I’m not even going to count the number of times the word incentive is used or try to fix that right now. The only incentive is a perverse incentive, unless it relates to satisfaction in doing good work. But pay for performance is the zeitgeist.
Here’s the big rub: the legislature intends to “transfer risk” to providers and away from the state. The Medicaid budget is a hot potato they want to throw somewhere else, anywhere else. So instead of dealing with this risk by increasing revenue, what did they do? Decide that providers would have to worry about making ends meet, not the state.
The law sets up RCOs—Regional Care Organizations—to manage patients within regions. Each RCO would be given a set amount of money per covered patient – capitation—and then required to cover any needed care. If medical expenses in that region unexpectedly are higher than the budgeted amount, the RCO has to cover the costs. The RCO must have a reserve of $ 2.5 million of provider front money in order to be given the contract, so we are not talking about a group of pediatricians and family doctors. From what I am hearing, mainly hospitals will be the “at-risk” providers.
The law says these RCOs are not to be considered insurance companies. Come on, folks, give us a break. That is exactly what they are—they will be insuring Alabama’s Medicaid program.
Why is this a problem? Let me count the ways. First, we have a history of providing insufficient per person funding for Medicaid, because we won’t stop our corporate handouts. We have one of the worst funded programs in the country, 3rd from the bottom in per person spending for Medicaid but 10th from the bottom in overall healthcare spending per person. Don’t believe it if you hear we are spending too much money on our current program. Dividing those inadequate funds into RCOs will not help. If you don’t have enough money in the bank to pay rent, writing 5 smaller checks to the landlord is an interesting thought—but sweetie, I’m sorry to tell you, at least one of those checks will bounce. The state plans to pass the blame on to the providers for not performing magic tricks. Providers won’t put up with that for long. They will exit the program and leave patients in the hands of a third party payer, in a system with few remaining physicians.
Second, once we turn hospitals into insurers, can we talk conflict of interest? Faced with a risk sinkhole, our hospital-insurers will be forced to limit services. I have already heard talk that in one region, children may not be allowed to go to the Children’s Hospital in Birmingham but could be sent to Vanderbilt, because the costs to the RCO will be lower. I don’t have any problem at all with Vanderbilt and send patients there regularly, but the choice of Children’s Hospitals should not be made on the basis of cost. It should be based on the skills of the particular specialists.
Let’s say that against all odds, we do fund the program fully. If our hospital-insurers come in under budget, they get to keep the surplus. Anyone can be corrupted with a carrot like that. I would far rather have my local hospital put in that position than one of the out of state third party payers like Centene. But we are all human, and every one of us is vulnerable to perverse incentives.
I knew, while this bill was in progress, that there was no way to interfere with the intention to transfer risk. The legislature was hell bent to do it. I think now is the correct time for some effort at damage control, because the state has to get a waiver approved before the restructuring can happen.
I admire and respect the people running the Medicaid program in Alabama, especially Don Williamson, who has always been a friend to children. He has taken a bad piece of legislation and is trying to make the best of it. I think we should help by asking the feds to fix what our legislators would not. No matter how much they try to wiggle out of the risk, the truth is that all of us who live here share the risk. A failed Medicaid program will come down on our heads, in failed hospital systems and loss of shared medical services. So let’s make this work! We need a restructured Medicaid to do the Expansion.
Here is the link to the concept paper submitted to CMS (Centers for Medicare and Medicaid Services). When the final application is submitted, we will have a 30 day comment period with CMS on their public site. I don’t know that date yet but expect it soon. I thought I’d let you know now, so you can study this a little and be working on your comments.
Here are mine, so far. If you have suggestions, please comment. There may be a better way to design the capitation floor in my first element. I’m setting the bar at what might sound low to you, the 25th % tile, but it would be higher than our current rate.
As a pediatrician in Alabama who helps care for the poorest children on Medicaid, I am concerned about Alabama’s 1115 Medicaid Waiver application for RCOs. It is very important for the plan to be approved expeditiously, because the possibility of our state accepting the Medicaid Expansion hinges upon restructure. However, the plan as it stands will put our hospitals in the position of insuring the state against high medical costs in an environment of historically inadequate funding. In addition, if adequate funding is provided, the plan creates a perverse incentive for RCO providers (whom we anticipate will be primarily hospital systems) to cut needed patient services in order to retain surplus funds. I believe these problems can be mitigated by the following:
1) Require the state to maintain a capitation payment rate that is never lower than the 25th percentile of per patient cost in the southeast region, to guard against insufficient funding of the program. A floor on capitation payments is critical to prevent collapse of Alabama Medicaid.
2) Require that any surplus funding an RCO does not spend be used for patient-related improvements to services in the regions (not for construction) OR be returned to the state general fund. This avoids the risk of perverse incentives for hospitals to cut patient services in order to increase their income and allows the state to receive the benefit of any cost-saving.
Pippa Abston, MD, PhD, FAAP
As always, I want to remind you that we can more effectively cope with the Medicaid funding woes by changing to a much larger risk pool—all of us. We all share the real risk, so let’s design our system to reflect that. Improved, Expanded Medicare for All, not Medicaid, is what we need.