• Medicaid by the numbers

    All of this is cribbed from a Viewpoint today in JAMA by Ben Sommers and David Grabowski.

    Medicaid beneficiaries in 2017:

    • Total: 77 million people
      • Kids: 34 million
      • Elderly: 6 million
      • Blind and disabled: 9 million
      • Pregnant women: 2 million
      • Parents and childless adults: 27 million

    For those of you keeping track at home, this means that only 35% of beneficiaries aren’t kids, old, blind, disabled, and/or pregnant. Remember that when people should say that Medicaid recipients should “try harder”. Also, of that 35%, many already have jobs. Some are stay-at-home parents. So the number of people who could “try harder” isn’t as many as lots of people think.

    Under the ACA, it’s projected that 86 million beneficiaries would exist in Medicaid. If repeal and replace happens, it would go down to 77 million.

    • Share of spending (2014)
      • Kids: 19%
      • Elderly: 21%
      • Blind and disabled: 40%
      • Parents and childless adults: 19%

    And if you cut, where will it come from? Pregnant women are included in the 19% of parents and childless adults. There’s not that much fat. So do you cut care for kids? For the blind and disabled? For the elderly?

    The numbers don’t add up easily. There’s no magic here. People will get “sent” to private plans with huge deductibles. It won’t be better.


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  • Don’t Assume That Private Insurance Is Better Than Medicaid

    The following originally appeared on The Upshot (copyright 2017, The New York Times Company). It was coauthored by Aaron Carroll and Austin Frakt. It also appeared on page A14 of the July 14, 2017 print edition

    As we recently wrote, it’s better for patients to have Medicaid than to be uninsured, contrary to critics of the program. But is having Medicaid, as those critics also say, much worse than having private insurance?

    This idea has become a talking point for conservatives who back big changes to Medicaid, as the Senate health bill proposes. The poor would benefit simply by being ushered off Medicaid and onto private insurance, they write.

    But it’s far from proven that Medicaid is worse than private insurance. A lot depends on what kind of insurance is compared with Medicaid, and how they are compared.

    Many studies that measure Medicaid against private insurance suffer from the same flaws that compare Medicaid with being uninsured. They’re terribly confounded, and can show only associations, not causation. People with private insurance are healthier and wealthier than those on Medicaid, and in ways not fully controlled for in statistical analyses. These factors almost certainly predispose someone on Medicaid to have worse outcomes than someone with private insurance.

    Perhaps the most convincing way to compare Medicaid and private insurance would be with a randomized controlled trial that pits them head to head. No such trials exist. Recall that the Oregon Medicaid study randomly offered, via a lottery, the opportunity for low-income adults to enroll in Medicaid. It did not have another study arm that offered private insurance.

    But we do have a decades-old trial that looked at varying levels of cost-sharing: the RAND Health Insurance Experiment. This is relevant because one substantial difference between Medicaid and most private coverage is the level of cost-sharing. Medicaid is nearly free. Most private coverage comes with deductibles and co-payments.

    The RAND study randomly assigned 2,750 families to one of four health plans. One had no cost-sharing whatsoever — kind of like Medicaid. The other three had cost-sharing (money people had to pay out-of-pocket for care) at levels of 25, 50 or 95 percent — capped at $1,000 at the time, which is about an inflation-adjusted $6,000 today. This level of personal liability acts like a deductible, making the plan with a 95 percent level of cost-sharing comparable to a “Bronze” plan on the Affordable Care Act’s exchanges today.

    The RAND study found that the more cost-sharing was imposed on people, the less health care they used — and therefore the less was spent on their care. The study also found that, over all, people’s health didn’t suffer from lower health care use and spending.

    Lower spending and no decline in health — these are the results that everyone cites to justify increased cost-sharing, and to justify shifting people from Medicaid to private plans with high deductibles.

    But the results of the RAND study, like so much in health care, are complicated. A deeper dive into the data shows that people decreased their consumption of necessary health care in equal measure to unnecessary health care. As a rule, people are terrible discriminators of what care is needed and what’s not. Since most people under the age of 65 are healthy, even in the RAND study, that doesn’t matter much.

    But even if most people are healthy, some are not (and particularly those on Medicaid). In the RAND study, poorer and sicker people — exactly the kind more likely to be on Medicaid — were slightly more likely to die with cost-sharing.

    Free care also resulted in improvements in vision and blood pressure for those with low income. As an influential 1983 New England Journal of Medicine paper put it: “Free care does make a difference.”

