Hearing First-hand: A Medicaid Administrator Speaks

From the Voice of the People section of today's Chicago Tribune:

I am an Illinois Department of Human Services worker who administers Medicaid, and caseloads have risen to unmanageable levels. The caseload size in my office has increased to around 1,380 per worker. We have deadlines and directives, too, like everyone else. We have to process vast amounts of work within agency time frames. In this environment, we don't have the ability to do a better job preventing fraud.

Illinois has one of the smallest state workforces in the country, and there is no hiring. Workers who retire are not replaced. It's a Catch-22: More people are applying for public assistance and are being serviced by fewer workers, and fewer workers have even more stringent deadlines. This is a recipe for abuse and guarantees that fraud will continue.

I suspect this problem is not unique to Illinois.

-Wes

Pensions and the Challenge to Health Care

I am not a finance guy, but was struck by what I read in the New York Times this morning:

Despite its pension reform, Illinois is still in deep trouble. That vaunted $300 million in immediate savings? The state produced it by giving itself credit now for the much smaller checks it will send retirees many years in the future — people who must first be hired and then, for full benefits, work until age 67.

By recognizing those far-off savings right away, Illinois is letting itself put less money into its pension fund now, starting with $300 million this year.

That saves the state money, but it also weakens the pension fund, actually a family of funds, raising the risk of a collapse long before the real savings start to materialize.

“We’re within a few years of having some of the pension funds run out of money,” said R. Eden Martin, president of the Commercial Club of Chicago, a business group that has been warning of a “financial implosion” for several years. “Funding for the schools is going to be cut radically. Funding for Medicaid. (emphasis mine) As these things all mount up, there’s going to be a lot of outrage.”

Joshua D. Rauh, an associate professor of finance at Northwestern University who studies public pension funds, predicts that at the current rate, Illinois’s pension system could run out of money by 2018. He believes the funds of other troubled states — including New Jersey, Indiana and Connecticut — are also on track to run out of money in less than a decade, unless they make meaningful changes.

If a state pension fund ran out of money, the state would be legally bound to make good on retirees’ benefits. But paying public pensions straight out of general revenue would be ruinous. In Illinois’s case, it would consume about half the state’s cash every year, bringing other vital state services to a standstill.

Of course, Illinois hospital systems know this. They are, after all, some of the largest and most lucrative employers in our state and are very savvy when it comes to the money of medicine.

As a result, large hospital systems purchase credit default swaps to hedge against the collapse of the Illinois bond market. Just this week, the price for those "swaps" (derivatives) just exceeded those for the state of California and are approaching the swap price for Greece.

All because the current union members want their pensions, some as early as age 55.

This presents very real problems for Medicaid patients:

Of the 32 million uninsured Americans expected to gain health coverage under the new law, as many as 20 million will be insured by Medicaid, experts estimate. Asset tests will be largely eliminated, so workers who lose their jobs can get health coverage even if they own their homes or have money saved for retirement. (Illegal immigrants will not be eligible.)

Absorbing that many people into the system will not be easy. The program is administered and partly financed by the states, which are now racing to figure out how to carry out the necessary changes and simplify enrollment even as they struggle to cope with severe budget cuts and staff shortages.

Many residents don’t realize they will be eligible, and it will be up to the states to let them know. And the program has long been haunted by questions about quality of care.

But why worry? Who cares if the states can't pay their Medicaid tab. The federal government will pay for the pension shortfall, right?

And it won't cost a thing... really...

-Wes

How Hospitals Survive: Making Dust

If they don't make dust, they fade (subscription):

UIC has spent four years drafting plans for a $450-million patient tower as the centerpiece of a $650-million, five-year-long overhaul of its Near West Side campus. But an inability to finance the project has forced longtime CEO John DeNardo to ice those plans for now.

He's settling for a $40-million repair job on the 500-bed hospital, which lost heat two days last month when the campus steam plant gave out.

The capital crunch poses a threat to UIC, where the hospital serves as a training ground for the nation's largest medical school — more than 15% of the state's physicians cut their teeth at the place. Rival university hospitals are pouring money into new buildings, including Rush University Medical Center's $1-billion makeover next door. The wider that gap grows, the harder UIC will have to work to attract talented physicians and researchers — or the well-insured patients it needs to improve its bottom line.

Part of the problem is the patient mix UIC sees, but the other larger part of the problem is the abysmal state of Medicaid funding:

The medical center has never been a financial powerhouse, partly because it treats a high percentage of low-income patients. Roughly one-third of its revenue in recent years has come from the state's Medicaid program for the poor. Still, its 500-physician medical staff has built some nationally prominent programs, including in eye care, organ transplants and robotic surgery.

Mr. DeNardo acknowledges the challenges but says the modest building overhaul will be enough to stay competitive and continue to provide a training center for medical students and residents.

