Looks like both sides are wrong about Medicaid

January 13, 2014
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It’s funny how major pieces of legislation and the debates about them can be based entirely on false assumptions.

That appears to be the case with the Obamacare Medicaid expansion—which is still a live issue here in Indiana.

The most common pro-Obamacare argument for expanding Medicaid went like this: Uninsured patients generally don’t receive care at physician offices, so they wind up going to hospital emergency rooms—the most expensive place in the health care system—racking up huge bills that the hospitals then pass on to everyone else. So expanding Medicaid will reduce those needless ER visits, thereby saving all of us money.

“We’re paying for it anyway,” Brian Williams, an Indianapolis-based health care consultant for PricewaterhouseCoopers, told me back in October, while speaking about Indiana’s tepid cooperation with health care reform.

That sentiment echoed President Obama’s argument during the legislative debate that produced Obamacare, aka the Affordable Care Act.

“Those of us with health insurance are also paying a hidden and growing tax for those without it -- about $1,000 per year that pays for somebody else's emergency room and charitable care,” Obama said during a September 2009 speech before Congress.

But research out of Oregon shows that not to be the case. Patients who received Medicaid benefits visited hospital ERs 40 percent more often than those who did not receive Medicaid benefits, according to the study by Amy Finkelstein, an economist at the Massachusetts Institute of Technology, and Katherine Baicker, a professor at the Harvard School of Public Health.

The Oregon research is important for all other states, including Indiana, because Oregon used a lottery to determine which citizens were allowed to join the health benefits program for the poor, and which were not. That situation set up the gold standard of research: a study population and a control group that were no different from one another, other than the chance occurrence of winning or losing Oregon’s lottery.

The average cost of each ER visit by the uninsured runs about $463 per year, based on federal cost data and the requency of visits recorded in the Oregon study. That means each additional person on Medicaid racks up an extra $190 per year in ER costs.

With Indiana contemplating a Medicaid expansion that would cover an estimated 182,000 Hoosiers, this additional ER could cost $35 million more per year. Of course, most of that expense would be borne by the federal government, not the state.

Even though conservatives crowed about the latest Medicaid study from Oregon, they should be reminded of earlier findings from the same researchers.

Finkelstein found that, contrary to conservative arguments, being on Medicaid is actually better than being uninsured. Oregonians who won the state’s lottery and received Medicaid benefits were 35 percent more likely to have an outpatient visit, 30 percent more likely to go the hospital, 15 percent more likely to take prescription drugs, and more likely to be in compliance with preventive care such as mammograms and cholesterol monitoring. Also, the lottery winners were 25 percent less likely to have an unpaid medical bill and 35 percent less likely to have any out-of-pocket medical expenses.

Medicaid improved measures of self-reported health and depression. However, in another bubble-bursting moment for Medicaid expansion advocates, Finkelstein found that Medicaid coverage had no effect on the prevalence of the really expensive diseases: diabetes, high blood pressure and high cholesterol.

This still leaves Medicaid open to plenty of criticism, but not to the long-standing conservative argument that being on Medicaid is worse than being uninsured.

I’m not sure if Indiana Gov. Mike Pence views Medicaid as worse than no insurance coverage, but he certainly views Medicaid as a failure, as I wrote last week. He thinks the Healthy Indiana Plan would provide better coverage for low-income Hoosiers and also help the state spend less money.

He’ll hash out that argument with the Obama administration next month.

What conclusions should we draw here? Only the most obvious ones: 1) some health care coverage is better for patients’ health and finances than no coverage; and 2) spending money does not save money.

And, finally, that the real debate is no longer about whether to expand coverage or not, but rather, how best to do it. Perhaps Obamacare can claim that shift in debate as one of its accomplishments. But it’s a debate that will have to be waged under different assumptions than the ones used to pass the law.

