Complexity is costly — PA Medicaid Expansion

Pennsylvania is currently a limited Medicaid eligibility state.  The governor, Republican Tom Corbett, has filed an 1115 waiver application with Health and Human Services for the Arkansas style ‘private option’ expansion.  The expansion would give individuals who make less than 138% of Federal Poverty Line (FPL) subsidies to cover the full cost of their cost-sharing assistance Silver plans (96% actuarial value) while current Pennsylvania Medicaid has close to a 98% actuarial value.  The original waiver filed last month has the following conditions on eligibility:

  • Income determined once a year
  • Premiums of$25 for a single adult or $35 for married couple for households over 100% FPL.
  • Wellness program
  • Job Search requiremetns with termination from coverage as a sanction (p.36 of the waiver)

As I said yesterday, HHS is quite willing to grant significant flexibility for Medicaid expansion waivers as long as there is no poor shaming and everything in the waiver has some logical connection to either health quality or health costs.

The last requirement for job search with termination of coverage if an individual fails to meet the requirements does not meet the WHAT THE FUCK test for health quality or health costs.

The Corbett Adminstration seems to have been quietly hit with a clue stick, and they’re proposing a new alternative that is structured as an incentive instead of a punishment.  Newly enrolled individuals would be able to see their premiums reduced if they worked.

  • 40% off for full time work
  • 25% off for 20 to 29 hours of work per week
  • 15% off for either less than 20 hours of work per week or job search participation.

If this is approved ( I don’t think it will be), then this will be an expensive fiasco.  It is an added layer of complexity to an already complex population base.  Complexity costs money in general, and the job search step-function of eligibility and benefit design means claims will have to be regularly manually re-processed.  That is expensive.

I’ll explain the details below the fold.

Most health insurance companies want to have as many claims as possible to automatically process.  Well designed claims systems can punch out 98% or 99% of their claims without any manual intervention.  They are able to apply complex business rules at the business line, and benefit design level (for instance if a person is cut open once and two mostly unrelated surgeries are performed at the same time, that is one price, while if the person is cut open twice, the two surgeries are priced as separate events.)  Medicare contracts out most of their claims processing and ends up paying an average of 58 cents per claim.  They get the per claim rate that low because their regional claims processors are amazingly automated.

However, once a claim has to be viewed by a human, expenses start to quickly add up.  A manual review of a claim is fairly cheap, maybe a dollar or two to cover the cost of the employee’s time and associated overhead.  However if the employee has to do anything to a claim, a manually processed claim prices out at five dollars if it is simple adjustment.  If the claim is complex, the manual intervention can easily cost ten or more dollars to process.

Medicaid eligibility has always been a messy business because people move between benefit categories, they move in and out of eligibility and the rules for payment structures change.  Some of those changes are future changes, and other changes are retroactive changes which require claims readjustment.  If a person was eligible for regular Medicaid but then either gets pregnant or goes on short term disability, they get a slightly better benefit package as more services will now be paid.  Those services were performed before the eligibility redetermination was made, so previously denied or held claims have to be reassessed and repaid.  That means new explanations of benefits, new explanations of payments, and new checks need to be sent out.

The Pennsylvania waiver proposal has six new categories that would require premium payment.  Each category would fall into one of the four buckets of job search incentive payments (0%, 15%, 25%, 40%) so that means twenty four benefit design configurations.  That is a large number, but it is manageable if the population basis is stable.

However, we can also look at the labor market for some insight on the stability or instability of the less than 138% FPL portion of the market.  This is an extremely volatile labor market.  Stable, predictable schedules are now a privilege of middle and upper middle class employees.  Low wage employees are on just in time scheduling where one week an individual might have thirty seven hours on the schedule, and the following week they have twenty six hours.   And since the schedule may only come out with three days notice, there is a low probability of a stable second job where the person is always in the same hours bucket.

Furthermore, low wage work tends to see shorter periods of attachment per job than high wage work.  It is far more likely for a person make $9.00 an hour to jump jobs without a pay raise than someone making three times as much because the universe of $9.o0/hr jobs is much larger than $27.00/hr jobs.

If the state is checking employment status of Medicaid expansion recipients on a weekly or monthly basis, individuals will routinely move between premium/benefit configuration buckets multiple times in a quarter.  And that means that an individual may have satisfied all of their deductibles and co-pays on the day they received a medical service, but since their work schedule was dropped to a lower bucket, the claims have to be readjusted to bill the member for another $5.00 in co-pay or deductible.  Conversely, if a member was in a low hour bucket on the day they received a service, but gets a consistent extra shift the following few weeks, their claims will be readjusted to pay back the extra deductible and co-pays.  Providers and insurers will scream about the additional administrative complexity.

If the state checks annually, this probably is worse as I would assume the state would take a good faith hours estimate from individuals and then come back and reconcile against tax records.  This reconciliation might have fewer people bouncing between buckets.  However, the people who do bounce between buckets will have a much larger claims history to readjust.