Joseph Flaherty, dean of U of I's medical school, says the hospital's deteriorating condition — especially in light of its competitors' gleaming new facilities — already has hurt its ability to recruit and keep top faculty. "If we don't start making some dust soon, people will feel that this is a sinking ship," Dr. Flaherty says.

It's survival of the financially fittest right now - even for hospitals.

One wonders how UIC's next door neighbors (Rush and Stroger) will fare should they close and their Medicaid patients are shunted their way. Given the mandate that Medicaid is being expanded and the burden falls squarely on the budgets of states after 2017, unless the government addresses these underfunded entitlement programs directly, it all seems like a colossal house of cards - even with "reform."

-Wes

Model Health Care System Drops Medicaid Patients

Yep, the Mayo clinic is refusing Medicaid patients from two states, citing poor payment rates.

So let me get this straight. The government sets the rates for the poor and disadvantaged and one of the President's model health care systems balks? How's this going to work when the government runs more and more of the health care delivery in the US?

Maybe this is why Mayo isn't too happy with the current reform plans.

-Wes

Are the Feds Propping Up Hospitals, Too?

It seems so. But already-struggling states are at a loss to use the money because they can't come up with their portion of the required buy-in.

-Wes

The Employed and Willfully Uninsured

A piece from the Herald Tribune describes the plight of what happens when the willfully uninsured, caught off-guard by an unexpected catastrophic illness, confront their options for care:

Their last resort for care is Medicaid, but it is unclear if the O'Learys would qualify -- or what sacrifices they might have to make to do so.

Florida is one of 33 states where Medicaid covers transplant surgery, and the program pays the full cost, a Medicaid spokeswoman official said. But first the O'Learys would have to qualify.

O'Leary would apply under the program's provision for medically disabled people, and that can take 90 days. Even if approved, eligibility documents show an income limit of $1,027 per month, far below Danae's salary.

That leaves the O'Learys with a dilemma -- to pay for Ron's care, they would be better off if she quit her job, giving up their sole stable income. They also might need to sell the restaurant to avoid Medicaid's asset limits.

It is a shame that Medicare rules require another a spouse to become unemployed to qualify their partner for Medicaid, rather than providing a realistic path to repay their debt to our social health programs.

-Wes

Oops, We Did It Again

Free care might not always lead to more care, for one simple reason: cost.

At issue is the amount of reimbursement pediatric specialists get from state and federal funds after treating a child insured under Medicaid or the All Kids program, which uses Medicaid funds. Currently, Illinois specialists said, they are repaid just 33 cents for every dollar they spend on such patients, one of the lowest reimbursement rates in the country.

Physicians worry the increasing gap between medical costs and Medicaid reimbursement rates will make it more difficult to attract new pediatric specialists to the state. Many also worry specialists will leave Illinois or stop accepting children who are covered by Medicaid or All Kids.

Now I really don't want to attract more specialists to our state (so that argument falls flat with me), but the mass exodus of doctors to other states is a consistent finding in states where doctors cannot economically maintain practices. After all, how long would any business last that received $0.33 for every $1 it spends providing their service?

Government-run healthcare ...

... be careful what you ask for.

Instead of asking where the other $0.66 went, these clever doctors, always interested in maintaining their livelihood (who can blaim them?) and understanding the system, do what any well-meaning group in this system would do: ask the government for more money!

Physicians hope legislation submitted to the Illinois General Assembly will help bring reimbursements closer to costs, allowing pediatric specialists, among other practices, to continue seeing All Kids and Medicaid patients.

But adjustments for pediatric specialists alone could cost the state $75 million, said George Hovanec, former state Medicaid director who is a consultant for Children's Memorial Hospital.

Who do you think will pay the bill?

Oops, we're doin' it again!

-Wes

Addendum 09:45AM CST: One more thought: Hey, if we don't care about costs, it's almost funny that the state can find a billion dollars for a single new children's hospital, but can't find $75 million to supplement doctors' fees.

Really Helping Our Needy

This evening, I saw a spot on the news about a new Illinois "comprehensive" health website to serve as a safety net for those without insurance in our state. I decided to peruse some of the offerings and had to check out the I-Save Rx link which promises to save our needy folks up to 40% on the cost of heart medications. Just dial 1-866-I-SAVE33 and earn a whopping 44% off your next prescription of Zocor imported from Australia, England, New Zealand or Canada!

Never mind that 100 pills (a 3-month, 10 day supply of 100 tablets of 40mg tablets of generic simvastatin from the USA) can be obtained at CostCo for $28.15 - a 93% savings.

Although some have certainly found benefit with the I-Save program, if we really want to help out the needy, why not make such information about generic drug alternatives available on the website as well?

Or could it be that special interests that contribute to governmental coffers might be making a killing on this program at the little guy's expense?

-Wes