How Children Get Left Behind in Medicaid

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On today’s edition of Coffee and Markets, Brad Jackson and Ben Domenech discuss the recent McKinsey health insurance survey, the inability of children to gain access to medical care through Medicaid, and the costs that program has shoveled upon states.

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Transcript

Jackson: On the show today Ben and I are going to talk about a recent McKinsey health insurance survey that shows an awful lot of companies are going to drop their health insurance come Obama-care time. Then we’ll discuss Medicaid, including the inability of children to gain proper access to medical care and the costs that the program has shoved upon many states. I’m your host, Brad Jackson, and you’re listening to the June 21, 2011 edition of Coffee and Markets.

So Ben, there was a really interesting study that came out this week from McKinsey Health Insurance survey, and it found something that I thought was pretty startling. It said 30% of surveyed employers were “definitely or probably planning on discontinuing employer sponsored health insurance after 2014,” which is of course when Obama care goes into effect. That’s pretty shocking. That’s going to be a lot of people who get booted off their health insurance.

Domenech: You know, it was interesting to watch the reactions to the McKinsey quarterly study and everything that sort of played out over the past several days, Brad, and I wonder if I could sort of walk you though it a little bit. The one thing that is, the thing that’s really incredible, the thing that sort of struck me as so odd about what happened when the study came out was the reaction from the supporters of Obama care. And not just within the White House, but within the entire left community which, it wasn’t really focused on the study as a whole.

Nancy Ann DeParle who is at the White House wrote on their official blog that it’s an outlier and that basically was the starting point for everybody who was criticizing it, including I have to say, unfortunately Megan McCardle who I, I don’t know if she just doesn’t pay enough attention to Medicaid. She’s obviously an economist and not a health policy person. But it really bothered me to see, basically a whole host of leftist writers and bloggers start standing up and hammering away at this study. And they were using all sorts of bizarre accusations about it. Brian Beutler at TPM was suggesting that they were internally backing away from it. And that he had it on good authority that the methodology for the study which they hadn’t fully released was, you know, just complete crap. That none of those things, in other words, were true and that none of the claims of the study which were all, of course, negative, were things that could be justified by the actual facts on the ground.

The problem for them is that one, it’s not an outlier. It’s completely consistent, I would say, with a number of previous studies which looked at the prospect of employer dumping. Which is essentially that when employers are mandated to choose between paying a fine and paying for health coverage, if you make that fine too low and you have certain expectations about what health coverage is going to cost, it makes rationale sense for you to have the predictability of paying that fine and dumping your employees into the health exchanged subsidized system. And the other thing that seemed to be left out of all the left calculations on this, is that the employees themselves are probably going to prefer that system, simply because the subsidies are going to be so tempting. It makes so much sense, particularly for smaller employers, for them to go into the system.

In fact, the concern that I had and several on the right had about the McKinsey study is that if there was any flaw in their methodology McKinsey’s companies tend to be of the larger kind. And so if anything it might underestimate the amount of employer dumping.

Jackson: Yeah. That’s what I was going to ask. Do we have a breakdown of, are we talking like Fortune 100 companies? Are we talking Fortune 500 companies? Are we talking, you know, the mom and pop place down the street?

Domenech: Well, here’s the interesting thing. So after a couple of days of —

Jackson: I am a small company and I am not dropping my health insurance.

Domenech: Well, and I appreciate that, Brad. I think that when it comes down to it the number of hits that they had on McKinsey were almost entirely based on assumptions. It was assumptions that this was actually funded by some external Republican biased source. They, you know, in terms of the actual truth of the matter, it turns out that the study was funded by McKinsey because they are supposed to give advice to their clients on these sorts of things and they had legitimate questions that they needed to answer. They have all sorts of hits by, you know, by a number of leftist economists who were just slamming away without actually looking at any of the actual facts that were within the study. They were just slamming away at the group on the assumption that it had to be some kind of biased survey, even though again, it’s not an out and out liar. It’s, you know, it’s not something that is surprising. You can look at an Urban Institute study by Gene Steurle who is a centrist moderate guy which showed the same thing. And there are a number of other studies which showed this kind of level.

It turns out that McKinsey actually, not only did the methodology work out when they released it yesterday, but it also showed, if anything, that the truth of the matter was worse than had been reported in the news. And that the companies that they had measured contained just a significant amount of smaller companies. In response to your question, in fact more than 20% of them have fewer than 20 employees and more than half of them had fewer than 100 employees.

