Woodworkers and assignment flexibility

Charles Gaba notes today that Pennsylvania’s  Medicaid Expansion has seen more people sign up for it than were projected to be eligible for it.  Michigan had the same pattern.

Officials expected that up to 600K would be eligible, and as of last summer 439,000 had already signed up. By December it was up to 500K.

Well, one year after standard expansion went live, the state of Pennsylvania is reporting that:

As of April 2016, the expansion had reached 625,970 newly eligible Pennsylvanians, ages 18 to 64.

Yup, that’s 26,000 more people enrolled than anyone had even thought were eligible for the program.

I think a few things could be going on here. The first is that our system of counting the poor and near poor and the high income variance might not be as good as we thought it was.

Secondly, I think the woodworker situation should be examined. Woodworkers is a wonk term for people who were eligible for Legacy Medicaid but did not sign up for it. However there has been a three year consciousness raising outreach on the importance of getting health insurance as well as increased connectors to assistance combined with fewer administrative barriers to signing up for Medicaid (both Legacy and Expansion flavors of Medicaid).  So a lot of people who were Legacy Medicaid eligible came out of the “woodwork” and signed up for Medicaid during one of the open enrollments.

My question on this is on the sub-population of Medicaid woodworkers who through a variety of circumstances could qualify for both Legacy Medicaid and income based Medicaid expansion.  I know in states with a 1115 waiver such as Arkansas, these individuals are moved to the Legacy Medicaid pool but I am not sure how this works in states with a straight-up expansion.

Legacy Medicaid is split funded.  The Federal government pays through the FMAP between 50% and 74.3% of Legacy Medicaid medical costs.  The state picks up the remainder.  Administrative costs are split a bit differently.  Expansion Medicaid is currently single source funded.  It is, until the end of this year, a 100% Federal program.  Going forward it will eventually be a 90%-10% Federal/State split.

This is important from a state Medicaid administration point of view.  An individual who is categorized as a Medicaid Expansion member is far cheaper (currently free) to the state government than someone who is on the books as a Legacy Medicaid member.  From an individual beneficiary point of view, there is minimal difference besides different codes on their ID card, but this is a big deal at the administrative level.  The states have every incentive to move as many people who could conceivably be qualified as Expansion eligible and Legacy eligible to Expansion.

My question for Pennsylvania, Michigan and other states with high Medicaid expansion enrollment is what percentage of those individuals are unique new individuals to Medicaid who would not have qualified under Legacy rules when they applied?  If that number is low, then the shifting of membership to FMAP optimization categories would be low.  If that number is high, then there is significant optimization happening.

Variance, risk adjustment and targeting

Risk adjustment is the process by which insurers with sicker than average populations get money from insurers with healthier than average populations. One of the  goals is to make cherry picking an inherently not particularly profitable activity. Some companies, like Centene/Ambetter, will deliberately seek out to insure a reasonably healthy population while accepting that they’ll have a massive cash outflow.  Risk adjustment occurs by the calculation of relative health/risk scores where individuals with certain diagnosises are scored in different manners.   The score will (roughly) reflect the average incremental cost multiplier for people who have a condition compared to the general population where everything else is held equal.

These risk scores are very rough guesses.  They are averages with wide error bands.  In Medicare, in 2015, an individual with Type 2 Diabetes was assumed to cost 15% more than the average Medicare beneficiary.  However there is wide variance in individual costs for people who have the same risk score.

And that is an area of an interesting possibility of an exchange hack.  Some Exchange insurers have started to issue condition specific policies.  There are several plans on Exchange that are actively recruiting individuals with diabetes.  This is odd and a clear signal of the transformation of the individual market.  Insurers are actively seeking to take on risk.

There are two reasons why insurers would want to do this.  The first is that risk adjustment is accurately pricing the incremental cost of treatment on average.  These insurers offering specific condition policies may have come up with either a better treatment regimen or they are merely paying their providers very little so the same treatment regime costs less than the risk adjustment bump payment.  This is a straightforward change that will put some downward pressure on pricing.

The other thing that could be going on is that insurers are skimming the low cost variance of the diabetes population.  This could be done by benefit design, it could be done by marketing these plans at gyms and nutritionist offices which would be attractive to people who are already mostly compliant with their treatment plans.  It could be done in a half dozen ways.  If these specific condition plans are primarily a risk selection play for low actual but high designated transfer payment individuals than it is a cost shift as the remaining diabetic population is being covered by other insurers who are not getting sufficiently large transfer payments to cover the incremental cost.