    One limitation of the RAND study is its age. It took place between 1971 and 1982. There have been no studies of cost-sharing to rival it since. Still, the best recent evidence we have is that giving free care to poorer and sicker people improves health and saves lives. It is reasonable to conclude that switching them to a plan with high cost-sharing (even a private plan) would do the opposite.

    Some of the more recent studies were nicely summarized in a paper by Katherine Swartz for the Robert Wood Johnson Foundation’s Synthesis project. She found that increased cost-sharing for low-income populations was associated with a shift toward more costly services, like increased emergency room visits because people skipped taking their drugs. She also found that increased cost-sharing affects poor people differently than everyone else, confirming RAND’s findings. A more recent study found that enrollment in plans with high deductibles led to reductions in necessary care, which would have consequences for the poor and sick.

    Austin wrote previously here how increased cost-sharing may lead people to take fewer drugs for their high cholesterol, hypertension and diabetes. In his first Upshot column, Aaron wrote that parents delay taking their children for asthma treatment when cost-sharing rises.

    Even small premiums can lead to problems. A $10 increase in monthly Medicaid premiums was followed by a 6.7 percent reduction in Medicaid and coverage of CHIP (Children’s Health Insurance Program) for people just above the poverty line.

    Unquestionably, private coverage can work very well for many people. Take us, for instance. The insurance that we each have from our employers is probably better for us than Medicaid would be. Though these plans come with cost-sharing, we have incomes that can handle it. Our plans cover things that Medicaid often does not, like dental checkups.

    Our plans have great networks, and they reimburse well for the care we receive. Just like Medicaid enrollees, we also receive support from the federal government, which waives tax collections on dollars contributed to premiums. That tax break is higher than the cost of Medicaid in many cases.

    We’re also relatively healthy and would probably be fine on any plan (unless and until our health deteriorates).

    But because our plans require considerable cost-sharing, even Medicaid enrollees would struggle on them. More important, neither House nor Senate repeal and replace bills offer poor Medicaid enrollees plans as generous as ours.

    The Senate’s health care plan, for example, would offer much less generous plans. A 64-year-old woman with an income of $11,400 would face a deductible of at least $6,000. For her, such a plan is not better than Medicaid; it is most likely much worse if she is also sick. Because of the deductible, the care she’d need would be financially out of reach.

    recent paper in Health Affairs documented that outcomes in Arkansas, which allowed poor people to buy private plans on the exchanges, were similar to those in Kentucky, which expanded access to poor people through Medicaid. But those private plans came with significant cost-sharing subsidies, which would be stripped away by the Senate’s bill. Even so, the evidence did not suggest that the private coverage of Arkansas was better than the public coverage of Kentucky.

    There are certainly private plans for poor and sick Americans that are better than Medicaid. But plans with very high cost-sharing — which are the ones being offered in Congress as A.C.A. replacements — are not among them.

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  • Private insurance isn’t always better than Medicaid

    Austin and I have a new column up on The Upshot today. We’ll post it here in its entirety on Friday, per our routine, but it’s important for you to go read it today before the new Senate bill is likely released tomorrow. A new talking point is that while Medicaid may be better than being uninsured (what people used to say), it’s certainly far, far worse than private insurance.

    We take that apart over at the NYT. Go read it.


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  • What should we do about children’s health coverage?

    Back in May, I was on a panel at the Pediatric Academic Societies to discuss health care reform, kids, and the future. After that panel, David Rubin wrote a post over at the Health Affairs blog summarizing his thoughts on what needed to be done.

    Most of the people there were either pediatricians, or pediatric-focused, and, of course, we were all pulling our hair out at how little of the conversation nationally focuses on kids or families. So much of our discussion focuses on adults, and then when they’re done talking about them, they turn to the elderly. Medicaid and CHIP cover something like two in five children and Medicaid, even before the expansion, covered one-third of births, and those births produce kids. I’ve written before about how employer-sponsored coverage for kids has been eroding. I shouldn’t need to remind any readers of this blog that proposals for Medicaid in Republican bills come with severely decreased funding in the future.

    David has some suggestions for focus:

    CHIP reauthorization: While the AHCA works its way through Congress, some may not have noticed that CHIP funding expires this fall. Without re-appropriation, more than 8 million children may lose coverage immediately. States are already sounding alarms; they have been unable to project their CHIP budgets for next year. The immediacy of the CHIP re-appropriation debate in Congress offers a “NOW” opportunity to stake a new way forward and present pragmatic solutions to strengthen children’s insurance, embracing the realities that have reshaped the family insurance market.

