Health Insurance and Mortality, Part 2

Please read Part 1 of this post before continuing.

Not surprisingly, there have been several criticisms of the Sommers, Long and Baicker study. Here are the main ones I've been able to identify so far, and my comments on each.

• It's too good to be true. The New York Times reports that experts are “skeptical of the magnitude and suddenness of the decline” in mortality. According to Dr. Joseph Antos, a health economist at the American Enterprise Institute, “Health care is a much more involved process—you don't just sign up and suddenly get well.” This objection, of course, does not explain the results. These researchers may be overlooking the fact that being without health insurance is a psychological stressor, the removal of which may have immediate health benefits.

• The results contradict those of the Oregon Medicaid study. A 2013 study by Baicker, et al., examined the effects of Medicaid expansion in Oregon using a randomized control group design. (The opportunity to sign up for Medicaid was determined by lottery.) Although this study found economic and psychological benefits of Medicaid, its effects on objective measures of health were disappointing. Blood pressure, cholesterol and blood sugar levels were all lower in the Medicaid group, but the differences were not statistically significant. However, the Oregon study's sample size was too small to detect medically important health benefits. The Massachusetts study has many more particpants. If the same percentage decline in mortality observed in the Massachusetts study had been seen in Oregon, it too would not have been statistically significant. The two studies are not inconsistent. An important strength of the Massachusetts study is its larger sample size. Furthermore, it measured the effects of the entire health reform package, not just Medicaid expansion.

• It costs too much. Using the Sommers, et al., data, Cannon calculated that it cost Massachusetts $4 million per life saved. He argues that this is not cost effective. However, this assumes that the only benefit people received from Romneycare was when it saved their lives. It ignores the many health and quality of life benefits people receive from medical treatments for non-life-threatening illnesses and injuries. What is the value of a knee or hip replacement that allows a person to walk free of pain for 20 years? How do you measure the benefits to a family of avoiding bankruptcy and the loss of their home?

• Massachusetts is different from other states. Massachusetts is “whiter and more affluent” than most other states, but the matched comparison groups control for race and income. It could be argued that Massachusetts has a more effective health care system (more doctors, better-equipped hospitals) than other states. However, a convincing alternative explanation must explain not just lower mortality in Massachusetts, but all the results. Why did the mortality rate change from 2001-2005 to 2007-2010? Wouldn't a better health care system be expected to help people over 65 as well? As Sommers, et al., state in their conclusion:

Although we cannot rule out unmeasured confounders, it is challenging to identify factors other than health care reform that might have produced this pattern of results: a declining mortality rate in Massachusetts since 2007 not present in similar counties elsewhere in the country, primarily for health care-amenable causes of death in adults aged 20 to 64 years (but not elderly adults), concentrated among poor and uninsured areas and not explained by changes in poverty or unemployment rates.

Of course, health insurance is useless if there are no doctors or hospitals in your area. The quality of the health system may have interacted with health care reform to produce a better result in Massachusetts than would be expected in other states. This does not explain away the results, but it may limit our ability to generalize from them.

• More research is needed. This cliché is, of course, trivially true. However, it is unrealistic to expect definitive studies of effects of the Affordable Care Act (ACA), since it is being implemented simultaneously in all 50 states. There are no experimental and control groups, only before and after comparisons, the results of which can easily be dismissed as caused by other changes taking place in society at the same time. About the best we can expect will be comparisons between states that do or do not expand Medicaid. (Pennsylvanians will be happy to know that, thanks to Governor Tom Corbett and our legislature, future researchers will be counting the number of excess deaths in our state.) However, states that are not expanding Medicaid are already known to differ both economically and politically from other states. And while Medicaid expansion is an important provision of the ACA, it is only a part of it.

In short, the Sommers, et al., study may be the best that is available for the foreseeable future. Even conservative critics of health care reform are granting it grudging respect.  Megan McArdle stated, "(A)fter yesterday's report, I've revised the probability of 'huge benefits' [from health care reform] upward, and you should do the same."

