Uninsured people who get Medicaid only gained from 20 to 40 cents in value from each dollar spent by the government.
A principal reason why the benefit of getting insured was so small is that when uninsured people received care, they typically paid only 20 cents on the dollar for those services. Safety-net providers, state or local government, friends, relatives, or someone else absorbed the remaining costs.
Because a large fraction of Medicaid expenditures financed care that recipients would have received anyway (for example, by leaving bad debt at hospitals), it is unclear whether recipients themselves would have been willing to pay the full costs of Medicaid.
Finkelstein and her colleagues were careful not to draw normative conclusions from these findings. But some Medicaid critics have argued, first, that Medicaid is an inefficient way to benefit the poor. If a Medicaid dollar results in only 20 cents in benefit to a previously uninsured person, wouldn’t it be more efficient to simply give that person a dollar? And, second, Medicaid is actually a subsidy for people other than those it ostensibly helps.
We see matters differently. One important reason why the value of Medicaid appears to be so low is that Finkelstein put a much lower value on the health of Medicaid recipients than is typically used in valuations of the health of other Americans. We also argue that in many cases, we should not be troubled that Medicaid payments are going to third parties who are, after all, providing care to Medicaid recipients.
After failing to persuade his Legislature to expand Medicaid, Gov. Bill Walker of Alaska said Thursday that he planned to unilaterally accept the federal funds available to cover more low-income residents under the program.
Mr. Walker, an independent who took office in December, said in a news conference in Anchorage that he could not wait any longer to offer health coverage to the roughly 42,000 people his administration projects will be eligible under the expansion. Expanding Medicaid — an option for every state under President Obama’s Affordable Care Act — was a campaign priority for Mr. Walker, who couched it as a “common-sense decision” for the state’s economy and for the health of its people.
Evidently Governor Walker tried to get the legislature to support the expansion, but when those options failed, he used his power of office to do it himself. From the tone of the articles I’ve read, he appears to be acting legally. At least, I’m not seeing any legislators calling him a tyrant and threatening lawsuits.
That makes Alaska the 30th state to accept the Medicaid expansion. Many of my colleagues think that is a sign of how weakly the ACA has been implemented. Me? I think the opposite. Healthcare reform is a marathon, not a sprint. It’s important to remember that the Medicaid expansion only went into effect less than two years ago. It’s really young. Traditional Medicaid was passed in 1965, and the last state to accept it (Arizona) did so in 1982. If that same gap held true for the ACA, then we should expect the last state to accept the expansion in 2031.
Even if you accept Arizona as an outlier, all states but that one didn’t start participating in Medicaid until 1972, seven years after it began. That would be 2021 for the Medicaid expansion.
And for anyone who thinks comparing something to Medicaid is a bad example, because Medicaid isn’t as “beloved” as Medicare, remember that just a few years ago the Supreme Court ruled that traditional Medicaid was so American-as-apple-pie and essential-to-freedom that threatening to take it away from a state was unconstitutional coercion.
Healthcare reform is a long-haul process. I know many people wish that every state would just accept the Medicaid expansion right now, but that’s unlikely to happen. The good news for them is that the fact that all the states haven’t come on board yet doesn’t mean they won’t in the near future.
I have obviously touched a nerve in many TIE readers. So let’s take a step back and revisit what I wrote and what is going on here.
There were somestudies that made predictions about the health and composition of the newly eligible for Medicaid. Those studies could be interpreted to mean the Medicaid expansion would cost less than predicted, because people entering would be healthier than those already enrolled. I WAS ONE OF THE PEOPLE WHO THOUGHT THAT INTERPRETATION MIGHT BE POSSIBLE. A recent report from CMS suggests that this lower-than-expected expense didn’t happen. I wrote that we need to figure out why and keep watching.
None of this was to suggest that the prior research was incorrect or poorly performed. It appears, upon further looking at the report, that there are some reasons that the differences are higher than estimated:
There are several explanations for the difference between the estimates in this year’s report and those in previous reports. First, most of the States that implemented the eligibility expansion are covering newly eligible adults in Medicaid managed care programs, and on average the capitation rates for the newly eligible adult enrollees were significantly greater than the projected average costs previously calculated.
Austin flagged this, by the way. In fact, some of the capitation rates may have been raised because states predicted pent-up demand because they assumed people entering might be sicker (in spite of the research I talked about).
Data for newly eligible adults are still limited. While CMS has reported some enrollment and expenditure data for this group, data on claims and managed care encounters, along with data on the health status and demographics of these enrollees, are not yet available. Thus, there is still considerable uncertainty about the health care costs of newly eligible adults in 2014, as well as for future years.