  • Funding & What Indiana Research Says
    Funding: Even if the extra ER visits do cost more money, the Medicaid Expansion is 100% federally funded for the first three years and no less than 90% afterward. Research: Indiana's own research on the HIP program showed an initial "bump" in ER utilization when recipients first obtained coverage. Over time, ER visits declined, and use of physician services and prescription drugs increased. As recipients were able to better control their conditions, ER visits leveled off. http://publications.milliman.com/research/health-rr/pdfs/experience-under-healthy-indiana.pdf So, even if Oregon had their experience, I feel Indiana has some evidence that says it might play out differently here. I also feel that it's very likely any Medicaid expansion approved by the state governor or legislature will include the maximum amount of contributions and particularly ER copays (for non emergency use) that are allowed by federal law, which could also hold down utilization.
  • Utilization management
    JK - if I recall, Oregon has gained some pretty good ground on controlling utilization since this study was conducted. As the previous commentator pointed out, we'd have 3 years at the Federal "teet" to replicate/innovate ways to improve appropriate utilization.
  • Educating the Patient
    Great comments: I watched an interview with an insurance executive yesterday that acknowledged and discussed the increase in emergency rooms as Medicaid has expanded. Like other commenters noted and the article stated, the insurance executive stated that educating the consumer/patient is key to changing their behavior (excessive use of emergency rooms). The executive also noted that more use of emergency rooms can be expected as the Medicaid population grows. Hospitals can seek more efficient ways of providing emergency services and establish after-hour facilities that are better suited to deal with emergency type situations. I think it is fair to say that changes in patient behavior will be slow as more education and decision making becomes incumbent on the patient. (I know I could have said all this more efficiently. Sorry! :))
  • Article Headline
    JK - one more comment. Your headline implies that expanded use of emergency services is an issue on par with or competing with the conservative assertion that having no insurance is better than having Medicaid. I would assert that these are not comparable--one deals with costs and the other deals with program effectiveness.
    • Thanks for the comments
      I really appreciate the commentary on how ER utilization could be moderated over time, as has indeed occurred with HIP and with Oregon Medicaid. But that was not the argument used to sell Obamacare, or the argument used to sell a Medicaid expansion in Indiana. The argument was that extending coverage to the uninsured would, by itself, reduce ER utilization. The Oregon experiment shows (and perhaps the HIP experiment does too) that that did not play out in fact. The fact that we're discussing how to moderate an increase in utilization, not enjoy the benefits of a decrease in utilization, seems to me to prove the same point.
    • Doc in the Box
      And who is moderating the hospital's behavior? Not every visit is an emergency. Hospitals could do a better job of triage and not turn away patients but provide an alternative on site or next door that would offer a more appropriate and cheaper medical solution. Not everyone who walks in needs to be treated like an emergency at high cost.
    • No free lunch
      Keep in mind. We are all paying for medical care one way or another. Everyone is receiving medical care. All we are talking about is how the bill is paid. We pay for indigent care through our taxes and insurance premiums. Sue a begger, get a flea. Unfortunately, too many folks don't live up to their personal responsibilities and find ways to put the invoice on everyone else.
    • Dose?
      By the way, I got a "dose" from a nice lady once, but it went away with some penicillin.
    • Narrow Views
      JK: I was a bit mystified by your last comments and went back to read again what was said in the article. My summary was this: If people are just given Medicaid, they will show up at the Hospital more often, not less-- given no other changes, actions or steps by the hospitals, the government or communities. In other words, the poor won't change their practices without making them aware of clinics, alternate care, preventive health screenings that are also available to them through Medicaid. After years of massive media marketing campaigns from hospitals to the suburbs, to the middle class to "market" health care, Medicaid patients are somehow expected to seek out preventative care? There have been major efforts to sell the public on hospital utilization; now we need to "unsell it" to the poor? I believe that the overall premise of your article is correct; both sides seem to be debating on expansion or not expansion of Medicaid without considering correct or complete information. But then I differ with you as to whether Indiana has any genuine interest in developing a system that will work for all it's citizens.
      • To Greg Jarvis
        My apologies for confusing you. I was not trying to say Indiana should not do the hard work of trying to change patients' behavior. In originally wrote several paragraphs arguing for the necessity to help patients do a better job of seeking the right amount of care in the right setting, but I cut them out of my post so it didn't get too long. I comment after this post was meant to make a distinction between two different arguments: 1) the notion that expanding Medicaid would lead to lower utilization, which I think has been debunked; and 2) the notion that there can and should be efforts to decrease utilization through other means. If I understand you correctly, you are arguing for the second one of those two. If so, I agree with you. If I have failed to understand you, I'm sorry. I'd be interested to hear a follow-up comment from you.
        • Respond to JK
          Yes, that was something I though worth adding to the dialogue. Poor people aren't an expense or a burden, they are people who may have a short or long term need for care. Starting with a declaration that all Indiana citizens have a right to appropriate care and treatment re-frames the issue and takes away some of the contention. That then leaves us with considering healthy lifestyles, alternatives to only medical/ hospital care, and a perspective that is less focused on blame (blaming the Pres, the Gov, the government, those who need the care) and more focused on how we can deliver health services that are patient-centered and appropriate. Sorry this is a lengthy comment, but we seem to lose the fact that "caring for our neighbor" may be a widely held value by Hoosiers that gets lost in arguing over expensive healthcare systems and politics.
        • Look deeper at the study
          I read a follow up this morning to oregons Er problem. after the ER problem was recognized the hospitals put a gate keeper in place that advised the patient they had alternatives other then the ER, this dropped the ER visits by 80%. So the numbers in Oregon were bad for the first three years and dropped considerably after the hospitals got pro active. So dig a little deeper and the facts will support that medicade expansion will drop ER visits. This study should have an asterisk by it, but that would destroy the new found, falsely promoted talking point against expansion.