You may also be interested in reading:

Health Insurance and Mortality, Part 1

Big News From Oregon:  Not All of It Good

The Coverage Gap:  The Real Failure of Obamacare

Romneycare:  The Bottom Line

Health Insurance and Mortality, Part 1

In 2006, Massachusetts implemented the country's first comprehensive health care reform (“Romneycare”). It made health insurance mandatory for nearly all citizens, expanded Medicaid to cover people earning up to 150% of the federal poverty level (FPL), and provided health insurance subsidies for people with incomes up to 300% of FPL. It became the structural model for the Affordable Care Act (ACA). A previous study showed that Massachusetts residents reported themselves to be in better health following the implementation of Romneycare. A new study out this week shows that health care reform significantly reduced the mortality rate in Massachusetts compared to nearby states. This is the bottom line in health care research. It's good news not only for the ACA, but for single payer advocates as well, since single payer would further expand the number of people covered by health insurance and would presumably reduce the red tape and out-of-pocket costs that keep some people from using health care.

The study, by Drs. Ben Sommers, Sharon Long, and Katherine Baicker, is a quasi-experimental design. It lacks an important feature of true experiments—random assignmnent of participants to conditions—but attempts to compensate for this by using a matched comparison group that controls for most plausible alternative explanations. In this case, the experimental group was the citizens of Massachusetts. Each county in Massachusetts was matched with a comparison county drawn from a nearby state. The counties were matched for age distribution, race and ethnicity, poverty, income, unemployment, lack of health insurance, and their existing mortality rate. The authors compared the mortality rates of adults under 65 from 2001-2005 (prereform) to 2007-2010 (postreform). Here are the results.

• Mortality in Massachusetts declined 2.9% relative to the comparison group. This is equivalent to 8.2 deaths per 100,000 people, or one death prevented for every 830 people who obtain health insurance. The New York Times calculates that a national 2.9% decline in mortality among adults under 65 would translate to about 17,000 lives saved per year. Harold Pollack claims that the number is as high as 24,000 per year.
• Mortality “amenable to health care,” i.e., from causes such as cancer, heart disease and diabetes, declined 4.5% relative to the control group. Mortality from causes not amenable to health care, i.e., auto accidents, was unchanged. See the chart below.
  
  

• Mortality among people over 65 was unaffected. This is to be expected, since senior citizens already had Medicare.
• Reductions in the mortality rate were greatest among counties with the lowest incomes and the lowest rates of insurance coverage prior to reform.
• As you would expect, the study also found significant increases in insurance coverage, access to medical care, and self-reported health in Massachusetts compared to the comparison group.

As health care expert Austin Frakt has noted, this study constitutes the strongest evidence yet that having health insurance can save your life. Nevertheless, the study is not without its critics. I will look at some of those criticisms in Part 2 of this post.

You may also be interested in reading:

Health Insurance and Mortality, Part 2

Big News From Oregon:  Not All of It Good

The Coverage Gap:  The Real Failure of Obamacare

Romneycare:  The Bottom Line

A Nous la Liberte

Each week, Dr. Aaron Carroll, one of the bloggers at The Incidental Economist, releases a 5-10 min video called "Health Care Triage," in which he discusses current issues in health. This week's installment will be of special interest to single payer advocates, since it concerns the French health care system, which he considers the best in the world. You may not know whether to laugh or cry.

In previous weeks, Dr. Carroll has also discussed the Canadian system--not as good as France's, but much better than ours. He often discusses empirical issues, such as whether organic food is better for your health. If you sign up, You Tube will send you an e-mail each time a new video in this series is released.

You may also be interested in reading:

Conceptualizing Health Care Policy

Are You Feeling Lonely?

Outlier (noun): (1) a person whose residence and place of business are at a distance; (2) something (as a geological feature) that is situated away from or classed differently from a main or related body; (3) a statistical observation that is markedly different in value from the others of the sample.

The Organization for Economic Cooperation and Development (OECD) has released Health at a Glance, its 2013 report on the performance of health systems in its member nations. Here is one of the charts.

