In our last blog entry, we identified the top reasons some states have decided not to move forward with expanding their Medicaid programs in 2014 (“State Decisions on Medicaid Expansion Still Unfolding”). Since the June 2012 U.S. Supreme Court ruling that made Medicaid expansion under the Affordable Care Act optional for states, the economic implications of the expansion have been key in each state’s decision. In this entry, we’ll discuss these economic implications and how they may affect hospital revenues and healthcare manufacturers.
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The economic implications of Medicaid expansion have been hotly debated by supporters and opponents of the measure. The federal government will bear 100% of costs from 2014-2017, and incrementally decrease funding from there until it reaches 90% in 2022. The states will then need to cover the remaining 10% of costs.1
States that support the measure want to take advantage of the federal dollars, which will reduce state costs and generate economic growth in the form of jobs and revenue.2,3
Opponents of Medicaid expansion are concerned that more of the cost will be shifted from the federal government to states down the line despite the government’s promises. They also point to state budget deficits and say that state fiscal stability must be fully reviewed before considering Medicaid expansion.2
Providers have a less diverse perspective of Medicaid expansion. Almost all providers believe that Medicaid expansion will have a positive impact on provider revenue. As the chart below shows, with the states currently moving forward (not including Michigan, which very recently decided to go forward ), hospital Medicaid payments are expected to increase by a total of $103.7 billion in the 2013-2022 time frame, the equivalent to a 7-8% increase in Medicaid payments.4
The expansion will move some U.S. residents from private insurance to Medicaid, which pays providers at lower rates. However, this loss for hospitals would be offset by Medicaid payments from the much greater number of previously uninsured patients who will be covered under Medicaid, to the tune of $2.59 gained per every dollar lost from private insurance payments.5 Hospitals are also expected to reduce uncompensated care costs (such as those often incurred in the emergency room), as these patients – if they are U.S. residents – will now be covered by Medicaid.
States that don’t move forward with expansion will retain their current federal funding for Medicaid programs, but will experience reductions in other federal funding. For example, the Affordable Care Act requires a reduction in funding for disproportionate share hospitals. In other words, they will take these cutbacks without the offsetting gains from Medicaid expansion.
How might the expected increase in Medicaid payments for many hospitals affect healthcare manufacturers?
We know that hospital Medicaid payments are expected to increase significantly as millions become insured in states that go forward. Additionally, the Affordable Care Act will expand state benchmark benefits packages to include ten broad categories of essential health benefits, including ambulatory care services, lab services and prescription drugs,6 that will likely increase market access to products and services (see table below for the full list7).
Ten Categories of Essential Health Benefits required by the Affordable Care Act
This increase in hospital payments could be a boon for manufacturers of medical devices and drugs used extensively in the hospital. For example, the increase in patient census will correspondingly increase demand for medical devices, imaging procedures and pharmaceuticals currently administered in the hospital. Medical device manufacturers might find a more welcome audience for a high value-added product, especially if the product generates offsetting cost savings and delivers measurable improvements in care that can translate into publicly reported outcomes.
However, this expectation should be taken with caution. As hospitals serve more patients, costs of direct care as well as facility maintenance and repair will increase. Many hospitals have been struggling financially for years, and revitalizing their own financial health may take higher priority than paying for high value-added products.
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Sources:
1. http://www.cbpp.org/files/status-of-the-ACA-medicaid-expansion-after-supreme-court-ruling.pdf
2. http://www.washingtontimes.com/news/2013/aug/12/medicaid-expansion-quandary/?page=all
3. http://www.healthlaw.org/images/stories/2012_08_02_50_reasons.pdf
4. http://kaiserfamilyfoundation.files.wordpress.com/2013/07/8458-analyzing-the-impact-of-state-medicaid-expansion-decisions2.pdf
5. http://www.rwjf.org/content/dam/farm/reports/issue_briefs/2013/rwjf405040/subassets/rwjf405040_1
6. http://www.medicaid.gov/state-resource-center/FAQ-medicaid-and-chip-affordable-care-act-implementation/downloads/Benefits-FAQs.pdf
7. http://www.annalsoflongtermcare.com/files/images/Stefanacci%20Table.png
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September 5, 2013 at 11:14 AM Lucy Ye
In our last post, we posed the question: “Are you tired of one-sided arguments, especially those based on unsupported statements and statistics (remember, there are lies, damn lies and statistics)?” We looked at the op-ed piece that is listed below and was published in the Chicago Tribune on October 5, 2010. We offered some thoughts about the evidence that is missing. We had only gotten through half of the op-ed piece. Now, we will finish our review of the op-ed piece.
Section 1311 of the new health care act will give the secretary of Health and Human Services and her minions the power to establish “guidelines” that will sting physicians with fines if they are not followed.