This is important in a private option scenario as the insurers have only a 20% non-medical loss ratio.  Well run insurers have only a 10% or 11% non-medical loss ratio cost, but they get there partially by automating their claims system so almost nothing has to be readjusted.  Medicaid expansion with this job search incentive necessitates massive number of adjustments without the state paying any extra.

So between poor-shaming and needless administrative complexity and costs, I don’t think HHS will approve the Pennsylvania waiver as it is currently written.



17 replies
  1. 1
    smith says:

    Not just poor shaming, but poor punishing, since this has the effect of charging you more as your income goes down. How very Republican.

  2. 2
    ruemara says:

    *sigh* They are such wicked, mean, avaricious people.

  3. 3
    Richard Mayhew says:

    @smith: But if you read Casey Mulligan, you know that individuals control their own hours of employment, so any disemployment is due to voluntary choices by the individual and can not be reflective of power imbalances, or macro-level structural changes in the labor-employment markets.

    Mulligan is the University of Chicago asshole who firmly believes that the employment cliff-diving of 2008-2009 was due to employees en masse deciding they wanted more vacation time. And people still take him seriously…

  4. 4
    BruceJ says:

    Gee, since “complexity is costly” it’s almost as if a single-payer or nationalized health care system would *gasp* SAVE the US taxpayers a great deal of money…as if those systems are why the rest of the civilized world pays significantly less for healthcare!

    Naah, couldn’t POSSIBLY be so, after all we know We Have The Best Healthcare System In The World, and they’re all socialist hellholes.

    And yes, it’s mainly the sociopathic desire of conservatives to punish poor people for being poor. “Prosperity Jesus” and all that, with the added side benefit of mainly punishing people of color, the lazy moochers, but also their desire to sabotage ANYTHING the government does.If you truly believe that Government is the Problem, then you’ll make damned sure that Government IS the problem when you have you hands on the levers.

  5. 5
    smith says:

    @Richard Mayhew:

    …the employment cliff-diving of 2008-2009 was due to employees en masse deciding they wanted more vacation time. And people still take him seriously…

    Wow. Just…wow.

  6. 6
    Richard Mayhew says:

    @smith: It is the only way that the Chicago school model can account for mass unemployment. and it has not led to a rethinking of that model by its louder advocates.

  7. 7
    Richard Mayhew says:

    @BruceJ: Completely agree, single payer can be significantly simpler on the administrative end (could also be as complex depending on how you want to do do things) but apriori, it is a much more straightforward system.

  8. 8
    Ned says:

    @Richard Mayhew: Whereas Medicaid is close to a single payer system, the “private option” takes public money and uses it to purchase private insurance for those who would qualify, therefore making sure the insurance industry gets their cut. Much more expensive. But at least the poors will have “skin in the game”

  9. 9
    JoyfulA says:

    On the bright side, Corbett will not be reelected in November, and his successor will apply for regular Medicaid, just later than other states.

    Although the Corbett plan would certainly increase employment, with everything that has to be tracked and provided.

  10. 10
    WereBear says:

    This makes as much sense as telling your child they can’t dance well while only buying them shoes that are two sizes too small.

  11. 11
    opiejeanne says:

    This morning I was greeted by this bit of nonsense: Even Obama Seems to be Losing Faith in Obamacare. This is because of the extensions being granted to businesses.

  12. 12
    mdblanche says:

    Oh FFS, Corbett. Everybody knows the only reason you’re doing this is because you’re winning the least popular governor’s contest against some pretty stiff competition and this is your Hail Mary pass to try to get re-elected. So quit dicking around and apply for a waiver that will actually be granted. Otherwise you’ll have nothing to show for this and you really can start packing your office already.

  13. 13
    RosiesDad says:

    Corbett is a dick; this is just one more reason why we will throw his bony white ass out of office in November.

  14. 14
    StringOnAStick says:

    Typical rethuglican proposal: shames/gouges the poor, and costs lots more of those precious tax payer dollars they are always going on about. I guess getting their righteous indignation on is more important.

  15. 15
    snarkworth says:

    I never understood Corbett’s work requirement. Expanded Medicaid is for the not-quite-poor, who one would imagine are already working.

  16. 16
    mclaren says:

    Once again, Richard Mayhew is lying to you.

    First, he claims that poor-shaming is “Republican.” In fact, it’s American. Everywhere in America, policies put in place by both Republicans and Democrats cost people more the poorer they are.

    Examples abound: if you don’t have a car, you must shop at local stores that cost far more than big box stores. If you don’t have the money to move to a big city, you can’t get a job making as much money. If you get sick, the Chargemaster system used by hospitals makes your hospital bill skyrocket to 10x or 20x the cost for basic medical procedures if you’re insured.

    Every day, in every way, especially if you get sick in America’s debased twisted broken medical-industrial-theft complex, it costs far far far more if you’re poor.

    That’s America. It’s not Republican or Democratic — it’s the way America works. The poorer your are, the higher your costs, across the board. Health care is just one small part of that fanatical American desire to punish the poor.

    See “The high cost of poverty: why the poor pay more,” The Washington Post, 18 May 2009.