The vertical dimension is life expectancy in years. On the horizontal is health care spending per person in US dollars. The line is the curve which best fits the data. It has both a linear component—as health care spending goes up, life expectancy increases—and a quadratic component—as spending increases, each dollar spent has diminishing returns. The United States is an outlier. We are spending quite a bit more (about $2400 per person more) than any other country, but our life expectancy is 26^th out of the 40 countries, almost one year lower than the international average. Another way of looking at it is that the two countries closest to us in life expectancy, Chile and the Czech Republic, are spending less than a quarter of what we're spending per capita on health care.

We're spending lots of money, but not getting a good return on our investment. A substantial portion of the money is being spent not on improved health care services, but rather on ever higher profits for private insurers, drug companies, and giant hospital chains.

The next time a politician says we have “the best health care system in the world,” you are free to burst out laughing.

You may also be interested in reading:

Where's the Outrage?

Why Are American Health Care Costs So High?

Where's the Outrage?

Drs. Peter Ubel, Amy Abernethy and Yousuf Zafar, all medical doctors, published an editorial in The New England Journal of Medicine entitled “Full Disclosure—Out-of-Pocket Costs as Side Effects.” An abbreviated version by Dr. Ubel appeared as an op-ed in The New York Times as “Doctor, First Tell Me What It Costs.” They argue that, just as doctors typically discuss negative side effects of drugs and medical treatments with their patients, they should also discuss the financial cost of drugs and medical treatments before the patient makes a decision. These costs should be treated as a potential side-effects because stress from the threat of financial ruin can adversely affect the patient's health. They note that cost is sometimes not discussed because both patients and doctors are too embarrassed to bring it up.

Some examples of costly decisions are given.

• Bevacizumab (or Avastin), a drug which extends the lives of colorectal cancer sufferers an average of five months beyond chemotherapy alone, has a median price of $44,000. A patient on Medicare would be responsible for 20% of that cost, or $8800.

• A breast cancer patient with a high deductible health insurance policy faces average out-of-pocket costs of $55,000—obviously, more than the life savings of most Americans. A person with a high deductible plan faces a bill of $40,000 for myocardial infarction, and $4,000 per year for management of “uncomplicated” diabetes. (Meanwhile employers are increasingly shifting workers to insurance policies with higher co-payments and deductibles.)

The authors state four reasons it would be beneficial for doctors to inform patients in advance of the cost of treatment. My comments on each are in parentheses.

1. Informing the patient of the cost of treatment may cause some patients to switch to a less expensive alternative treatment that is just as effective. (Why would a doctor ever recommend a drug or treatment if there is an equally effective and less expensive alternative?)
2. Some patients may be “willling to trade off some chance of medical benefit” in exchange for lower cost. (This possibility, which the authors refer to as “complex and ethically charged,” gets to the heart of the matter. Some patients may choose to forego treatment rather than leave themselves or their families bankrupt. It is implied that knowing the full cost of treatment may persuade some folks to commit passive suicide.)
3. Patients could attempt to obtain financial assistance in advance of the treatment. (An example is given of someone who was able to obtain help from a charity—a rare event, at best.)
4. “A growing body of evidence” suggests that if patients take cost into account, it “might reduce costs for patients and society in the long term.” (However, there is no citation to this body of evidence and the authors do not elaborate. They may mean that if everyone became more cost-conscious, prices might come down, but does the health care industry operate the same way as other more competitive markets?)

It seems so obvious that doctors should discuss costs with patients that it hardly seems necessary for NEJM to publish an editorial suggesting that they do so. But the most revealing thing about this article is the issues Ubel and his colleagues don't even mention.

First of all, they don't ask why the costs of drugs and medical treatment are so much higher in this country than in other industrialized countries. Medical costs are treated as if they were merely an uncontroversial feature of the natural environment, and no mention is made of how they might be reduced.