So, it wasn’t biased toward McKinsey clients, because they actually used Ipsos to do the survey which went over more than 600,000 people. And in terms of the way that the questions were constructed, in terms of the way that the level was demanded, in terms of who was the primary decision maker and that they weren’t just surveying people who had an opinion as opposed to people whose opinion was going to matter in terms of what the company did.

It’s absolutely clear, this is just a slam dunk. The people who were attacking this were, you know, as I was pointing out the other day online, that it was the kind of people, you were hearing criticisms of methodology from people for whom, you know, in depth research means that you go to the second page of a Google search. It is just insulting, but here’s the thing that’s more insulting about the whole concept. The people who claim that this is ridiculous and biased, the economists on the left who are going to continue to claim this even though it’s, you know, the facts don’t justify that at all, they actually don’t know that much about health policy. What you notice that’s interesting about people who are making these claims is that they tend to be economists who haven’t looked closely at the issues involved.

And actually that’s true of other areas as well, particularly the current argument over Medicaid. Because it’s one where people are analyzing stuff from a distance and they’re not actually paying attention to anything that is being said by the people on the ground. If you talk to these companies, if you go to the meetings where they are at and where they are talking about these things, you would know that the number of people who, you know, are planning to drop coverage is at least that amount. And the data that McKinsey’s release showed that there’s actually another 40% of plus of respondents who said that they are undecided on whether they’re going to keep coverage or not. Only 28.7% of them said that they’re definitely or probably not going to drop health coverage. And that’s —

Jackson: Wow.

Domenech: — significant. Yeah.

(Commercial Break)

Jackson: Let’s move on to Medicaid. There are a few things to talk about, but I want to start with something that Avik Roy had in Forbes, “The New England Journal of Medicine found that two-thirds of Medicaid children were denied a doctor’s appointment versus 11% who were privately insured.” The Medicaid quote also includes people on, kids on S-chip (phonetic sp.). I want to relay a personal story on this. My dad, of course, is a pediatric cardiologist and he always notes that in the pediatric field that these doctors often talk about how awful Medicaid is at paying them the cost of the children actually visiting and getting all these treatments. So, this number actually doesn’t surprise me. I guess the level of the number, the 66% is a little surprising to me, but the fact that there is a big disparity is not.

But Ben, this has to lead to a lot of just poor health care services for these kids.

Domenech: You know, what your father is telling you is, of course, completely true. And I guess the question that I ask, you know, for any listener who is trying to understand this problem is imagine somebody comes to you and says, here’s what’s going to happen. I’m going to give you a client list and that client list is going to consist of people for whom I am going to pay. I’m only going to pay you a third at most of what you make servicing other clients. And it’s going to take forever for me to pay you, and you’re going to have to fill out a lot of forms, and you’re going to have to put up with a ridiculously difficult client community in order to receive this money. Would you like to participate?

Jackson: Yeah. Absolutely not.

Domenech: And I think that, you know, the vast majority of people would respond to that by saying, of course not. I’m going to compete within the open market place with my product and I’m going to give it to consumers who are going to pay me on time. Who I know are going to be less difficult. And whose problems I’ll be able to solve. And I don’t want to put up with this, you know, ridiculousness. Why should I have to? It’s exactly what’s happening with Medicaid. It’s a simple way to put it, but when you drill down to it that’s exactly the reason that you see these kinds of studies.

This latest one from the, that was published in the New England Journal of Medicine, it was conducted by a couple of the University of Pennsylvania researchers, is getting a lot of attention mostly because Medicaid is becoming a bigger and bigger political issue. And one of the things that sort of is coming with that is, you know, as with any sort of issue that sort of rockets up is it fits into the political construct of the moment. So, you have all these different Democrats signing letters saying that you need to leave Medicaid alone. You know, leave Medicaid alone. They don’t want to touch the program. They don’t want to consider any reform.