          • Poverty
            I just made an explanation on how to save out of poverty, for those interested. Let me know what you think. Take care. https://www.youtube.com/watch?v=nVat9VBsSCg&feature=c4-overview&list=UUh3B6Znt_L6Ck3SbqVDc6eA
          • Response to Poverty
            I viewed your video. It is simply an illustration of how compound interest works using an unrealistic 10% average rate of return. Perhaps suggesting a mandatory high school course in personal finance and personal responsibility is really the solution you are looking for.
          • To Joe Dayan
            Can you tell me where you read that 80% reduction figure in ER visits in Oregon. According to this analysis by the Oregon Health Authority, its efforts have so far reduced ER visits by 9% and ER spending by 18%: http://www.oregon.gov/oha/Metrics/Documents/report-november-2013.pdf. But perhaps I have missed something that you read.
          • OR study caveat
            "6.3 Extrapolation to other contexts A natural instinct is to try to generalize our experimental estimates to other contexts, including the planned 2014 Medicaid expansions. Any such attempt comes with important caveats. First, by their nature, our findings speak to the partial equilibrium effects of covering a small number of people, holding constant the rest of the health care system. In particular, the lottery we studied covered about 10,000 low income uninsured adults, relative to a total Oregon population of about 3.8 million, including about 650,000 uninsured and about 200,000 low-income adult uninsured.53 Our estimates are therefore difficult to extrapolate to the likely effects of much larger health insurance expansions, in which there may well be supply side responses from the health care sector (Finkelstein, 2007). Second, our results are specific to a population of low-income, uninsured adults in Oregon who expressed interest in obtaining health insurance (by signing up for the lottery). This group is not representative of the low-income uninsured adults in the rest of the United States on a number of observable (and presumably unobservable) dimensions. One striking difference is that our study population has more whites and fewer African-Americans (by about 15 percentage points each) than the general low-income, uninsured adult, US population. It is also somewhat (4 to 5 years) older and on some measures appears to be in somewhat worse self-reported health (Allen et al. 2010). These differences are amplified when focusing on compliers, who, relative to the overall lottery population, are somewhat older, more white, in worse health, and of lower socio-economic status (as proxied by education and having revolving credit at the time of the lottery); although we examined heterogeneity in treatment effect by these and other observables, we lacked power to draw precise inferences (see Appendix 3.4 and Table A23 for details). "Although our setting shares some features with the planned 2014 Medicaid expansions, it might not with other insurance expansions. The insurance offered in this setting was free or heavily subsidized, so our estimates capture the combined effect of insurance at actuarially fair prices and the wealth effect from the large premium subsidy; average annual OHP Standard expenditures – and hence an actuarially fair premium – are about $3,000, which is quite high relative to the actual annual premium of $0 to $240. Presumably, however, most health insurance coverage for this type of low income population would also be heavily or completely subsidized. Our results suggest that Medicaid provides benefits to this population above and beyond the non-Medicaid alternatives that exist through various safety net options'.
          • Medicaid
            The problem with Medicaid Is the incredibly low reimbursement. In 1992 when I started in practice, the Medicaid rate was $13.88. Now, 22 years later, the Medicaid rate is still $13.88. Is it any wonder that I would prefer to limit the number of Medicaid patients in my practice? And before anyone makes any comments about my lack of compassion as a physician: note that I still provide my services to every patient who walks in the door, regardless of their ability to pay. But how is no adjustment of the Medicaid rate (even for inflation) over two decades justified? Expansion of Medicaid, without realistic reimbursement, will not expand real access to health care. Every working physician knows this stuff.
          • One side MORE WRONG
            WE can try to shift blame all that we want, Gov Pence is receiving heavy criticism on natl level from both parties on his failure to implement new Medicaid plans. This would have only benefited Hoosiers who were eligible, and this state, the number keeps growing, because we keep losing business' to other states for several reasons. Hoosiers are moving away at record numbers as census records will bear out. We are lacking rail service, esp in northern part of central IN and appears we are about to make another huge mistake with this mass transportation proposal by lady Sen Miller over Rep Tory R rep from Carmel, who proposed implementing light rail on an already existent rail line, running from Tipton to Indy. Train could provide much faster service that would is environmentally more friendly, could move several more commuters on just one train, fed and state monies have already been poured into upgrading that line with mass trans over last fifteen years for its implementation in the way of upgraded crossings, rail and bed work, would not be subjected to the traffic jams buses will encounter, not to even mention what will happen in weather like we have had this winter. There will be scores of stranded commuters, bus accidents seem to be an everyday occurrence now. Additionally, through several surveys conducted, 75% of potential commuters ALL picked rail over bus service, but we seem to have a state government whose interests are not the citizens and their desires. Now, talking major tax hikes for all of us. With one mile of track, a bridge, and train, which could be paid for with feds chipping in, would take the trains right into Union Station, which would be a link with Amtrak, and future fed plans to implement much faster rail, consistent with many European and Japanese rail service. This would also boost retail in downtown, would not congest already congested city streets and highways, and with the second leg of rail proposal, out to airport, this was a win win proposal for Hoosiers, and in sync with national trends. Time to move this state out of 18th century mindset but have a very ill informed state legislature that lacks vision, and a Indy mayor, who many people who live in this city, that don't even know his name, this new proposal is outrageously deficient on the facts, just as this Medicaid deal has been. Having worked ER's for years, I know just how many patients go there for routine treatment, which could be handled by pvt practice; taxpayers pick up this very expensive tab, yet our governor refused to implement it, which is heavily funded by federal government. Terrible mistake and it will fall on our shoulders.

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