Bacon's Rebellion

Restructuring Medicaid: Prevention and Managed Care

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by

James A. Bacon
in

Amerigroup Corp., one of Virginia’s fastest growing companies, administers managed care plans for Medicaid and Medicare programs. Based in Virginia Beach, the company is finally doing business in its home state, taking on responsibility for 24,000 Medicaid patients in Northern Virginia, mostly young mothers and children.

The company’s forte is preventive care. The company has developed effective techniques for identifying and treating medical problems of poor people before they deteriorate into full-fledged medical crises that require expensive emergency-room treatment. Programs focus on prenatal care, treating asthma and other ailments common among the Medicaid population.

According to Marjolijn Bijlefeld, writing in Virginia Business magazine, studies have shown significant savings in other states. “In Ohio, for example, inpatient costs decreased 27 percent under Medicaid managed care. In Wisconsin, the savings were estimated at nearly 11 percent.”

Virginia needs to aggressively implement preventive care across the state. Given the enormous size of the Medicaid budget, savings could amount to tens of millions, perhaps hundreds of millions, of dollars per year. We don’t need to cut poor people out of the program; we don’t need to short-change doctors and hospitals. We simply need to re-think our model for delivering health government-backed health care.

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  1. James Atticus Bowden Avatar
    James Atticus Bowden

    Del. Phil Hamilton holds his first meeting of his GA study group on Medicaid on Sep 18th.

    We need short term solutions like better management. Also, need to look to increase medical supply and reduce government costs to the supply curve.

    I’ve written before about greatly expanding Health Savings accounts currently in VA Code. We need to let others – family, church family, co-workers, and neighbors contribute to others’ health savings accounts and get a tax break – a big one.

    Actually, I think we should have Virginia Trust or Commonweal Accounts that start at birth or upon registering to vote for move ins and are portable – savings accounts for all. Gee, kinda like Social Security was sold with phony account numbers in Baltimore, but do it as the real deal.

    Corporations and individuals who donate seed money to our poor citizens would get a tax break. Maybe, as a last resort, the Commonwealth could put in some seed money for our poorest folks.

  2. SouthoftheJames.com Avatar
    SouthoftheJames.com

    Health Savings Accounts don’t address the critical issues involved with the health care “crisis”: rising costs of routine and specialized procedures and medical malpractice. At the same time, what motivation do I as a private citizen have to directly contribute to someone’s HSA other than a tax break? That’s like asking me to contribute to some kid’s college fund. Charity and philanthropy are done best when the donor gives without regard to the recipient and there is broad service – economies of scale and scope, my friend – open to all in need. Tax credits for things like this just further dilute the whole notion of sound government management.

    Until we resolve the supply and demand issues, in the most efficient and equitable manner, states will continue to band-aid Medicaid and health care. We need more focus on preventive care and informed personal decisionmaking, especially since many of these activities involve individual/family lifestyle changes versus large, systemic expenses (some estimates hold that 80% of common medical problems like diabetes, heart disease and even cancer are preventable). Other issues that we can reduce without government regulation would be to encourage the reduction of emergency care usage through shifting noncritical quick response needs to acute care centers (like Patient First in Metro Richmond), dramatically reduce the financial and institutional barriers to entry for qualified students by diversifying the delivery of medical education through public university medical schools (tiered programming – let the private schools have the boutique specialities), and incentivize employer health plan participation through association health plans and bulk-purchase pharmacy and medical service programs. None of this requires much in the way of higher government spending – it’s reallocatio of resources and in some instances, reduction of expenditures due to costs savings.

    — Conaway

  3. Jim Bacon Avatar
    Jim Bacon

    Conaway, I’m not sure that you and I share the same definition of a Health Savings Account. I agree that HSAs are not a panacea, but they are a step in the right direction by gving the consumer an incentive to exercise restraint — or better yet, foresight — in accessing the health care system.

    HSAs are set up by employers as private accounts. Instead of paying traditional medical insurance, employers put money into the employee’s personal account, with an insurance wrapper that protects against cataclysmic expenses. The better plans also contain a strong educational component geared to persuading people to change lifestyles (smoking, lack of exercise, high blood pressure, etc.) that contribute to illness. HSAs are strongly oriented to preventive medicine. But, because the patient pays for medical expenses out of his own account, he won’t access the health care system frivolously.

    Are there other factors driving up health care costs? Of course there are. But without consumer pushback, there is little incentive for anyone to do anything about them.

  4. James Atticus Bowden Avatar
    James Atticus Bowden

    South of the James: The things we say are not mutually exclusive.

  5. SouthoftheJames.com Avatar
    SouthoftheJames.com

    J.A.B. – I concur.

    Jim – Unfortunately, I didn’t make it clear that the initial portions of my response were directed toward JAB’s specific comments, more so than yours. My conception of HSA’s is inclusive of both the employer-based plans that you refer to, as well as, the consumer-choice plans that supplement existing employer or private health insurance or employer-based catastrophic-only coverage. The consumer plans are established through financial institutions and have existed in various forms for a few years, often with favorable tax treatments. But tended to be caught up in political and bureaucracy uncertainty in DC, and over time, the enabling legislation expired.

    I fully agree with both of you that incentives for consumers to change lifestyles and exercise some level of control over individual health outcomes is critical (if only my waistline could talk!). We should look to any and all alternatives (HSA, preventive care, malpractice improvements, alternative medicine, etc), especially if we are to deter the health care system crisis that I fear will push us further toward a national call for a socialized federal healthcare system. Inside the Beltway, the liberals/progressives are really ready to make this call (Kerry quickly backed away from it after slipping it in to his campaign, and Kennedy still wants it), esp. since the evidence is mounting that such systems, like in the UK and Canada, are facing severe problems of their own (the Economist ran a great series on this a few weeks/months ago).

  6. CG2 Avatar
    CG2

    Two points:

    1) Prevention focused investments and rules can and should play an important role in reducing the cost of health care. We can reduce health care costs by reducing the incidence of high cost chronic diseases like diabetes, and by reducing the high cost of preventable accident and injury in our health care institutions. Medicaid reimbursement should be linked to institutional safety records. Each year nearly 100,000 people die in health care institutions from preventable accidents and disease. Would we tolerate a safety record in the airline industry that had the equivalent of 300 jumbo jets crashing each year? I don’t think so. We should not be rewarding unsafe practices by reimbursing institutions for medical care for patients who would not have needed it if, for example, nurses had washed their hands or fall precautions had been observed. For more, see http://www.cg2consulting.com/article_the_health.html and http://www.cg2consulting.com/article_the_health2.html

    2) HSAs alone will not meet the objectives sought here. If we want to encourage employers to set HSAs up and employees to invest, there will need to be some tax incentives. Info on uninsured and underinsured in Virginia shows that both employers and employees fail to offer/participate in health insurance/HSA programs because of cost. Insurers charge small employers more than larger ones; premium costs for employees went up 12% in 2002; wages only 4%. For more see, http://www.cg2consulting.com/article_insuring_working.html

    3) Personal responsibility and accountability also play a role here. Those who shop for and prepare food for themselves and their families can make a difference; each of us can live healthier, and, if enough of us did, health care costs would go down, individually and collectively.

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