    Guarantee of essential health benefits: The most critical issue arising from any children’s insurance plan today, whether in the employer-sponsored or public insurance market, is the promise of a set of health standards to all children regardless of their insurance. The House-passed AHCA proposes removing the requirement of federally guaranteed essential health benefits from all plans. Should this become law, states will have the choice of whether or not to provide these benefits. So, one solution for protecting children is to require these states to provide families access to a CHIP plan that meets a comprehensive and standard set of federally legislated and guaranteed essential benefits, such as vision, developmental, and behavioral health screenings.

    Private market reforms: Beyond essential benefits, it may be time to address the affordability and quality of dependent coverage on the employer-sponsored and exchange markets. We may need stronger caps on deductibles as a proportion of income, and limits to exorbitant cost-sharing for child dependents. Furthermore, prohibitions of narrow networks—or the increase of cost-sharing for enrollees who seek out-of-network services—in the pediatric market would go a long way to ensuring that families have critical access to pediatric subspecialty care should their children develop cancer, diabetes, or other debilitating illnesses. While narrow networks may work in the adult health care arena, they are not nimble for families whose children have special health care needs and require specialists based solely in children’s hospital networks that may be tiered out in such plans. All told, the private market is not working for families, and if Congress wishes to halt the migration of families onto public insurance, they may need to hold employers and commercial insurers responsible for their own contributions to crowding families out of that market.

    Go read the whole thing. And remember it when people say that no one has any plans.


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  • Medicaid is good for children and makes them better adults

    The Senate’s Better Care Reconciliation Act (BCRA) significantly cuts Medicaid, the program that insured 39% of US children in 2015 and 50% or more in New Mexico, West Virginia, and Mississippi. The Congressional Budget Office estimates that the BCRA will increase the number of uninsured Americans by 22 million, among them many of those currently covered by Medicaid. However, many supporters of these bills argue either that Medicaid delivers no health benefits to the insured or actually harms them. If this is what they believe, then surely reducing Medicaid enrollment is a virtue of the BCRA, not a flaw.

    Whether Medicaid is harmful has been debated for years. In this post, I call your attention to emerging evidence that Medicaid benefits children.

    Liberals have trouble understanding how Medicaid could be harmful. It’s true that some doctors are less likely to accept a Medicaid patient than a privately insured one. However, a doctor who turns down a Medicaid patient would be even less likely to care for an uninsured one. So how could the well-being of someone on Medicaid be improved if they became uninsured?

    These liberals have missed the point of the conservative argument. That view, best articulated by Charles Murray, is that the social safety net harms you by exposing you to incentives that keep you dependent. In a welfare-dependent family, it’s harder for a child to develop into an independent, functional adult. Getting social assistance, therefore, traps you and your family in poverty. The strong prediction by conservatives is that poor kids who grow up as dependents of the welfare state will be less healthy and less functional than other kids.

    Arguments that Medicaid is ineffective usually cite the Oregon Health Insurance Experiment (OHIE). This randomized experiment found that getting Medicaid coverage did not improve several important physiological measures of health. Benjamin Sommers, Atul Gawande, and Katherine Baicker (who was the Principal Investigator of the OHIE) rebut this argument in the NEJM. Likewise, Aaron and Austin argue in The New York Times that Medicaid critics have misinterpreted the research. According to these analysts, the OHIE had little chance to find substantial physiological benefits because it studied a small group of people for a relatively brief period of time. Other studies involving large populations and designs that allow causal inferences have shown that getting Medicaid saves lives.

    It follows that the ideal study of Medicaid would look at large populations of people over long periods of time with a design that was a randomized experiment or approximated one. It turns out that this is to some degree possible if you look at the child and adult health outcomes of kids who grew up in states where poor families had varying degrees of access to Medicaid.

    Congress created Medicaid in 1965, but because it is administered and paid for by both states and the federal government, states started their programs at different times and varied in who they covered. This map from the Social Security Administration shows the year and quarter when states began Medicaid.

    The month/year in which states adopted Medicaid. From Boudreaux et al.

