will frustrate the intent of the ACA and deny medical care to many Americans who need it most.

How expensive is Medicaid? The average annual cost of Medicaid expansion for adults is $6000 per year, although the ACA hopes to implement some cost savings. Recall that the Sommers, et al study I referred to yesterday estimated that one life is saved per year for every 176 people added to the Medicaid rolls. From this we can calculate that the average cost per life saved is 176 x $6000, or slightly over $1 million. This sounds like a lot, but is actually well below what society is ordinarily willing to pay to save a life.

Most health care policy experts point out that Medicaid expansion is a huge financial windfall for the states, and that the logic of expanding Medicaid should be strong enough to overcome any resistance due to ideology. The states that do not expand Medicaid will be turning down “free money.” They will have to explain to their citizens why they can't have health care that is fully paid for by the federal government. The citizens of those states will be paying to expand Medicaid anyway through their federal taxes, their money will go to the states that have accepted the deal.

Uninsured citizens in the non-expanding states will continue to show up at hospital emergency rooms. Their care will be paid for through cost shifting. Costs are shifted in three ways.

1. Some of the cost is paid by those who have health insurance. Their premiums are higher to cover the cost of treating people without health insurance.
2. Part of the cost is paid by federal, state and local taxes, which provide emergency health care for the poor. The Urban Institute estimated that in 2008, state and local governments spent $10.6 billion providing emergency care for the uninsured. But beginning in 2014, the federal government will no longer subsidize emergency care, so the burden will fall even more heavily on state and local government. If they expand Medicare, state and local governments will have to spend very little on emergency care. This cost savings alone could be greater than the cost to states even when they are paying 10% of the cost of Medicaid expansion.
3. Finally, part of the cost is shifted to hospitals through what is called “forced charity”—uncompensated medical care for the uninsured.

Whatever Medicaid costs the federal government—and our best estimate is $6000 per recipient—this money will be added to the economies of the accepting states. Initially, it will go primarily to doctors, hospitals, pharmaceutical companies and other health care providers. Doctors and hospitals have already agreed to reduce their reimbursement rates under the ACA, in anticipation of having many more customers due to Medicaid expansion. They are also not happy about forced charity. They can be expected to lobby heavily for Medicaid expansion.

These advantages must be balanced against the costs to the states of Medicaid expansion.

1. The 5% (in 2017) to 10% (2020 and thereafter) of the cost of Medicaid expansion is not exactly pocket change. Some states also claim to be worried that the Feds will play a “bait and switch” game on them and increase their financial obligation in the future.
2. States also claim to be worried about the “woodwork effect.” Many Americans who are eligible for Medicaid in their state don't apply for it. However, the publicity surrounding the ACA and the threat of a fine for violating the individual mandate may persuade more eligible people to sign up. The states will then be responsible for whatever part of the cost they would have had to cover under traditional Medicare. However, the woodwork effect will occur anyway, even if the states do not expand Medicaid.

Health care experts such as Aaron Carroll and Austin Frakt argue that, leaving all humane considerations aside, it's in the overwhelming financial interest of states to implement Medicaid expansion. In the next part, I'll look at how these financial contigencies affect Pennsylvania and attempt to evaluate Governor Corbett's stated rationale for refusing Medicaid expansion.

You may also be interested in reading:

Tom Corbett to PA's Working Poor:  "Drop Dead!" (Part 1)

Tom Corbett to PA's Working Poor:  "Drop Dead!" (Part 3)

Tom Corbett to PA's Working Poor:  "Drop Dead!" (Part 4)

Tom Corbett to PA's Working Poor: "Drop Dead!"

Part 1. Medicaid Improves Health and Saves Lives

On Tuesday, PA Governor Tom Corbett stated that at this time he cannot recommend accepting $38 billion in federal funding to expand Medicaid under the Affordable Care Act, thereby denying medical assistance to more than 700,000 Pennsylvanians. This series of posts will consider the implications of that decision.

It is difficult to arrange a definitive test of whether a social policy such as Medicaid is effective in achieving its goal of better health. In order to demonstrate causality, you must run an experiment with a randomized control group design, in which some people are randomly assigned to receive Medicaid (the experimental group), while others are randomly assigned to not receive it (the control group). Random assignment is critical. You can't compare Medicaid recipients to all non-recipients because to be eligible for Medicaid, you must be poor, and poor people have worse health outcomes. Since Medicaid is voluntary, you can't compare people who sign up and receive Medicaid to other eligible people who don't sign up, because people seek out health insurance when they are ill. While these flaws may seem obvious, you should be careful. Opponents of government health insurance will sometimes cite these flawed comparisons to convince people that Medicaid is counterproductive.