Medicaid still expects newly eligible adults to cost less in the future (Figure 6). It’s entirely possible they are correct.
But here’s the thing. It may be that this research turns out to be incorrect. I doubt it, in that I think the work is correct in that the newly eligible appear to be less sick than those already covered. It may be that this research is correct, and that still spending goes up for other reasons. Maybe people just spend more. Maybe docs find new ways to bill more. Maybe policy makers set capitation rates too high.* But if I report on research, and make some guesses as to the future, and they turn out to be incorrect, I will write that my predictions were wrong, that we need to figure out why, and that we should keep looking into it.
That’s what I did. That’s what I will continue to do.
The Supreme Court ruled against the plaintiffs in King vs. Burwell. In the aftermath, Michael Cannon, a principal architect of the plaintiffs’ suit, wrote that
the battle to set in place a health care system that works for all Americans is far from over.
Cannon is absolutely right.
King was a victory because it prevented millions of people from losing insurance coverage. But it did not advance the cause of health care reform a centimeter with respect to the status quo ante King.
In The New Republic, I argue that the principal goals of health care reform remain to be fulfilled. Getting them fulfilled will require us to win new political fights to extend universal health insurance in every state. We need to keep working on innovative health care delivery models that control the growth in health care expenditures while improving the quality of care.
Above all, we need to get more empirical:
Health care reform has to be driven by results, not political beliefs. Programs should be selected based on evidence, such as the results of randomized clinical trials. Every new reform should collect rigorous data to determine whether it works.
The Supreme Court today declined to hear Maine’s appeal in a case involving a constitutional challenge to an ACA provision relating to Medicaid. That’s good news for supporters of the law, who had no desire to relive the fight over constitutional coercion in yet another case about the ACA.
What’s the case about? The ACA says that, as of the date of its enactment, the states can’t restrict the category of kids and young adults who are eligible to receive Medicaid. Known as a “maintenance of effort” provision, the ACA freezes Maine’s eligibility rules for that population.
Before the ACA, Maine chose to cover 18- to 20-year-olds in its Medicaid program. After the ACA, the state wanted to restrict its eligibility rules—but the maintenance-of-effort provision said it couldn’t. So Maine sued, arguing that the ACA placed an unconstitutionally coercive condition on the receipt of its Medicaid dollars.
The First Circuit—quite properly in my view—rejected the argument. Under the Chief Justice’s controlling opinion in NFIB v. Sebelius, a federal spending condition is unconstitutional where failure to adhere to the condition not only threatens the loss of federal funds tied to a given program, but also the loss of federal funds tied to a substantial and independent program.
In NFIB, the Chief concluded that the Medicaid expansion was a new program—call it Obamacaid. Because a state had to adhere to the rules of Obamacaid or lose all of its existing Medicaid money, the Chief reasoned, the expansion was unconstitutionally coercive.
Here, however, the maintenance-of-effort provision applied only to Maine’s traditional Medicaid program. By the Chief’s lights, adjusting the rules for an existing program isn’t unconstitutionally coercive since it doesn’t threaten the loss of independent federal funding. If Maine didn’t wish to comply, it would lose all of its Medicaid dollars—but it wouldn’t also lose, say, its education funding.
The Supreme Court’s rejection of Maine’s petition suggests that the Chief is not inclined to revisit his coercion decision in NFIB. If he was convinced that the First Circuit botched it, he probably could have persuaded his conservative colleagues, who have a more expansive view of what counts as unconstitutional coercion, to hear the case.
More subtly, the Court’s refusal to hear the case suggests that the Court won’t use King v. Burwell to shift the law on what counts as unconstitutional coercion. Were such an opinion in the works, the Court would have held onto Maine’s petition and, after issuing King, given the First Circuit a chance to reconsider its decision.
Does that portend anything about the outcome in King? I don’t think so. The justices who think that adopting the plaintiffs’ interpretation raises coercion concerns—Justice Kennedy, perhaps, or even the Chief Justice— could rule for the plaintiffs on statutory grounds, while flagging the constitutional concerns for future litigation. Alternatively, they could rule for the government in an effort to avoid potential constitutional concerns.
Either way, the Court’s decision wouldn’t call into question the outcome of the First Circuit case. Beyond signaling that the Court won’t use King to rewrite the coercion doctrine—an unlikely outcome in any event—the denial of Maine’s petition doesn’t tell us much about King. We’re still in a waiting game.
“Avalere Health projects that 76 percent of beneficiaries in Medicaid and the related Children’s Health Insurance Program (CHIP) will be covered by private managed care by 2016.”