Of course, just a few years ago many of these same Democrats were conceding that Medicaid was a program that was a failure that needed to be reformed. Mark Warner from Virginia, in fact, wrote just I think two years ago that long before Social Security ever goes bankrupt, Medicaid is going to bankrupt all the states. And this was something that he was saying actually before the passage of Obama Care. Obama Care really doesn’t change that much when it comes to Medicaid, it just accelerates the problem. It takes all the existing problems and it makes them matter quicker, and it makes the states face these budgetary challenges on a sooner time scale. Basically, you know, in terms of the actual experience that children have within Medicaid, you know, the study that we’re talking about right now was isolated to Cook County, Illinois and was just looking at the way that appointments were scheduled for all sorts of standard problems that were considered urgent, but aren’t emergencies.

So, that includes things like diabetes, asthma, broken bones, things like that. So, the child is not going to die if they don’t get seen, but they’re also not doing well. They have a serious problem and they need to be, you know, as soon as possible. And trust me —

Jackson: And that could translate into worse outcomes down the road.

Domenech: Absolutely. Absolutely.

Jackson: Yeah.

Domenech: And that’s, the biggest problem that you see with Medicaid in fact, is particularly in a time of economic downturn when a lot of the parents involved, a lot of whom are single moms, are working multiple jobs, or are working jobs where they have difficult schedules, it’s very difficult to see anybody who actually, you know, within the Medicaid system who can schedule you. And that’s, you know, that’s one of these things that people on the left just don’t understand. Particularly people who continue with this methodology that Medicaid offers people access to care. It’s just not true.

And you don’t have to look at a study that’s this isolated, even though it obviously is about children which makes people perk up and is certainly, you know, worse. There are a number of studies over the past two decades that basically show this, going back to breast cancer studies in the ‘90s. And then studies that were more recent that I find very disturbing, which basically looked at the way that people have difficulty scheduling appointments in a number of different areas. Just as an example, because this was a study that I thought was interesting that looked at primary care appointments.

So, you know, obviously this is something that everybody has to deal with. And they went to different doctor’s offices in major cities. So, Phoenix, LA, Denver, Atlanta, Chicago, et cetera. And they would call them and they would do the sort of secret shopper method where they would ask for an appointment under a certain set of different situations. Private insurance, Medicaid, uninsured, and then uninsured where they would pay in cash they said, or uninsured where they would pay in cash, but they would say they could only afford to pay $20. So, in other words you’ve got to bill me for the rest. I’m uninsured, I’m only going to pay cash, and I can only afford to pay you twenty bucks. All right. So, that’s not an encouraging sign typically for a doctor’s office.

Jackson: Oh, no. No. That would not be good.

Domenech: What they actually found is that Medicaid is worse and in some cases only slightly better than promising to pay 20 bucks. In —

Jackson: Really?

Domenech: Yeah. In Denver, for instance, Medicaid if you said you were on Medicaid they tried to get, there were 24 different appointments that they tried to get with doctor offices in the area. Only two of them were accepted. If they promised a cash payment of only $20, they got three appointments. Okay. It’s incredible in terms of the matchup there. I mean, just think about that for a second. This card promising that the taxpayers are going to pay something is only as good as somebody taking an Andrew Jackson out of their pocket and putting it on the desk. Okay. And you know that you’re going to have to chase them down with billing calls and things like that in the future.

Jackson: Well, at least it something.

Domenech: Exactly.

Jackson: I guess that’s (unintelligible) thinking.

Domenech: At least it’s something. And the point is, you know, and these are visits that are normally going to total about, you know, $120, $150, something along those lines in terms of actual costs to the doctor. But the point is, that they’re willing to accept that because they know that just getting that one third payment, roughly, from Medicaid is going to be a heck of a lot more of a headache. And it’s going to be, you know, incredibly difficult. And that, I mean, that should scare a lot of people. And you know, it’s consistent again with other studies in pediatrics, the Rand Corporation (phonetic sp.) studies. There was a dentist study, and dental practices are actually a big problem, particularly for kids within the Medicaid system because fewer and fewer dentists are accepting it. And they found that, they were looking for, they did a study in Illinois where dentists were facing an emergency care situation.

So, it’s fictional obviously, but it’s a 10-year old kid with a fractured front tooth needs to be seen immediately. You know, as soon as possible. And they phoned almost 100 dentists over the course of four weeks, and even when they were calling dentists who were enrolled in Medicaid, so they’ve already agreed to be enrolled in it, they’re not getting rejected by people who aren’t, only 68% were able to get an appointment. Okay. And all privately insured kids were able to get an appointment.