    This means that poor kids born in 1966 in Oklahoma, which started Medicaid in that year, were likely to have had much more cumulative insurance coverage by the time they reached adulthood than kids born in 1966 in Arizona, which started Medicaid in 1982. So if Medicaid is bad for you, then everything else being equal the states that had larger proportions of kids covered for longer periods of time should have populations of adults that look worse, on average, than other states.

    Several groups of analysts have looked at state health outcomes following this strategy. Importantly, these researchers have looked at many aspects of adult well-being, not just health. For example, Cohodes, Grossman, Kleiner and Lovenheim examined

    the effects of the public insurance expansions among children in the 1980s and 1990s on their future educational attainment. Our findings indicate that expanding health insurance coverage for low-income children increases the rate of high school completion and college completion… We present suggestive evidence that better health is one of the mechanisms driving our results by showing that Medicaid eligibility when young translates into better teen health. Overall, our results indicate that the long-run benefits of public health insurance are substantial. (Ungated version here.)

    Boudreaux, Golberstein, and McAlpine analyzed data from the Panel Study of Income Dynamics. They found that Medicaid coverage in early childhood (age 0–5) was associated with statistically significant and meaningful improvements in adult health (age 25–54). Interestingly, they found that Medicaid was associated with lower blood pressure and a lower overall chronic disease score, which contrasts with the lack of physiological effects in the OHIE. Boudreaux and his colleagues found these benefits only among the low-income people most likely to have been covered by Medicaid.

    Miller and Wherry studied

    how a rapid expansion of prenatal and child health insurance through the Medicaid program affected adult outcomes of individuals born between 1979 and 1993 who gained access to coverage in utero and as children… We find that cohorts whose mothers gained eligibility for prenatal coverage under Medicaid have lower rates of obesity as adults and fewer hospitalizations related to endocrine, nutritional and metabolic diseases, and immunity disorders as adults. We also find that the prenatal expansions increased high school graduation rates among affected cohorts.

    Meyer and Wherry looked at

    a policy discontinuity [in] several early Medicaid expansions that extended eligibility only to children born after September 30, 1983… We find a substantial effect of public eligibility during childhood on the later life mortality of black children at ages 15-18. The estimates indicate a 13-20 percent decrease in the internal mortality rate of black teens born after September 30, 1983.

    Andrew Goodman-Bacon found that

    Before Medicaid, higher- and lower-eligibility states had similar infant and child mortality trends. After Medicaid, public insurance utilization increased and mortality fell more rapidly among children and infants in high-Medicaid-eligibility states. Mortality among nonwhite children on Medicaid fell by 20 percent, leading to a reduction in aggregate nonwhite child mortality rates of 11 percent.

    In another analysis, Goodman-Bason looked at the effect of Medicaid coverage when you are 0 to 10 years old on adult mortality rates, whether the children found employment when they became adults, and what they received in transfer payments.

    For mortality, he reported that

    about 345,000 lives were saved between 1980 and 1999—54,000 among whites and 291,000 among nonwhites.

    For rates of disability,

    each full year of early-life cumulative [Medicaid] eligibility reduces white ambulatory difficulty rates by 3.8 percentage points (s.e. = 1.2) and nonwhite rates by 2.9 percentage points (s.e. -1.8).

    For employment,

    each year of childhood Medicaid eligibility reduces the probability of being out of the labor force by 6.6 percentage points (s.e. = 1.5)

    These reductions in disability and unemployment among kids covered by Medicaid in early childhood reduced the social assistance transfer payments the Medicaid kids received as adults. As a result,

    The government earns a discounted annual return of between 2 and 7 percent on the original cost of childhood coverage for these cohorts, most of which comes from lower cash transfer payments.

    Are these findings credible? These are complicated analyses with many moving parts. A lot hangs on the idea that you can make an “everything else being equal” comparison between states based on how they administered Medicaid. Looking at the map above, there are regional correlations in when states started Medicaid, and there are likely correlations with state poverty and other factors. Yet even within regions, there is variation in when Medicaid started and how it was run. The papers I’ve summarized look for this kind of variation in Medicaid coverage policies between comparable states. This variation allows them to infer that Medicaid coverage during early childhood caused these better child and adult outcomes. It’s a large claim and it’s certain to be disputed.

    But if you accept this analytical strategy, what do these findings show?

    First, the prediction that Medicaid harms children is flat wrong. There’s no evidence that Medicaid kids are worse off. To the contrary, on several important outcomes kids were better off if they grew up in states that started Medicaid coverage earlier and covered more kids.