“Private insurers booked $115 billion in Medicaid revenue last year, according to data compiled from regulatory filings by Mark Farrah Associates and analyzed by Kaiser Health News.”
“Operating profit on those premiums came to $2.4 billion. Net profit, after accounting for taxes, depreciation and other expenses not directly connected to health coverage, would have been less.”
Among the new, proposed regulations of Medicaid managed care plans, “HHS now wants states to certify at least annually, perhaps based on direct queries to doctors, that enough caregivers are in the managed-care network and close enough to plan members to serve them.”
“[F]or nondisabled adults  increased [Medicaid managed care or MMC] penetration is associated with increased probability of an emergency department visit, difficulty seeing a specialist, and unmet need for prescription drugs.” Some other work they cite, but not all of it, is consistent with these findings.
Consistent with prior work they cite (here’s some, the working paper version of which I mentioned here), Medicaid managed care penetration “is not associated with reduced expenditures. We find no association between penetration and health care outcomes for disabled adults.”
“[T]he primary gains from MMC may be administrative simplicity and budget predictability for states rather than reduced expenditures or improved access for individuals.”
Their analysis excluded Medicaid-Medicare dual enrollees and those with less than full year coverage. Separate analyses of the SSI population were generally not statistically significant, but the sample was smaller.
“[M]ore than half of all Medicaid beneficiaries are enrolled in risk-based managed care organizations (MCOs) through which they receive all or most of their care.”
“Not all state Medicaid programs contract with MCOs, but a large and growing number are doing so, and some states mandate that beneficiaries enroll in MCOs to receive Medicaid benefits.”
“In FY 2013, capitation payments to comprehensive MCOs accounted for about 28% of Medicaid spending nationally.”
“The federal regulations, last updated in 2002, set forth state responsibilities and requirements in areas including enrollee rights and protections, quality assessment and performance improvement (including provider access standards), external quality review, grievances and appeals, program integrity, and sanctions.”
Because I am hoping to see a new issue brief that summarizes what’s actually in the proposed regs, I’m not going go through this brief in detail. Suffice it to say, as things to look for in the new regs, the brief covers availability and accessibility of plan information, enrollee appeal rights, provider network adequacy, quality of care, long-term care services and supports, actuarial soundness of capitation rates, medical loss ratio, encounter data, and program integrity (basically, auditing contractors).
“Many state Medicaid programs are expanding their reliance on MCOs. In a recent 50-state survey of Medicaid directors conducted by the Kaiser Commission on Medicaid and the Uninsured, half the states reported taking action in 2014 to enroll additional Medicaid eligibility groups in MCOs. These states include California, New York, Texas, Florida, and Illinois – the five states with the largest Medicaid populations. A smaller number of states expanded their managed care programs geographically and/or shifted from voluntary to mandatory MCO enrollment. Nearly half the states plan to expand their risk-based managed care programs in 2015 as well.”
“A number of large health insurance companies have a significant stake in the Medicaid managed care market. Currently, 16 firms own Medicaid MCOs in two or more states, including five firms – UnitedHealth Group, WellPoint, Centene, Aetna, and Molina – that have Medicaid MCOs in 10 or more states. Eleven of the 16 multi-state parent firms are publicly traded; eight of these 11, including the five just mentioned, are ranked in the Fortune 500. The other five multi-state parent firms are nonprofit companies.”
Also, from the tracker directly, of the 38 states (plus DC) with MCO contracts, 25 have five or fewer and 14 have three or fewer. Suffice it to say, competition isn’t robust in many states.
Some red states are considering whether they should accept the ACA’s Medicaid expansion, but only if they can get a waiver from the federal government allowing them to attach a requirement that recipients have or seek paid employment. In The New Republic, I offer five reasons why this is a terrible idea.
The legal dispute at the core of last week’s Supreme Court decision in Armstrong v. Exceptional Child Center, Inc. is arcane, but the real-world consequences are not. After Armstrong, it’ll be easier for states to slash their Medicaid payment rates, even where the cuts make it difficult or impossible for Medicaid beneficiaries to find a doctor.
What’s Armstrong all about? The states have loads of discretion in how they run their Medicaid programs and, specifically, in how much to pay for medical services. But that discretion is cabined by the terms of the federal Medicaid statute, which says, in section 30(A), that states can’t drop their payment rates so low that Medicaid beneficiaries find it harder than the rest of us to get needed care. (I first wrote about Armstrong-type cases a couple of years ago.)