Jackson: Wow.

Domenech: Non-enrolled dentists, okay, which is again, you know, getting a bigger and bigger number, offered an appointment to only 7% of kids. Okay. And keep in mind, Medicaid reimburses them even if they’re not, you know, all emergency medical and dental care is reimbursed by Medicaid regardless of whether you’re enrolled in the system or not. So, even then 7% of the non-enrolled are going to take it and that’s just, it shows you how much of a headache is. And that also feeds into the problem that states are really facing right now. You know, that it’s not just the situation of being bankrupted, but it’s being bankrupted by a system that doesn’t work.

Jackson: Yeah. Let’s talk about that. You touched on that earlier, the cost of states. There are plenty of governors out there talking about the need for reform of this system because of the costs and how Obama Care is only going to add to that.

What do you think is the way forward on that? Is there a way forward?

Domenech: Well, you know, it’s very, it’s disturbing to look at the state picture. And the reason that it’s disturbing is because states have basically been fooling themselves for a long time, I think, about the trajectory of the kind of costs that they’re facing.

Jackson: Well and they’re already facing you know, tight budgets for other reasons.

Domenech: Exactly. You know, the downturn has sort of exacerbated this because it’s pushed more people onto Medicaid, people who weren’t expected to be on there, but for eligibility reasons are getting on. And then it’s also put a crimp on state budgets because they’re facing budget holes in a number of other areas and they don’t have a lot of flexibility. Medicaid is already the largest budget expense that states face. It’s roughly a quarter of the amount of spending that they had in 2010. It’s about, a little more than 22%. There’s an incredible amount of increased costs there that states are facing. It’s just an unsustainable picture.

Now, keep this in mind, when it comes to the solution that President Obama proposed for coverage in America, you know, the individual mandate and everything that comes with it, the vast, the biggest solution, the one that’s actually going to have the most impact on the most people directly, is the expansion of Medicaid. Okay. They raised the amount in terms of your qualifications, and they also put basically this in a situation where it’s inevitable that a large number of people are going to come out of the woodwork and join on to the program because of the individual mandate and because of the overall push for people to get on, even though they don’t actually have to. The expectation among people at the state level is that they’re going to be facing basically all these people who are eligible, who are younger, and healthy, and just had never gone down and filled out the form are going to come out and get on the system.

Now, here’s the thing that the left is saying. The left is saying well, most of those people are going to be helpful, are going to be healthy anyway. So, they’re not going to really hurt the system because they’re not going to be using care. Now, anybody who is on the right can tell you that statistically if you subsidize something people will use it and they will use more of it. Okay. So, if they have the impression that the taxpayer is paying for something, that it is free for them to do whatever it is that they are doing, they are going to use care at a much higher rate, which is one of the reasons that we’ve seen the kind of emergency room problems that we’ve seen in Massachusetts and elsewhere. Where, you know, you talk about sort of the crisis of the uninsured filling the emergency rooms. That’s actually a myth. The people who fill the ERs are overwhelmingly Medicaid patients because that’s where they go when they have a problem. It’s just the most direct way to get seen.

When it comes to the kinds of cost increases that states are facing, just to put this in perspective, there’s a Cato study that sort of went through and analyzed the level of spending that states ought to expect. If you have a reasonable expectation amount, the number of people who are going to come on who are newly eligible, and the number of people who are going to come on who are already eligible but just haven’t signed up. They expect, according to this study which is by Jagadeesh Gokhale and which was sponsored originally by the Texas Public Policy Foundation, that in the five most populous states, in California, Florida, Illinois, New York and Texas, you’re going to see a situation of just incredible Medicaid spending growth in four out of those five states. In Florida you’re looking at, you know, a growth rate of basically over the first 10 year period of full implementation, so that’s 2014 to 2023, you’re looking at an additional $20 billion, in Illinois $19 billion, in Texas $21.6 billion, and in New York $52.6 billion.

Jackson: My God.

Domenech: Now, these are states. Okay. Billions when it comes to the Federal level, you know, not that big of a deal. It’s, you know, it’s one of these situations where they are dealing with all sorts of, you know, opportunities to shift stuff around. To play politics with money. States don’t have that flexibility. Okay. They can’t just turn to China, all right. And the thing you’re looking at, in terms of a, you know, a percentage is that compared to a world without President Obama’s health care law, you’re looking at a 17% roughly increase in Florida, a 28% increase in Illinois, a 16% increase in New York, and a 12% increase in Texas over 10 years.