My colleague Paul Ricci has blogged frequently—for example, here—about how we're spending much more per person on health care than other countries, and getting mediocre results. Ezra Klein has posted 21 graphs with comparative data on the costs of specific drugs and medical treatments. Medical bills account for over 60% of U. S., bankruptcies, and 75% of people with medically-related bankruptcies had health insurance.  A 2013 survey of 11 countries by the Commonwealth Fund found that Americans were more likely than residents of the other ten countries to forego health care because of cost and to have difficult paying for care even when they were insured.

There is some objective data comparing the causes of our higher prices. A 2012 study by the Institute of Medicine, a division of the National Academy of Sciences, estimated that the U. S. health care system wastes $750 billion a year, roughly 30% of the money spent. The report identified six major areas of waste: unnecessary services ($210 billion annually), inefficient delivery of care ($130 billion), excess administrative costs ($190 billion), inflated prices ($105 billion), prevention failures ($55 billion), and fraud ($75 billion). Our doctors are more highly compensated than doctors in the rest of the world. Our hospitals attempt to maximize their profits, regardless of whether they are legally registered as for-profit or nonprofit corporations. Part of the problem is political corruption. For example, when Congress expanded Medicare to include prescription drug coverage, Medicare was forbidden to use its purchasing power to negotiate for lower drug prices.

More importantly, the authors don't even question why it is necessary for so many Americans to choose between financial ruin and illness or death when they suffer from common medical conditions. They fail to mention that the rest of the world's developed countries have largely solved this dilemma by establishing government run single payer health care systems. If this were merely a matter of money, we could talk about the vast sums this country wastes on overseas military misadventures, or the way our billionaires grow increasingly rich while paying lower tax rates than their secretaries. But these outrages are irrelevant, since a single payer system will save money. All the countries with single payer spend less per capita on health care than we do.

To be fair, Ubel does say, “No one should have to suffer unnecessarily from the cost of medical care.” But he fails to pursue any of the implications of this remark. The authors never make the point that single payer would almost certainly solve many of the financial problems they agonize over in these articles. I suppose it's possible Ubel and his colleagues are secretly hoping to build momentum for single payer by encouraging doctors to empathize more with their patients, but there's nothing in the article to support this speculation.

To paraphrase a point frequently made by Noam Chomsky, no one becomes a tenured professor at an elite university, or is invited to write an editorial for The New York Times, unless he or she has completely internalized the world view of the ruling class, and in the process learned to ignore all the really important issues facing our society.

You may also be interested in reading:

Why Are American Health Care Costs So High?

New Time Magazine Article on Health Care Costs

Protecting the Parasites:  The Irony of Obamacare

Conceptualizing Health Care Policy

Mike Konczal has written an important article in which he asks: (1) What parts the Affordable Care Act (ACA) are not working well, and why?, and (2) What does this imply about future developments in health care policy? Will government abandon the effort to provide health care for all, or will we move toward a single-payer system?

Paul Krugman has described the ACA as a “kludge.” It is too complicated, and those complications are making the system inefficient and expensive, while depriving many Americans of health insurance. Konczal notes four specific problems:

1. The process of signing up for health insurance in the federal exchange (HealthCare.gov) is complicated because everyone must be means tested. The government must be able to confirm virtually every datum the applicants enter: their identity, their citizenship, their income, their eligibility for coverage through other federal or state programs, etc. All this is necessary to determine whether each applicant is entitled to a subsidy, and if so, the amount.
2. A further complication is that each applicant must be matched to a private insurer. The government must check that all of the thousands of insurance plans meet their minimum standards. They must clearly communicate the important characteristics of each policy to consumers, even though the insurance companies deliberately try to confuse them. They must contend with insurance company sabotage such as canceling plans abruptly and arbitrarily raising rates.
3. The ACA faces the threat of adverse selection—the possibility that the oldest and sickest among us will patiently navigate the exchange and eventually purchase a policy, while the youngest and healthiest will ignore the law and hope the penalty for not buying insurance is unenforceable. If Americans in poor health are more likely to buy insurance, the costs go up and there is a very real possibility that the system will collapse.
4. Finally, the federal government has to deal with attempted sabotage by states controlled by Republican governors and legislatures, exemplified by their refusal to set up state exchanges and to participate in Medicaid expansion, which is denying coverage to over 5 million low income Americans.