    Second, it appears that the most important times for coverage are when you are in-utero, an infant, or a young child. This reinforces James Heckman’s argument that early childhood is a critical period where we get the highest return for investments in improving the social determinants of health and human development.

    Third, the effects of early exposure to Medicaid are found not just in health, but also in educational attainment, employment, and reduced welfare dependency. In other words, Medicaid works on precisely the issues that conservatives care the most about. Provision of Medicaid to families with poor children appears to give those kids a better chance of growing up to be high functioning adults. As such, it promotes fair equality of opportunity. Conversely, these findings count against predictions that Medicaid traps children in lives of poverty.

    What the findings do not show is that Medicaid, or public health insurance of any kind, is the optimal way to invest in families or child development. It would help if we knew how Medicaid benefits children. Is it increased access to health care, is it because health insurance reduces the out-of-pocket costs to families, or is it because having health insurance reduces the psychological stress of being a family? These studies don’t tell us. So it’s possible that some other policy would help kids more. For example, we don’t know whether paying for a poor family’s Medicaid is more cost-effective than giving that family the actuarially-equivalent cash.

    This and similar proposals deserve serious consideration. But it is critical to note that the comparison between providing Medicaid and giving cash is irrelevant to the debate about the BCRA and the House of Representatives’ American Health Care Act of 2017. Instead of taking resources from Medicaid to fund cash transfers to the poor, these bills take cash out of Medicaid to fund tax cuts for the wealthy.

    Finally, these findings cast light on the American (and far stronger Canadian) commitments to a decentralized federal system for the administration of public health insurance. Justice Brandeis argued that federalism — meaning here that states that have considerable autonomy in how they implemented Medicaid — is valuable to the country as a whole. It’s valuable because a

    state may, if its citizens choose, serve as a laboratory; and try novel social and economic experiments without risk to the rest of the country.

    Many argue, following Brandeis, that federalism is a way to learn what works in social policy.

    To learn about policy, however, we have to ask how can we actually get reliable information from the laboratories of the states. One answer is that we do it through differences-in-differences analyses of variation in the implementation of state programs, such as those that we have reviewed above. If you believe that the independence of states gives us a laboratory for democracy, you should take seriously the results on Medicaid that have come back from the lab.


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  • Medicaid Worsens Your Health? That’s a Classic Misinterpretation of Research

    The following originally appeared on The Upshot (copyright 2017, The New York Times Company). It was coauthored by Aaron Carroll and Austin Frakt.

    As a program for low-income Americans, Medicaid requires the poor to pay almost nothing for their health care. Republicans in Congress have made clear that they want to change that equation for many, whether through the health bill that is struggling in the Senate or through future legislation.

    The current proposal, to scale back the Affordable Care Act’s Medicaid expansion and to cap spending each year, would give incentives to states to drop Medicaid coverage for millions of low-income Americans. It would offer tax credits toward premiums for private coverage, but those policies would come with thousands of dollars in new deductibles and other cost sharing. Despite the much higher out-of-pocket costs, some policy analysts and policy makers argue that low-income Americans would be better off.

    To take one highly placed example, Seema Verma, the leader of the agency that administers Medicaid, recently cited studies questioning the program’s effectiveness and wrote that the health bill “will help Medicaid produce better results for recipients.”

    What is the basis for the argument that poor Americans will be healthier if they are required to pay substantially more for health care? It appears that proponents like Ms. Verma have looked at research and concluded that having Medicaid is often no better than being uninsured — and thus that any private insurance, even with enormous deductibles, must be better. But our examination of research in this field suggests this kind of thinking is based on a classic misunderstanding: confusing correlation for causation.

    It’s relatively easy to conduct and publish research that shows that Medicaid enrollees have worse health care outcomes than those with private coverage or even with no coverage. One such study that received considerable attention was conducted at the University of Virginia Health System.

    For patients with different kinds of insurance — Medicaid, Medicare, private insurance and none — researchers examined the outcomes from almost 900,000 major operations, like coronary artery bypass grafts or organ removal. They found that Medicaid patients were more likely than any other type of patient to die in the hospital. They were also more likely to have certain kinds of complications and infections. Medicaid patients stayed in the hospital longer and cost more than any other type of patient. Private insurance outperformed Medicaid by almost every measure.

    Other studies have also found that Medicaid patients have worse health outcomes than those with private coverage or even those with no insurance. If we take them to mean that Medicaid causes worse health, we would be justified in canceling the program. Why spend more to get less?