Now, that’s just an unsustainable amount of expenditure. You’re looking at a situation where basically the entire government of these states are going to be health insurers. That’s basically what they’re going to be doing. And they’re going to have no flexibility to do anything that they need to do in terms of education, in terms of any of the other things that states do. In terms of building roads. In terms of responding to the needs of their citizens. And I think that what you’re going to see is that as states look at this they recognize that we’ve got to change around our system if we’re going to solve this problem. The problem is, Washington as part of President Obama’s plan, just really hamstrings them in terms of preventing them from doing the things that they need to do to meet the needs of the people who are truly sick and the people who are truly poor. And that’s something that I think is really the essence of the problem here.

If states you know, really get back to what Medicaid is supposed to be about, it’s supposed to be about a safety net for the poorest of the poor and the sickest of the sick. Instead, you know, the vast majority of the states are facing situations where the people on long term care who are dual eligible, who are eligible for both Medicare and Medicaid, if you do a Google search just about this, you’ll find all sorts of financial advisors selling books on how to structure your finances so that you can be eligible for Medicaid long term care, because it’s actually a better system and more stable system than what Medicare offers.

Jackson: Good God, are you serious?

Domenech: Oh, absolutely. Absolutely. And this is, I mean, it was interesting, I had a little bit of a conflict with the Washington Post fact checker a couple of months ago because he was criticizing Haley Barbour’s statement about people driving around in BMWs and then picking up their prescriptions with Medicaid. And he was saying that this was a false thing because there wasn’t an actual incident of somebody pulling up in a BMW to get their Medicaid thing that was reported in the news that people could find.

But just to put this in perspective, you know, all across the country and you can find this at ReformMedicaid.org, there are all sorts of stories of incredible levels of fraud in terms of defrauding the Medicaid and Medicare system. In terms of one, just one example from last year, there are people who live in a multi-million dollar home who owned properties in both New York and New Jersey, and who basically over the course of about four years defrauded Medicaid out of about $60,000. And you know, it’s just incredible levels of claims in terms of what they could do by shifting their money around and pretending to be incredibly poor on one hand and —

Jackson: And we could spend a whole show on Medicaid fraud. I mean that is just —

Domenech: Oh, yeah.

Jackson: — it’s just rampant.

Domenech: It’s just incredible. And the thing is, again, the states are just completely hamstrung in terms of what they can do. There’s no, every single thing that the states really want to do when it comes to Medicaid, in terms of reform, is something that they have to get a waiver from the Feds for. And that’s just ridiculous. Because they’re, you know, the matching amount that the Feds are looking at is already going to go away within the next several years. They’re forcing the states to take on the costs of an enormous amount of new people under the system.

It’s just an approach that doesn’t just go against sort of the basis of what we think of when it comes to the authority of states and the role of states. But it also goes against the very principles that Medicaid was started under. Under the great society programs. If you want big government, if you want these big government programs, shouldn’t you on the left at least want them to work? Because the real response that I think that we ought to have to something like Medicaid is, it already doesn’t work. Now you’re going to force millions more people onto the system, you’re going to overburden the system that’s already overburdened. You’re going to overburden doctors who are within in to the point that they are probably going to leave.

And do you know what the inevitability of this situation is? The inevitable end point of this, and we’re already seeing it in Massachusetts, the end point is one where states start considering if you have a medical license in the state, then you have to sign a contract agreeing to cover Medicaid patients. Okay. That is —

Jackson: Wow.

Domenech: — that is the end point of this.

Jackson: That is going to force doctors out of states.

Domenech: Exactly. It’s going to force doctors out of states, and it’s going to put them in a situation where very few people, you’re going to end up being a civil servant if you become a doctor. And that’s the end point for all of this. And I think that that’s the ultimate strategy behind it. And in terms of the long view, it’s the one that the liberal elites really wants.

But I think that, you know, as we look at the system, as we look at the reforms that need to happen, you know, Senator Coburn has proposed something along with Senator Burr. There is a number of other potential reforms out there on smaller levels, but there needs to be comprehensive reform on this, otherwise the states are going to face a budgetary system that is just going to collapse and the whole system is going to break down.

(End)