Summarizing these problems, Konczal describes two approaches to social insurance, which he calls Category A and Category B.

Konczal describes Category A as the “neoliberal” approach to public policy. Neoliberalism has, in recent years, become a synonym for conservatism. It refers to policies that reduce the role of government in public life through strategies such as privatization and deregulation. Category A social insurance sees the government as “an enabler to market activities, with perhaps some coordinated charity to individuals most in need.”

Category B, on the other hand, encompasses progressive programs such as the New Deal and the Great Society. It sees certain goods and services, such as food, shelter and health care, as basic human rights, and attempts to remove them from the marketplace by providing them to everyone.

There are very few pure examples of Categories A and B; most policies fall somewhere along a continuum between these extremes. However, the ACA falls clearly into Category A. This is not surprising because it is a plan devised by a conservative think tank which was promoted for decades by the Republican party. Social Security and Medicare, on the other hand, fall into Category B. Medicaid is a hybrid, since it is means tested and administered (and regularly sabotaged) by the states.

In the last three decades, we have seen a gradual rollback of Category B programs. This is not surprising, given the extent to which the political system is controlled by corporations and wealthy individuals. In the old days, the Republicans favored Category A and the Democrats Category B. As both parties have shifted to the right, the Democrats have shifted their allegiance to the Category A policies favored by their corporate donors, while many Republicans advocate eliminating social insurance entirely.

Whenever a public service is privatized, it moves from Category B to A. This is what happens, for example, when you turn over tax dollars to charter schools, so that corporations can make profits by educating children as cheaply as possible. Of course, the ultimate disaster for the country would be the Republican plan to privatize Social Security, since another Great Recession—a virtual certainty in the absence of financial reregulation—would have the potential to impoverish our elderly population.

PA Governor Tom Corbett's proposal to expand Medicaid would move this program further toward Category A through a combination of stricter means testing and turning the program over to private insurance companies. Dave Steil, President of Healthcare 4 All--PA, has written an op-ed critizing the Corbett plan. He rightly notes the waste of money that would result from turning Medicaid over to private insurance companies. However, he overlooks the hardship that increased means testing, premiums and copayments will impose on working class Pennsylvanians.

Advocates of single payer health insurance—obviously a Category B program—are going to be urinating into a stiff wind for the foreseeable future. However, there is some hope. It is the four Category A characteristics noted above that are turning the ACA into a “kludge.” While Republicans will argue for repeal, pragmatists are likely to notice that if you drop some of these characteristics, you can improve health outcomes while saving money. And if you drop all four, you have single payer.

You may also be interested in reading:

The Coverage Gap:  The Real Failure of Obamacare

A Clouded Vision, Part 1:  The Stick

A Clouded Vision, Part 2:  The Carrot

UPMC Gives Pittsburgh the One-Finger Salute--Twice

UPMC, the largest member of Pittsburgh's health care oligopoly, whose fees are well above the national average, was in the news twice last week. The City of Pittsburgh is suing UPMC, which claims to be a non-profit, to strip it of its tax-exempt status. In a court hearing last week, UPMC claimed it does not owe any payroll taxes because it does not have any employees! (Although their website claims they have 55,000 employees, UPMC says these people are employed by subsidiaries.) So far, Judge R. Stanton Wettick, Jr., has not ruled on the credibility of this claim.

The Bombardier BD-700-1A10 Global Express

On Friday, it was learned that UPMC is spending $51 million on a new corporate jet plane, a Bombardier Global Express, described as “a luxury, ultra-long range business jet with twin Rolls Royce engines.” For security reasons, the flight plans of this airplane are to remain hidden from the public.

I'm sure Pittsburghers who are struggling to pay their medical bills will be thrilled to hear that UPMC is able to afford $51 million for a new stealth jetliner. But who is going to ride around on this luxury aircraft, since, as we now know, UPMC has no employees?