    But that is not a proper interpretation of such studies. There are many other, more plausible explanations for the findings. Medicaid enrollees are of lower socioeconomic status — even lower than the uninsured as a group — and so may have fewer community and family resources that promote good health. They also tend to be sicker than other patients. In fact, some health care providers help the sickest and the neediest to enroll in Medicaid when they have no other option for coverage. Because people can sign up for Medicaid retroactively, becoming ill often leads to Medicaid enrollment, not the opposite.

    Some of these differences can be measured and are controlled for in statistical analyses, including the Virginia study. But many other unmeasured differences can skew results, even in studies with such statistical controls. The authors of the U.V.A. surgical study and of studies like it know this, and say as much right in their papers. They practically shout that the correlations they find are not evidence of causation.

    That hasn’t stopped policy makers and others in the media from asserting otherwise.

    Other approaches to studying Medicaid more credibly demonstrate the value of the program. The most straightforward way is a prospective randomized trial, which gets around the subtle biases that plague studies that use only statistical controls. There has been exactly one randomized study of Medicaid, focused on an expansion of the program in Oregon.

    Because demand for the program exceeded what Oregon could fund, in 2008 the state introduced a lottery for Medicaid eligibility. A now famous analysis took advantage of this lottery’s randomness, finding that Medicaid increased rates of diabetes detection and management, reduced rates of depression and lowered financial strain. It did not detect improvements in mortality or measures of physical health, but it did not have enough sick patients or enough time to detect differences we might have expected to see. In other words, it was not powered to detect changes in mortality or physical health.

    Saying that this study proves Medicaid doesn’t work ignores this limitation. Regardless, there was nothing to indicate that having Medicaid worsened health.

    Another way to tease out the causal effect of Medicaid is to look at variations in Medicaid eligibility rules across states. With respect to health outcomes, these state decisions are effectively random, so they act like a natural experiment. Older studies based on this approach, using data from the 1980s and 1990s, have not found that Medicaid causes worse health.

    Findings from more recent studies looking at expansions in enrollment, in the 2000s and then under the Affordable Care Act in 2014, are consistent with older ones. One can argue that Medicaid can be improved upon, but the credible evidence to date is that Medicaid improves health. It is better than being uninsured.

    Here’s another telling way to test the idea that Medicaid is harmful. Some of the studies that associate Medicaid with worse health, as compared with private insurance, also find the same association with Medicare. No one argues that Medicare is making people sick.

    A very recent New England Journal of Medicine review by Ben Sommers, Atul Gawande and Kate Baicker found that Medicaid increases patients’ access to care and leads to earlier detection of disease, better medication adherence and improved management of chronic conditions. It also provides people with peace of mind — knowing that they will be able to afford care when they get sick.

    Research is clear on how people react when asked to pay more for their health care, as the Senate would ask many of those now on Medicaid to do. As the Congressional Budget Office reported, many poor people would choose not to be covered, because even if they could afford the premiums with help from tax credits, deductibles and co-payments would still be prohibitively expensive. No studies prove that removing millions from Medicaid in this way would “produce better results for recipients,” at least as far as their health is concerned.

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  • Medicaid, a “broken program that harms its beneficiaries”

    I asked on Twitter for policymakers’ expressions of harm caused by Medicaid.

    By email, Andrew Goodman-Bacon came through in a huge way. The bullets below are a lightly edited version of what he sent me, shared with his permission. (For the record, Medicaid does not cause harm. More about that soon.)

    • The Sommers/Epstein paper surveyed governors and found that five of those who opposed expansion felt that Medicaid was a “broken program that harms its beneficiaries.”
    • Senator Ted Cruz has said that Medicaid hurts health care access
    • In one of Tom Price’s recent testimonies he said ,“Medicaid is a program that has, by and large, decreased people’s ability to access care.”
    • Speaker Paul Ryan comes close on pg 24 of “A Better Way
    • A Healthy Indiana report (notably produced by the Pence administration) cites Roy and LaPar, but doesn’t go all in on the “harms” claim
    • Here is the American Action Forum saying “harm”
    • See also, this brief from a policy shop in MI, this brief from a policy shop in NC, and this brief from a policy shop in PA
    • Here is ALEC citing that study, although not going so far as to say patients will be “harmed”

    To these, I will add this quote of Representative Bill Cassidy (via Aaron) and this op-ed by Seema Verma (via Adrianna). Note: I have not looked through everything in the above list. If you find errors or have more contributions, let me know.


