Unintended Consequences Of Medicaid Reform

Stanley Feld MD.FACP, MACE

Everyone will be paying for the increased costs associated with Medicaid changes. Patients and taxpayers will conclude that President Obama’s healthcare reform act was a complicated bureaucratic mistake.

States want to limit Medicaid eligibility criteria. States have large budget deficits that are not permitted by their constitutions.

President Obama wants to increase enrollment in order to cover 16 million uninsured. States are also decreasing reimbursement by at least 10-17% to hospital systems and physicians. The result will be for participating providers to drop out of the Medicaid program.

Physicians have the option to drop out of Medicaid. The present physician shortage will intensify as more physicians drop out of Medicaid.

“No one can force doctors to accept Medicaid patients. It’s their right to decide what insurance to accept, if any.”

Hospital systems by law cannot drop out of Medicaid. If President Obama does not give them a waiver as presently requested by 29 states several things can happen.

1. There will not be enough physicians to service the increase in hospitalized Medicaid patients.
2. Hospitals will be forced to hire physicians. The shortage of physicians will require hospitals to pay more to physicians than the reimbursement.
3. The cost of service to hospitals will be higher than reimbursement.
4. It will require hospital systems to cost shift to the private sector.
5. Hospital systems will try to do this by demanding increased payment from the healthcare insurance industry.
6. The healthcare insurance industry will raise rates. Many are already raising rates because of the anticipated changes and the decrease in enrollment for private healthcare insurance.
7. Employers are decreasing the amount of coverage resulting in higher out of pocket expenses to employees.
8. Employers will have incentive to drop private healthcare insurance completely and pay the penalty.
9. This will result in a further skyrocketing of healthcare premiums for employers.
10. Consumers will be forced to buy into the public option.
11. Everyone will pay more for health care

How is this going to play out?

Texas is a prototype. Fiscal responsibility and a balanced budget is the goal. Texas wants to avoid a state income tax and be business friendly. The state has calculated the more business the more tax revenue and the more employment. More employment means more sales tax and property tax revenue.

The Texas House Republicans’ budget is going to reduce Medicaid funding to balance the budget. Republicans control the State House. The annual growth of the state’s $8.3 billion Medicaid program is not sustainable nor will it permit a balanced budget.

“Local hospitals facing a possible 10 percent cut in Medicaid fees plan to pressure commercial health insurers for better rates, which could drive up costs for everyone.”

There will be cost shifting with Medicaid cost cutting.

“What will happen is fewer physicians will take Medicaid patients, and patients will then go to the emergency room,” said Sandy Lutz, managing director of PricewaterhouseCoopers’ Health Research Institute in Dallas.

North Texas doctors accepting Medicaid already are in short supply. Only 39% of Dallas physicians are accepting Medicaid.

“This cut will not allow doctors to meet their overhead,” said John Holcomb, chairman of the Texas Medical Association’s committee on Medicaid and access to care.

“Why would someone take a 10 percent cut and keep scheduling Medicaid patients when they could schedule a commercially insured patient?” Holcomb asked.”

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Medicaid reimbursement to hospitals will be a fraction of reimbursement needed to cover expenses. Hospitals would then try to recoup expenses from private health insurers.

“We’ve grown into a health care system where we’re forced to depend on private insurers and employer-based insurers to pick up the tab the government does not pick up.”

The healthcare industry and the hospital systems negotiate hard deals. The hospital systems eventually get a small increase in reimbursement. The increase in reimbursement is passed on to the employers at a multiple increasing the healthcare insurance industry’s profit.

“Obviously health plans like us resist that cost shift as much as possible,” said Darren Rogers, president of Richardson-based Blue Cross Blue Shield of Texas.

Employers have been decreasing the level of coverage to employees while increasing the co-pays and deductibles.

As President Obama’s healthcare reform act progresses, employers will be discontinuing healthcare insurance coverage for employees. It is cheaper to pay the penalty than it is to provide healthcare coverage.

Employees will end up paying for individual coverage at an increased premium with after tax dollars. Presently employers pay for premiums with pre-tax dollars. The result will be a decrease in employees’ discretionary income. Consumer spending will decrease. Jobs will not be created and unemployment will increase.

The wheels are starting to fall off. President Obama has not thought this out very well.

The opinions expressed in the blog “Repairing The Healthcare System” are, mine and mine alone.