First, is this plagiarism? I found the following in a letter to The Madison St. Clair Record dated September 19, 2010 (http://www.madisonrecord.com/arguments/229751-lipstick-on-health-care-wont-make-it-more-palatable accessed October 14, 2010). That is two weeks before the op-ed piece below. “And yes there are “death panels”! Section 1311 of the new health care legislation gives the U.S. Secretary of Health and Human Services and her appointees the power to establish care guidelines that your doctor must abide by or face penalties and fines. Doctors will no longer be in charge of your health care decisions, which will destroy the sanctity of the doctor-patient relationship.”
From the Congressional Research Service’s (CRS) summary of Section 1311 of the Patient Protection and Affordable Care Act:
Part II: Consumer Choices and Insurance Competition Through Health Benefit Exchanges – (Sec. 1311, as modified by Sec. 10104) Requires states to establish an American Health Benefit Exchange that: (1) facilitates the purchase of qualified health plans; and (2) provides for the establishment of a Small Business Health Options Program (SHOP Exchange) that is designed to assist qualified small employers in facilitating the enrollment of their employees in qualified health plans offered in the small group market in the state.
Requires the Secretary to establish criteria for the certification of health plans as qualified health plans, including requirements for: (1) meeting market requirements; and (2) ensuring a sufficient choice of providers.
Sets forth the requirements for an Exchange, including that an Exchange: (1) must be a governmental agency or nonprofit entity that is established by a state; (2) may not make available any health plan that is not a qualified health plan; (3) must implement procedures for certification of health plans as qualified health plans; and (4) must require health plans seeking certification to submit a justification of any premium increase prior to implementation of such increase.
Permits states to require qualified health plans to offer additional benefits. Requires states to pay for the cost of such additional benefits.
Allows a state to establish one or more subsidiary Exchanges for geographically distinct areas of a certain size.
Applies mental health parity provisions to qualified health plans.
The full text of Section 1311 can be found at the following link (http://www.opencongress.org/bill/111-h3590/text).
As the above summary illustrates, Section 1311 does not mention “death panels,” it does not discuss treatment algorithms nor does Section 1311 mention fines for physicians. Again, Byrne mis-states the facts by relying on a letter to the editor from a lay person (or another source that both don’t credit).
The op-ed piece refers to Docs4PatientCare, a group of doctors who are leaving letters in their waiting rooms warning patients of the impact of ObamaCare. The letter warns that in addition to “badly exacerbating the current doctor shortage,” the ObamaCare will also bring about “major cost increases, rising insurance premiums, higher taxes, a decline in new medical techniques, a fall-off in the development of miracle drugs as well as rationing by government panels and bureaucrats … that will force delays of months or sometimes years for hospitalization or surgery.”
The Association of American Medical Colleges (AAMC) agrees that there is a shortage of primary care doctors. As stated in an op-ed piece in the Wall Street Journal on April 12, 2010, “The U.S. has 352,908 primary-care doctors now, and the college association estimates that 45,000 more will be needed by 2020. But the number of medical-school students entering family medicine fell more than a quarter between 2002 and 2007.” “It will probably take 10 years to even make a dent into the number of doctors that we need out there,” said Atul Grover, the AAMC’s chief advocacy officer.” (http://online.wsj.com/article/SB10001424052702304506904575180331528424238.html; accessed October 14, 2010). While not presented in Mr. Byrne’s op-ed piece, there appears to be evidence to support his claims of a physician shortage. Covering more than 30 million additional US citizens will, therefore, exacerbate the physician shortage.
As Obamacare raises Medicare taxes, there is justification for the claim that healthcare reform will increase taxes.
Where is the evidence for the claims of “rising insurance premiums…a decline in new medical techniques, a fall-off in the development of miracle drugs as well as rationing by government panels and bureaucrats?” Drug and medical device companies will pay fees to the government, which will decrease funds available for R&D. Competition from biosimilars and bioequivalents is likely to reduce the profitability of biotechnology companies. However, the increase in revenue from 30 million more patients with coverage and the elimination of co-pays and deductible for vaccines, annual exams and other preventive care should increase revenues for healthcare manufacturers. Increased revenue means more funds available for R&D. The availability of biosimilars and bioequivalents should increase access to these “miracle drugs” for more patients.
Today, healthcare insurers ration care through drug formularies and associated co-pays and co-insurance, medical policies and deductibles. This won’t change under healthcare reform. In fact, healthcare reform’s expansion towards universal coverage, elimination of annual and lifetime coverage limits, exclusions for pre-existing conditions and recisions of healthcare policies will reduce the rationing of care.