The question in Armstrong is whether the courts can enforce section 30(A) at the behest of private parties—typically providers who are upset at payment cuts. Before Armstrong, the answer was yes. The circuit courts were generally willing to invoke their equitable powers to enjoin state Medicaid officials from implementing spending cuts that conflicted with 30(A). The idea, conventionally traced back to the 1908 case of Ex parte Young, is that the federal courts won’t stand for it when state officials flout federal law.
When it comes to Medicaid, however, neither the states nor the federal government were happy with this arrangement. In their view, the federal government—specifically, the officials within CMS who review and approve state Medicaid plans—has sole responsibility for holding states’ feet to the fire. If CMS says that state payment rates comply with 30(A), courts can’t second-guess that determination in a lawsuit against state officials.
That argument makes a lot of sense to me. It also made a lot of sense to a five-justice majority on the Supreme Court. How are judges supposed to know if payment cuts will drive too many providers out of the Medicaid market? To decide that question, as Justice Breyer explained in a concurring opinion, you’d have to know something about “the actual cost of providing quality services, including personnel and total operating expenses; changes in public expectations with respect to delivery of services; inflation; a comparison of rates paid in neighboring States for comparable services; and a comparison of any rates paid for comparable services in other public or private capacities.”
Courts aren’t well-equipped to undertake this kind of inquiry. Better to leave the question to an agency with expertise in payment rates. The decision in Armstrong elevates that idea into a holding: given the open-endedness of 30(A), Congress must have “implicitly preclude[d]” private enforcement.
That’s where I start to have qualms about Armstrong—qualms that the four dissenting justices emphatically share. When Congress enacted 30(A) in 1989, it did so knowing that Ex parte Young would allow courts to enforce the provision directly against state officials. Congress could have—but did not—close the courthouse doors to such lawsuits. Nor has it done so in the twenty-six years since.
A compelling amicus brief from former HHS officials explains that, as a result, “[e]very aspect of [CMS’s] administration of the Medicaid program—from its regulations to its annual budget—is premised on the understanding that private parties will shoulder much of the enforcement burden.” With private enforcement as a backstop, Congress hasn’t funded CMS at anywhere near the levels necessary to enforce 30(A).
In other words, it’s fine and good to say that CMS should enforce the Medicaid statute. But what if it doesn’t? What if it can’t? And what if Congress never expected it to?
That’s the quandary of Armstrong. For what it’s worth, I think it’s a genuinely hard case. I’m sympathetic with the view that the courts shouldn’t be responsible for enforcing 30(A) against the states. The question of how much to spend on Medicaid beneficiaries ought to be hashed out in negotiations between the states and the federal government, not in a courtroom.
But I fear that the Supreme Court may have substituted its own views about sound enforcement strategy for the strategy that Congress actually adopted. In so doing, the Court has created an enforcement vacuum—one that cash-strapped states could exploit to make life even harder for Medicaid beneficiaries.
A lot of time, and a lot of ink, has been spent talking about access and Medicaid. Many who oppose the expansion of the program will point to the fact that sometimes evidence shows that fewer doctors accept Medicaid insurance than other types of coverage. There’s some truth there. Medicaid does often reimburse at a lower rate than other insurance coverage, and sometimes doctors don’t want to accept those lower rates. But there’s more to the story.
King v. Burwell will be argued before the Supreme Court this week. It won’t be decided, just argued. Then, we’ll parse how well the arguments went, and whether we can predict what will happen from that show. Last time, by the way, we couldn’t. Then, in June, we’ll get a decision.
I know lots of people (including possibly everyone else at this blog) think the plaintiffs will win. Putting my cards on the table – I’m not one of them. I think the Justices will rule for the government, but I admit that’s a gut feeling. I may be wrong.
But the world won’t end overnight, and neither will the ACA. It will still function in a subset of states. I think even more will take quick action to fix their exchanges. I have a hard time believing that any state that accepted the Medicaid expansion won’t find a way to accept subsidies for their citizens who are working. So we’ll be left with a minority of states that don’t have subsidies and have a broken individual insurance market.
Between 1965 and 1982, we had a country where a program existed to cover all poor children, all poor pregnant women, the poor elderly, and many poor parents – but only in some states and not in others. The Earth continued to spin on its axis. The country survived. It was ridiculously unfair for some people who lived in states that refused to accept Medicaid, but eventually, all the states did.
The same can be said of the US if the Supreme Court finds for the plaintiffs. But, as with Medicaid, I think it’s likely the ACA will survive. I also believe, someday, that someday the Supreme Court will view the removal of the ACA as “coercive” as it viewed the removal of traditional Medicaid just a few years ago.