Posted by: Allison Rice | April 15, 2013

Much ado about Medicaid

It’s been a while since our last post.  That’s how things go in the life of the semester – gets a little crazy about two thirds in. Today’s the last day of classes at Duke, and maybe things will settle down.

While we’ve been focused elsewhere, the NC Medicaid program has continued to be in the news. A couple weeks ago Governor McCrory and DHHS Secretary Aldona Vos announced their plan to privatize the program. This idea continues the “broken” rhetoric that McCrory et al have been been parroting, following the lead of Bobby Jindal and other GOP luminaries.

That rhetoric has been questioned in several excellent pieces.  Rose Hoban of North Carolina Health News, with her usual thoughtful reporting, has examined the “broken” myth specifically. In her piece, “How ‘Broken’ is NC Medicaid” today, she takes a closer look at claims of budget over-runs and excessive administrative costs.  She spoke with Jonathan Oberlander, a health researcher at UNC, who pointed out that Medicaid spending is countercyclical. That is, its costs are higher when the economy tanks, because more people are out of work and no longer have employer health insurance. Says Oberlander,

“. . . Medicaid did what it was supposed to do in the last decade: It acted as a safety net for a lot of people. What’s been driving spending is that Medicaid has been covering more people, because more people in North Carolina needed Medicaid when they lost jobs.”

Check out Rose’s piece for a discussion of administrative costs, including the incentive to charge expenses to that category to get federal matching funds.

Last week, Rose reported on an interview with Secretary Vos and Medicaid director Carol Steckel, in which these leaders defend the “broken” label.  The story and the extremely interesting transcript of the interview, present leaders who appear to see private enterprise as a panacea for all ills. If you read the interview transcript you’ll see more of their foundational ideological position: “government: bad; private: good.” You’ll also see some amazing double-speak, incoherent mumbo jumbo from the Secretary.

Adam Linker from the Justice Center responds to the magical thinking about private enterprise in a “point/counterpoint” with Secretary Vos in the Star News Online.  

This initiative will save money because the private companies will get a set budget from the state. The insurers will then use the magic of the free market to cut expenses, provide superb care, and still turn a tidy profit. That’s the theory. This is never how it works in reality.

We have seen this exact plan play out in a number of states. Most recently, Kansas and Kentucky have implemented this proposal. In Kansas, the rollout is too recent to judge, although some early problems are emerging. In Kentucky, there is chaos. The state auditor there began a probe when he heard reports that small medical providers needed new lines of credit to stay open. In the first several months of implementation, the auditor discovered, managed-care companies received $708 million from the state and paid out just $420 million in claims.

The auditor in Kentucky announced that he would form a new unit dedicated to investigating the Medicaid managed care companies. He also released a series of scathing recommendations, including one that mental health services be removed from managed care. Legislators in that state want to give the Department of Insurance authority to directly regulate the Medicaid companies.

These results are tragic but predictable. The truth is that managed care companies don’t have any secret sauce to saving money. To keep their executives and shareholders well- compensated, these corporations delay payments to providers and deny care to patients

Secretary Vos’s piece is a retread of a press release from a couple weeks ago.


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