Entrenching the ACA

Kentucky is the test case to see how embedded a fully implemented and operational Death Star  Obamacare really is.

It has a virulently anti-Obamacare governor and a political configuration that is not particularly supportive of broad based social welfare programs. And yet Obamacare survives. It takes a few punches as Kynect has shut down but the core functionality transfers to Healthcare.gov. The Medicaid Expansion is fundamentally intact even as Governor Bevin makes waves at seeking a harsh, punitive and counter-productive 1115 waiver.

Kentucky can do marginally dumb things that makes Obamacare work less well and reach fewer people but the Kentucky political establishment is unwilling and unable to kill implementation in their state because it costs too damn much.

This is good news for the morning.

Pricing variations

There are three major types of pricing variations in healthcare.  The first is general product level pricing variations.  Medicaid tends to pay less than Medicare which tends to pay less than large group Commercial.


There is also regional variation.  New York City is more expensive than its suburbs.  North Dakota and other very rural places which have a hard time attracting and holding onto docs are more expensive than medium sized cities.

Finally there is in-region, in-product idiosyncratic pricing variation. A new paper in Health Affairs looks at the pricing variance within markets and between markets for commercial insurers. **

Our study included prices for up to 242 services in each of forty-one states and the District of Columbia. Prices for 162 of these services were reportable in all forty-one states and the District of Columbia. We found that the ratios of average state prices to the average national price for these 162 services varied from a low of 0.79 in Florida to a high of 2.64 in Alaska. Ratios at the twenty-fifth and seventy-fifth percentiles—Oklahoma (0.97) and New Mexico (1.25)—differed by 0.28….

Average prices were computed for 242 services, some of which are standardized collections of common groupings of diagnostic and procedure codes.9 Some services have a single code (for example, Current Procedural Terminology [CPT] code 76811 is for pregnancy ultrasound). Other services encompass an episode of care, such as knee replacement, which includes a specialist’s evaluation, surgery, physical therapy, and follow-up evaluation.

Examining price variation by service provides an understanding of the impact of the variation on patients and insurers. We selected three services—pregnancy ultrasound, knee replacement, and, again, cataract removal—for this examination because they exemplify the range of services and the extent of price variation that exist for common medical services….

Based on the interquartile range ratio, knee replacement prices appear to have the least variation: 1.32, compared to 1.54 for pregnancy ultrasound and 1.47 for cataract removal (Exhibit 3). However, the national average price for knee replacement is more than a hundred times higher than the national average price for pregnancy ultrasound and ten times higher than the price for cataract removal (see the Appendix).11 Thus, even though knee replacement has less variation in price than the other two services do, its variation can have a substantial impact on total expenditures and on patient cost sharing….

Price variation within states was examined though MSA-level prices….We also found considerable variation in the average price for pregnancy ultrasound (Exhibit 6). The average price in Cleveland ($522) was almost three times that in Canton ($183), even though these two Ohio MSAs are only 60 miles apart. Conversely, Virginia Beach ($275) and Richmond ($271), both in Virginia and 107 miles apart, had nearly identical average prices.

I would want to overlay the pricing variations with some type of medical provider market concentration factor.  I would bet that areas within a state that have higher levels of pricing than other areas in the state are also areas where the providers are relatively more concentrated than the payers.  Elective procedures that are deferrable (knee replacements)  and quasi-elective procedures that are fairly low skill and generic (pregnancy ultrasounds) should have variance in pricing due to local general price levels (New York City should be more expensive than Buffalo on this logic) but the wild swings should not be present if the medical services markets were vaguely efficient or functional.

** Newman, D., Parente, S. T., Barrette, E., & Kennedy, K. (2016). Prices For Common Medical Services Vary Substantially Among The Commercially Insured. Health Affairs, 35(5), 923-927. doi:10.1377/hlthaff.2015.1379

It takes a local party

Building on Betty’s post this morning on how we need to build a leftward pendulum swing at all levels of government and society, I want to endorse and fundraise for promising candidate for Oakland County Commissioner in Michigan:

Charles Gaba is the guy behind ACASignups.net which is the go-to source for all enrollment information about the Exchanges and a very good clearinghouse for lots of other health wonkery.

He is running for County Commissioner in a suburban county in the Detroit metro area where the Presidential top-lines have the county as a lean Democratic area but the local government has a significant Republican presence.  He is doing something about that and I want to help a colleague and a fellow wonk.  So if you can spare a few bucks, help elect a wonky progressive to a county government board:


Here is Charles’ Act Blue link:   https://secure.actblue.com/contribute/page/gaba