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  • “Everyone seems to agree: Drug prices are too damn high.”

    So begins a post from Rachel Sachs, Darius Lakdawalla, and me at the Health Affairs Blog on the complicated interplay between value-based pricing and Medicaid’s best-price rule.

    What is the best-price rule? Does it really impede the adoption of value-based pricing? If so, what can be done about it?

    To keep federal spending in check, state Medicaid programs never pay full price for a drug. By statute, they receive rebates worth about one-quarter of a drug’s average manufacturer price. But if a manufacturer chooses to sell the drug to someone else for less than the rebated amount, Medicaid will only pay that “best price.” It’s a guarantee that Medicaid can buy the drug at the cheapest price that the manufacturer can afford to sell it.

    Now consider outcome-based pricing, in which manufacturers get paid less when their drugs perform poorly. A manufacturer, for example, might agree to pay a $75 rebate on a $100 drug that fails to work for a particular patient. If it did, however, $25 would now be the drug’s “best price.” Every Medicaid program would be legally entitled to that price, decimating the manufacturer’s revenue from Medicaid.

    That’s why the pharmaceutical industry complains that the best-price rule impedes outcome-based pricing. Its objection is accurate so far as it goes, but it ignores a technique that drug companies and insurers could use to contract around the best-price rule. Instead of granting a rebate if a drug fails to work for a particular patient, manufacturers can offer a rebate based on the performance of the drug across a patient population. To return to the earlier example, a drug manufacturer might sell a drug for $100 but offer a $75 rebate per patient for whom the drug doesn’t work, based on the drug’s performance across 1,000 patients. If the drug is 75 percent effective, the average price for the drugs sold to the 1,000 patients would be north of $80, high enough not to trigger the best-price rule. Indeed, the fact that drug companies have begun to enter into some of these contracts suggests that companies may already be doing some weighted average pricing.

    Even so, tremendous uncertainty remains. In a rule, the Centers for Medicare and Medicaid Services (CMS) has said that best price must be determined on a “unit basis.” Depending on what CMS understands the term to mean, the unit-basis rule may thwart efforts to contract around the best-price rule. At the same time, however, CMS has the authority to change its rule. The statute itself does not contain any unit-basis requirement, meaning that it could be amended to encourage outcome-based pricing arrangements.

    There’s more at the post, which builds off a paper, a draft of which is available here, that Rachel, Darius, and I will be publishing at the Journal of Health Politics, Policy and Law. Comments on the draft are welcome!


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  • Block grant funding of public health insurance: the Canadian example

    Speaker Paul Ryan wants to reform Medicaid by “block granting” the program, that is,

    by capping federal funding and turning control of the program over to states. The aim of such reforms is to reduce federal funding over the long term, while preserving a safety net for needy, low-income Americans. An additional valuable aim of this effort has been to advance federalism by reducing the federal government’s role and giving states and governors more freedom and flexibility in managing their Medicaid programs and helping people in their states.

    What are the likely consequences of block granting? Benjamin Sommers and David Naylor write in JAMA about how Canada’s joint federal/provincial funding of health care provides lessons about the likely consequences of block granting.

    Canada is a single payer health care system. However, there isn’t a Canadian single payer. Rather, there is a single payer for each province: I am covered by the Ontario Health Insurance Plan (OHIP). These plans are primarily funded by provincial taxes. However, provinces also receive a health transfer from the Canadian federal government, i. e., a block grant. The provincial health insurance plans are run by provincial health ministers, not the federal minister in Ottawa.

    So, does provincial autonomy facilitate experimentation and tailoring by the provinces? Sommers and Naylor think not.

    there is little evidence that the alleged advantages of block grants have materialized in Canada. Advocates argue that with greater flexibility and proper incentives, states can reduce costs by improving the efficiency of care. In Canada, however, the provinces’ primary means of coping with budget pressures under block grants has been to reduce funding to hospitals and bargain harder with provincial medical associations. Ironically, then, if this scenario plays out in the United States, it would exacerbate one of the chief Republican criticisms of Medicaid — that it pays clinicians such low rates that they have reduced incentives to care for low-income patients.

    Indeed, physician refusal to take Medicaid patients is one of Speaker Ryan’s central criticisms of Medicaid.

    What about the effects of a block grant system on federal funding of health care?