    But second (and most important), the real cause of the insane complexity in America’s broken health care system isn’t bureacuracy — it’s doctors’ and hospitals’ and medical devicemakers’ desire to squeeze as much money out of the system as they can. To do this, America’s doctors and hospitals and insurers have conspired to create a billing system so Byzantine, so labyrinthine, so bizarrely complicated, that no one can figure out how much things actually cost.

    That’s not a bug — that’s a feature in America’s broken health care system. When a hospital hits you with a bill that totals 500 pages, it becomes impossible to discern what you’re being overcharged for, and why.

    For evidence that the grotesque complexity of America’s medical billing system is a cover for massive corruption and widespread fraud by doctors and hospitals and insurers like Richard Mayhew, see the Time magazine cover story: “Bitter Pill: Why Medical Bills Are Killing Us,” 4 April 2013.

    Once again the ultrawealthy one percenter Richard Mayhew is lying to you. Once again he’s trying to convince you that the bizarre complexity of this particular state’s medical reimbursement system is unusual, that it’s all a Republican problem, and the Democrats offer a straightforward reasonable reform of America’s broken health care system.

    But the reality is that the ACA does little to reduce the complexity of medical billing in America. Fee for service continues as before; the hospitals still use their insane Chargemaster system to overprice medical procedures — and not just by 10% or 20%, but by 500% or 700%. MRIs that cost $280 in France cost $1080 in America, using the exact same machine. Why? Because of the grotesque complexity of America’s medical system, which the ACA does not change.

    A routine doctor’s visit costs $20 in Spain, but $180 in America. Why? Because of the absurd complexity of America’s medical billing system, in which every cotton ball and every tongue depressor used by an American doctor gets separately billed as an individual service at insanely high prices, in a bill so complex that no one can understand it.

    For the ultimate rundown on how this insanely complex billing rips off insurers and patients and the taxpayer, see the New York Times article “As Hospital Prices Soar, A Stitch Tops $500”:

    SAN FRANCISCO — With blood oozing from deep lacerations, the two patients arrived at California Pacific Medical Center’s tidy emergency room. Deepika Singh, 26, had gashed her knee at a backyard barbecue. Orla Roche, a rambunctious toddler on vacation with her family, had tumbled from a couch, splitting open her forehead on a table.

    On a quiet Saturday in May, nurses in blue scrubs quickly ushered the two patients into treatment rooms. The wounds were cleaned, numbed and mended in under an hour. “It was great — they had good DVDs, the staff couldn’t have been nicer,” said Emer Duffy, Orla’s mother.

    Then the bills arrived. Ms. Singh’s three stitches cost $2,229.11. Orla’s forehead was sealed with a dab of skin glue for $1,696. “When I first saw the charge, I said, ‘What could possibly have cost that much?’ ” recalled Ms. Singh. “They billed for everything, every pill.”

    In a medical system notorious for opaque finances and inflated bills, nothing is more convoluted than hospital pricing, economists say. Hospital charges represent about a third of the $2.7 trillion annual United States health care bill, the biggest single segment, according to government statistics, and are the largest driver of medical inflation, a new study in The Journal of the American Medical Association found.

    A day spent as an inpatient at an American hospital costs on average more than $4,000, five times the charge in many other developed countries, according to the International Federation of Health Plans, a global network of health insurance industries. The most expensive hospitals charge more than $12,500 a day. And at many of them, including California Pacific Medical Center, emergency rooms are profit centers. That is why one of the simplest and oldest medical procedures — closing a wound with a needle and thread — typically leads to bills of at least $1,500 and often much more.

    At Lenox Hill Hospital in New York City, Daniel Diaz, 29, a public relations executive, was billed $3,355.96 for five stitches on his finger after cutting himself while peeling an avocado. At a hospital in Jacksonville, Fla., Arch Roberts Jr., 56, a former government employee, was charged more than $2,000 for three stitches after being bitten by a dog. At Mercy Hospital in Port Huron, Mich., Chelsea Manning, 22, a student, received bills for close to $3,000 for six stitches after she tripped running up a path. Insurers and patients negotiated lower prices, but those charges were a starting point.

    Source: “As Hospital Prices Soar, A Stitch Tops $500,” The New York Times, 2 December 2013.

    Richard Mayhew is lying to you. He’s trying to claim that the complexity of this Republican’s governor’s medicaid reinursement plan is somehow unusual. But Mayhew is lying, because complexity is basic to America’s corrupt greed-riddled broken health care system.

    And by the way…we’re still waiting for CEO Richard Mayhew to tell us how much he makes per year.

    Over $400,000?

    Over $800,000?

    Over a million dollars?

    Richard Mayhew has never told us. Why?

    What is he hiding?

    Could it be that Mayhew is afraid to tell us how many tens of thousands of dollars he hoovers up every month because we’ll connect the dots and realize that parasites like Mayhew are the problem with America’s broken health care system, not the solution…?

  17. 17
    richard mayhew says:

    @mclaren: go fuck yourself

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