Assuming that a randomized control group design is not possible, there are two general ways to evaluate a social reform such as Medicaid expansion. In a time series design, you measure the outcomes of a group of people from before to after the change is implemented. The main problem with this design is that other events may occur at the same time as the reform, and they may serve as alternative explanations for the results. In a comparison group design, you compare the outcomes of a group of people who receive the treatment to a comparison group that does not receive it. Outcomes are measured at the same time. The problem with this design is that the two groups may not have been equivalent at the beginning of the study. Any irrelevant difference between the two groups can be an alternative explanation for the results. It is possible to combine the good features of both these designs in a time series design with a comparison group. However, it is still possible that some outside event that coincides with the treatment is affecting one group more than the other.

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I will discuss two studies, both published in 2012, that evaluate Medicaid outcomes. Since these two studies are superior to any that have gone before, previous studies are basically irrelevant. A study by Benjamin Sommers and others, published in the New England Journal of Medicine, utilized a time series design with comparison groups. One of its strengths is that it used three experimental groups and four comparison groups. In 2001 and 2002, three states, New York, Maine and Arizona, substantially expanded Medicaid by relaxing their eligibility requirements. For example, in New York, you could previously apply for Medicaid if you were below the federal poverty level. In 2001, people were allowed to sign up if their income was at or below 150% of the poverty level. For each of these states, they selected geographically close and demographically similar comparison states that did not expand Medicaid access. New York's comparison state was Pennsylvania, Maine's was New Hampshire, and Arizona's were Nevada and New Mexico. Since they were interested in whether Medicaid saved lives, the primary outcome measure was the mortality rate, which in this country is reported at the county level. All the outcomes were measured from five years before the change until five years after.

The results showed that prior to Medicaid expansion, there were no significant differences in mortality between the expansion and comparison states. After they implemented the expansion, these states showed a 6.1% reduction in mortality relative to the comparison states. Additional analyses showed that, as you might expect, the decline in mortality was greatest among the poor, minorities and older adults. Survey data showed that Medicaid expansion was associated with a 24.7% increase in Medicaid coverage, a 21.3% decrease in the rate of delayed care due to cost, and a 3.4% increase in number of people saying their health was “excellent” or “very good.” The authors calculated that one life per year was saved for every 176 adults that were added to the Medicaid rolls.

As impressive as these results are, they do not prove that Medicaid caused these health improvements.  A critic might argue that these three states—especially New York, which showed the greatest drop in the death rate—are not typical of the rest of the country, and thus the study exaggerates the benefits of Medicaid. Fortunately, circumstances have given us a randomized control group design with which to evaluate the effects of Medicaid. This is the “gold standard” for social policy research. In 2008, Oregon attempted to expand its Medicaid program, but didn't have enough money. They invited people who were eligible to apply. Ninety thousand people applied, and 10,000 of them were randomly selected to receive Medicaid in a lottery. Amy Finkelstein and her colleagues are conducting an ongoing survey comparing the lucky winners to those who applied but were turned away. They reported some preliminary results last year.

The main finding is that the Medicaid group is 25% more likely than the control group to report themselves in “good” or “excellent” health, as opposed to “fair” or “poor” health. More importantly, 40% fewer people in the experimental group reported a decline in their health over the last six months. (The reason this difference is so much greater than in the Sommers study is that Finkelstein only compared Medicaid recipients to those who were turned away, while Sommers' data estimated the health of everyone in these states regardless of whether they were enrolled in Medicaid.) As you would expect, the Medicaid group reported more doctor and hospital visits, more preventive care, and fewer unpaid medical bills.

The number of people in the Oregon study is too small to detect meaningful differences in mortality. Nevertheless, the two studies converge to give us the best evidence we have ever had that Medicaid improves its recipients' health and saves some of their lives. In the next post in this series, I will look at cost considerations.

You may also be interested in reading:

Tom Corbett to PA's Working Poor:  "Drop Dead!" (Part 2)

Tom Corbett to PA's Working Poor:  "Drop Dead!" (Part 3)

Tom Corbett to PA's Working Poor:  "Drop Dead!" (Part 4)