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Medicaid: Governor’s panel says Idahoans skeptical of expanding the program

Medicaid: Governor’s panel says Idahoans skeptical of expanding the program

Idaho Freedom Foundation staff
September 28, 2012

The proposed federal expansion of Medicaid in Idaho is still fraught with uncertainty regarding its costs, potential participants and details of implementation, according to the members of Gov. Butch Otter's working group, which met on Thursday. Participants spent the day considering whether to expand Medicaid, keep Idaho's decentralized system of catastrophic and indigent care in place or reform that care from within the state.

A repeated concern as the meeting drew to a close, though, was how to sell the expansion to skeptical constituents despite a lack of evidence that it would be cost-effective.

Brent Reinke, director of the Idaho Department of Correction, touched on one of the biggest reasons that expansion costs are unpredictable. It's impossible to know in advance, he said, how many people will use a new entitlement far more than they need to once it becomes available to them.

"With this eligibility expansion, I can see a lot more of our population living within that new parameter, and not trying to better themselves, not trying to get beyond Medicaid, but being very satisfied with living in that box," Reinke said. "Because it's very doable. And it just concerns me with what we might see in the future, as I look down that road."

Reinke pointed out that he has widespread experience dealing with people who are willing to take full advantage of every potential benefit. "The challenge that I have with this is that I look at this from a very needy population—a population that tends to work systems."

Sen. Patti Ann Lodge, R-Huston, told the group, "I've received this summer more letters, emails, personal contacts than I ever have before at this time in a campaign, and it has been about this issue—and also the exchange. We are not doing a good enough job, or a good enough job is not being presented, to show the taxpayers and the citizenry what the costs are going to be. So, when we figure out what the costs are going to be on these three options, we have got to have this publicized well."

Lodge added, "The information I'm receiving from people now is they don't like Obamacare and they don't want anything that has anything to do with it. And I'm trying to convince them that there might be cost savings."

Rep. Fred Wood, R-Burley, worried that refusing to expand Medicaid eligibility could be a disincentive for out-of-state businesses to invest in Idaho, although he realizes that quantifying this sort of speculative future scenario is problematic.

"We have to somehow put that in a dollar form," Wood said, "because if you are going to make the argument that we should expand, and we should expand sooner rather than later—so that the feds are going to pay for this, or the anticipated surge that we're going to run into with 100 percent funding, as opposed to 90 percent funding if we opted in later on—those are the kinds of very simple charts that we need to make an argument, whichever way we're going to go on this."

Wood also noted that when patients don't participate in compensation for their own care, they may use the system differently than when they possess knowledge of and responsibility for the costs of the services they use. A couple of issues need to be addressed to change that, he said.

"You have to address the fee-for-service system we have, which is purchasing volume as opposed to purchasing quality," Wood said. The second is that we've gone from a system of insurance where we manage risk to a system of prepaid health care, which is an entitlement. And that's not only true of government programs, but that's also true of private commercial programs. I mean, nobody now wants a health care plan with a large deductible. They want prepaid health care. Both of those are going to have to be replaced if, in fact, we're actually going to get to a system where the perverse incentives go away."

Economist Arnold Kling calls this method of health care provision "insulation" rather than insurance, because consumers of services are sequestered behind a wall of ignorance about the price. Patients who are insulated in this way don't have an incentive to economize on the costs of their treatment, Kling says, and providers have an incentive to offer more numerous and expensive services.

"Insulation leads people to over-consume health care services," Kling wrote. "Americans make extravagant use of services that have high costs and low benefits. Many studies that compare groups with similar conditions show that those with the largest levels of health care spending fare no better in terms of outcomes than those that spend less."

Gooding County Commissioner Tom Faulkner recognized the severity of this problem in his remarks.

"Part of the problem with health care is that providers are going through the roof with costs," Faulkner said. He's seen some dramatic price increases that he says have occurred "just because they knew they'd get away with charging us whatever they wanted to charge us. And I'm seeing a lot with hospital bills, and all the providers are just raising more and more funds by going up exponentially with what they're charging for their fees."

Faulkner continued, "We've had situations where we've gone in and they've done an analysis of whether it was a reasonable cost for the procedure, and they said, 'Well, if it was Medicare it would have been $80,000, but it's $250,000 at the county.' That's just the way Medicare is built as opposed to Medicaid. We need to watch the costs, I think, and make sure that whatever system we come out of here with, we need to somehow put some stops in there that says the providers aren't going to just keep growing the system. I think that will help a lot in selling it to the citizens of Idaho."

Working group members often suggest that a comprehensive system of managed care, with portable electronic records and data sharing, could bring substantial cost savings to Idaho, but New York Times reporters recently described how, in practice, this becomes a source of higher prices from health care providers.

"When the federal government began providing billions of dollars in incentives to push hospitals and physicians to use electronic medical and billing records, the goal was not only to improve efficiency and patient safety, but also to reduce health care costs," they wrote. "But, in reality, the move to electronic health records may be contributing to billions of dollars in higher costs for Medicare, private insurers and patients by making it easier for hospitals and physicians to bill more for their services, whether or not they provide additional care."

They continued, "Critics say the abuses are widespread. 'It's like doping and bicycling,' said Dr. Donald W. Simborg, who was the chairman of federal panels examining the potential for fraud with electronic systems. 'Everybody knows it's going on.'"

The Medicaid working group tentatively plans to meet again on Oct. 23, when it will discuss additional details of the proposed expansion, including the findings of a report issued by Leavitt Partners, a Utah-based company that analyzes health care data, detailing its estimates of the demographics and health status of Idahoans who would be newly eligible for Medicaid if an expansion goes forward.

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