    Once block funding was initiated in 1977, health care funding became a line item in the federal budget that could be arbitrarily cut or capped for fiscal or political reasons, as opposed to a level of spending pegged to the needs and health care use of the population. Importantly, these cuts occurred under both conservative and liberal federal governments.

    When the Canadian health transfer began, the federal government paid 50% of provincial costs. However, the transfer has steadily declined, until it is now about 20%. Sommers and Naylor predict that US federal block grants would also decline, and this is clearly one of Speaker Ryan’s goals.

    However, Canadian health care spending per capita has not declined.

    Graph from the Fraser Institute.

    As the cost of providing care has risen, but the federal health transfer has stayed fixed or declined, the provinces have taxed more and the federal government has taxed less. The provincial governments hate this, because they would rather have the federal government make the unpopular choice to raise taxes. But it’s not clear whether block granting has made a big difference in the health care received by Canadians.

    American states could similarly increase taxes in response to a declining federal Medicaid block grant, but would they? The key difference between Canadian public health insurance and Medicaid is that the former is universal, while the latter is means-tested. Ontarians prefer lower taxes, but if Ontario decreases funding for OHIP, every Ontarian will experience longer waits for care. But American states can cut Medicaid — and reduce taxes — without affecting the health care of better off and able-bodied citizens.

    The affluent and able-bodied are also the citizens most likely to vote. American states determine their own voting procedures. Block granting gives states an incentive to manage voting so as to reduce the participation of the marginalized communities who are most in need of public health insurance. Block granting is likely to undermine the health care for the poor and disabled, and it could reinforce the post-Shelby County v. Holder efforts to restrict voting.


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  • Out of Sight, Out of Mind — Behavioral and Developmental Care for Rural Children

    Today in the NEJM, Kelly Kelleher (of Nationwide Children’s Hospital) and I discuss rural US kids with mental health and developmental disorders, and the obstacles to caring for them.

    We summarize new data from the Centers for Disease Control about the epidemiology of these problems among rural kids. We also discuss data from the US Department of Agriculture which show that poverty is higher among rural children than urban children and that rural child poverty is higher than it has been since 1993.

    Poverty is more common for rural children.

    Then we look at the many obstacles to getting services to kids in rural settings, particularly the lack of mental health specialists. It’s a problem in the US and Canada, both of which have large regions with low population densities.

    We conclude:

    A romantic and pastoral view of the countryside as a place of healing is ingrained in American culture. The increased burden of MBDDs among rural children belies this image, as does the failure of the traditional behavioral and developmental health care system to address rural children’s needs. These problems have received too little attention, because most behavioral and developmental health specialists, researchers, and health policymakers live in cities. The problems of rural children, their families’ crises, and the lack of services have been out of sight and out of mind.

    And of course I have to say: please read the whole thing!

    Our article was in press before the text of the AHCA was released. Sara Rosenbaum reports that the bill changes Medicaid in several ways.

    the House bill essentially eliminates the enhanced funding levels that made possible states’ expansion of Medicaid to their poorest working-age adult residents, something that 31 states and the District of Columbia now have done. Expansion states could face up to a 40-point difference between the federal funding enhancements they expected to receive in 2020 for the expansion population and what they actually would receive under the bill. What is at stake is continued coverage for some 11 million of the more than 16 million people who have gained eligibility since full implementation of the ACA Medicaid expansion.

    The proposed changes could harm rural America, and rural American kids specifically, in two ways.

    First, many rural families are covered by Medicaid. Losing this coverage will increase the stress on already highly-stressed families. Medicaid funding is also critical to the children’s hospitals that are among the primary places that kids get care for developmental and mental health disorders.

    Second, rural Americans are currently experiencing a significant public health crisis involving opiates, amphetamines, and suicide. Parental substance abuse can adversely affect children. The AHCA has a provision that may undermine efforts to address the substance abuse epidemic. Katie Zezima and Chris Ingraham report in the Washington Post that

    Beginning in 2020, the plan would eliminate an Affordable Care Act requirement that Medicaid cover basic mental-health and addiction services in states that expanded it, allowing them to decide whether to include those benefits in Medicaid plans.

    There are large areas in rural Americas where there are no addiction services. If Medicaid funding shrinks, state administrators will look for places to cut. Eliminating the requirement to fund mental health and addiction services means that funding shortfalls will disproportionately affect kids with mental health and developmental disorders.


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