You may also be interested in reading:

Gekkonomics

It Ain't Over 'Til It's Over

Why Are American Health Care Costs So High?

Here's a 8-minute video by author John Green that repeats some arguments that are familiar to single-payer advocates, but in a very clear and concise way.

Bending the Health Care Cost Curve

On One Hand . . .

A Friday report from the Medicare Board of Trustees shows that there was a slowdown in the growth of Medicare costs in 2012. The Medicare trust fund is now projected to last until 2026, two years longer than previously estimated. Medicare spending is now growing at the historically low rate of 1.7% per year. Of course, a decline in the rate of growth doesn't mean the problem is solved. Costs are still going up. But at least they are heading in the right direction. The report attributes the decline in costs to a combination of the current recession, which is causing people to cut back on health care, and the Affordable Care Act (ACA).

Dr. Ezekiel Emanuel, one of the authors of the ACA, points out that there are two types of cost control embedded in the ACA, payment reductions and what he calls “structural and incentive changes.” The two primary payment reductions affecting Medicare are:

• Reduced payments for Medicare Advantage. Medicare Advantage allows seniors to purchase private insurance in lieu of traditional Medicare. It costs the government 14% more than Medicare even though it doesn't produce any better outcomes. That 14% is presumably being pocketed by the private insurance companies, and the government is taking it back.
• Reduced payments to Medicare providers, i.e., hospitals, home care agencies, etc. Emanuel says these organizations have profited from increased productivity in recent decades, but have not passed these savings on to the consumer. Therefore, Medicare is paying them less.

In short, the ACA made $716 million in automatic cuts to the Medicare program in 2012. This chart shows that these two payment reductions account for the bulk of these Medicare cuts. They are the primary reason for the slowdown in the growth of Medicare spending.

The structural and incentive changes include things like bundled payments, where Medicare pays a fixed rate for an episode of care rather than fee-for-service, and Medicare's Independent Payment Advisory Board, which can make specific treatment recommendations in order to reduce excess cost growth. Most of these changes are several years away.

These cost controls are an important positive changes, since they have reduced costs without eliminating benefits to Medicare recipients. However, they're only a fraction of the amount that could be saved if the country were to move to a single payer system. First of all, they only affect Medicare, which insures 17% of Americans. Secondly, they are relatively modest cuts when you consider the excess profits currently being taken by hospitals and insurance companies.

The bottom line is that these data seem to show that the ACA is working in controlling Medicare costs, but it is only a modest first step compared to what we could and should be doing.

On the Other Hand . . .

Elisabeth Rosenthal has a long article in the Sunday New York Times about the high cost of medical care in the U. S., similar to the February Time feature by Steven Brill. Her article focuses on colonoscopies, presumably because it is a vivid metaphor for what the for-profit health care system is doing to all of us. However, her chart shows several common medical costs in which the average U. S. price tag is as much as 25 times higher than the price in other countries.

The sub-heading of the article says, “Colonoscopies explain why U. S. leads the world in health expenditures,” but they do no such thing. Merely listing the costs of medical procedures does not explain why those costs are so much higher in this country. Most of Rosenthal's argument is a tautology: Prices are high because prices are high. The closest she comes to offering an explanation is buried in the nineteenth paragraph:

A major factor behind the high costs is that the United States, unique among industrialized nations, does not generally regulate or intervene in medical pricing, aside from setting payment rates for Medicare and Medicaid, the government programs for older people and the poor. Many other countries deliver health care on a private fee-for-service basis, as does much of the American health care system, but they set rates as if health care were a public utility or negotiate fees with providers and insurers nationwide, for example.

Of course, she manages to make this point without mentioning the poisonous words “single payer,” which all the other countries cited in her article have. But the Medicare data show us what could happen if the government were to take a more active role in combating greed in the health care system.

You may also be interested in reading:

A New Time Magazine Article on Health Care Costs with Stewart Discussion

An Explanation of Washington Post Graphs on the Cost of Procedures

Medicaid Expansion Update

Legalized Bribery

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)