The following section of Byrne’s op-ed piece is correct: ”
House Speaker Nancy Pelosi famously insisted that we have to pass ObamaCare to find out what’s in it. Now, we’re finding out that this 1,000-plus page law has left so much out that bureaucrats, far from any kind of public accountability, (e.g. the Medicare Independent Payment Advisory Board) will be making crucial decisions. It only stands to reason: A mere 1,000 pages is inherently unable to regulate and manage the nation’s entire health care system; bureaucrats will be filling in the blanks for decades to come. And what surprises they will have.” While the law is lengthy and complex, many sections lack final details. Government agencies, such as the Centers for Medicare and Medicaid (CMS), state Departments of Health, the Department of Health and Human Services and others will implement the law’s guidelines. The only consideration is that all laws work the same way. Legislation lacks details that federal and state agencies fill in, often working in concert with interested parties. Using pejorative words, such as “beauracrats” to imply agency personnel are unqualified or deficient in some other manner is unnecessary.
Knowledgeable debate and disagreement is healthy and productive. Misleading statements that are emotionally manipulative and not supported by data are not helpful. Raising the level of debate could only help the United States be more successful and trusting of each other.
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ObamaCare can and must be repealed
Can ObamaCare, the most complex, far-reaching and epically destructive legislation enacted in living memory be repealed?
The thought is at once alluring or repulsive, reasonable or batty, depending on your politics. My politics say repeal is necessary and possible.
At first blush, it would seem impossible. Powerful interests are aligned on both sides and, presumably, a tie or standoff would go to the status quo. Even if Republicans could take control of both houses of Congress next month (some starry-eyed partisans are perilously taking a Democratic trouncing for granted), they still face a president whose name is permanently attached to this law. ObamaCare opponents would have to be clever, indeed, to craft a strategy that could foil a near certain veto by President Barack Obama.
Inertia also favors the status quo, as well as the populous’ exhaustion with the yearlong health care hostilities. In their desire for an armistice, much of the public just might not want to restart the war.
Except that all the old rules are out the window. Polls show that opposition to ObamaCare has not abated since its passage in March, when it faced great public antipathy. In fact, pollster.com has reported that ObamaCare is even less popular now than when it passed.
Some Democrats, recognizing the continuing demands for repeal by a majority — not just a plurality — have tried to hide behind a “mend it, don’t end it” strategy. But that still leaves them in the minority.
What’s keeping up the public pressure? You would have expected some opponents to have dropped off after the law’s passage, having accepted a fait accompli. The Obama administration has encouraged that with a publicity blitz that included mailings to Americans about ObamaCare’s great boons and an Andy Griffith television spot touting ObamaCare to seniors. (Five senators have asked for an investigation to determine whether the ads violate laws against using tax money for campaign purposes.) Whatever little success such propaganda has achieved apparently has been offset by Americans disillusioned by increasing evidence of ObamaCare’s failures.
Just a few of them: ObamaCare was supposed to stop increasing health insurance premiums, even lower them in some cases. But a PriceWaterhouseCoopers study projected that premiums in a decade could rise 111 percent with ObamaCare, compared with 79 percent without ObamaCare. A review by John Goodman of the National Center for Policy Analysis finds that 87 million Americans “will no longer be able to retain the health plan they have and the number could be as high as 117 million.”
Section 1311 of the new health care act will give the secretary of Health and Human Services and her minions the power to establish “guidelines” that will sting physicians with fines if they are not followed. This has led to the creation of Docs4PatientCare, a group of doctors who are leaving letters in their waiting rooms warning patients of the impact of ObamaCare. The letter warns that in addition to “badly exacerbating the current doctor shortage,” the ObamaCare will also bring about “major cost increases, rising insurance premiums, higher taxes, a decline in new medical techniques, a fall-off in the development of miracle drugs as well as rationing by government panels and bureaucrats … that will force delays of months or sometimes years for hospitalization or surgery.”
But what do they know? They’re only doctors who are firsthand witnesses to this train wreck.
House Speaker Nancy Pelosi famously insisted that we have to pass ObamaCare to find out what’s in it. Now, we’re finding out that this 1,000-plus page law has left so much out that bureaucrats, far from any kind of public accountability, (e.g. the Medicare Independent Payment Advisory Board) will be making crucial decisions. It only stands to reason: A mere 1,000 pages is inherently unable to regulate and manage the nation’s entire health care system; bureaucrats will be filling in the blanks for decades to come. And what surprises they will have.
A “repeal and replace” pledge is gaining ground in the House, the place most likely to suffer the slings of voter outrage. Tactics are being debated, including House refusal to fund the law’s most egregious sections. Opponents are savoring, with an eye to the 2012 election, Obama’s rigid and deceptive defense of the law. Stop it for now, and replace it after fed-up voters dump everyone who gave us the law.
Political “realists” assure us that stopping the law’s momentum won’t work, and that repealing it is fantasy. They’re not counting on the reality that as we discover more and more what’s in the law, it will become ever more hated.
Dennis Byrne is a Chicago-area writer. He blogs at chicagonow.com
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October 14, 2010 at 11:36 PM Robert Kaminsky
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