Insight, analysis & opinion from Joe Paduda

Jan
18

A use for Cox-2s?

A very funny post on Mathew Holt’s “Health Beat” blog re the silver lining of the grey cloud of Cox-2s
Highly recommended!


Jan
18

NY’s Medicaid troubles

the recent publicity about the Bush administration’s plans to change the way the federal government pays for Medicad got me wondering what the states think of the program.
We know that Florida is struggling with a $1 billion increase in Medicaid costs this year.
Another big state has problems that make FL’s situation look positively sunny be comparison. (free subscription required) Medicaid in NY is now consuming 44% of the state budget. That’s $44 billion, and has resulted in calls for significant cuts in the program, accompanied by increased taxes on health care providers including hospitals.
The New York Times reports:
“The cuts, if they go through, will cause a ripple effect. Since the state’s contribution to Medicaid generates matching contributions from the federal government and New York localities, a $1 billion cut in state financing could mean a decrease of at least $3 billion in overall Medicaid spending across the state, according to health care analysts. Hospital trade groups predicted that cuts on that scale would stun the health care industry, a major sector in the state’s economy, and perhaps lead to cuts in service or even hospital closings.”
NY is somewhat unique in that it requires local governments to partially fund their portion of Medicaid. This complicates Gov. Pataki’s (R) mission, as he has also promised to cap Medicaid funding increases for local government at the general rate of inflation.
Couple that promise with the Bush Administration’s pending changes and the political power of health care employee unions and you have the makings of a very unpleasant budget battle.
We’ll look at other states in future posts – here’s hoping there’s some good news amongst the bad.


Jan
17

thanks to healthsignals.com

On MLK day
“Of all the forms of inequality, injustice in healthcare is the most shocking and inhumane.”
Rev. Dr. Martin Luther King, Jr.


Jan
15

Privatization of Medicaid – FL trial balloon

Gov. Jeb Bush (R) of FL announced a proposal to enroll FL’s 2.1 million Medicaid recipients in private health plans, a sweeping change from the present program wherein the government acts as the sole administrator.
The program is designed to address FL’s rapidly growing Medicaid cost, which at $14 billion accounts for a quarter of the state budget. At present growth rates, the program will double in size, and consumption of the state’s budget, within eleven years.
Bush’s proposal, Mike Leavitt’s nomination to Sec HHS, and other recent pronouncements from the administration noted here and elsewhere are adding clarity to the picture of governmental health programs of the future. Here’s the essence –
–government as funder, not administrator
–funds based on defined contribution not defined benefit
–beginning to push responsibility for lifestyle-related diseases onto insureds
Not exactly Hillary II, but perhaps even more far-reaching.
Thanks to Andrea Lewis of Choice Medical Management in FL for pointing me to this…


Jan
14

Medicare reimbursement to MDs to increase

Medicare will increase payments to physicians by 2.6% in 2006.
While this will likely not lead to a line out the door at the Bentley dealerships, it will impact other health care payers whose reimbursement is tied to Medicare – including most states that use Medicare as a basis for their Workers’ Comp fee schedules.
Note that 2.6% is well under the general rate of inflation. Again, providers will undoubtedly seek to recover the lost income from other payers…


Jan
14

Health care costs reaching critical stage

In a rather stunning announcement, GM announced it’s earnings in 2005 would suffer a significant decline, due in large part to (free subscription required) GM’s increasing health care costs.
As a global competitor, GM is hampered by the US health care payment system, which is largely employer-driven. This has a direct, and very signficant, impact on its competitiveness. To quote the Times:
” G.M. is the largest automaker in the world by volume, but its profits are dwarfed by those of foreign competitors like Toyota and Nissan. The company is hampered on numerous fronts, including the obligation to pay health care and pension benefits to about a half million American retirees and their families. Competitors based in nations with socialized medical systems do not have similar retiree health care burdens. ”
By way of comparison, GM’s annual health care budget of approximately $73 BILLION is equivalent to about half of the UK’s National Health Service’s annual expenditures.
The silver lining in this funnel cloud is easily discerned – when companies the size and stature of GM are finding their earnings dragged down, and dragged down significantly, by health care costs, we are getting closer to the point where we must address our national health care cost crisis.
Health care is rapidly becoming an issue of global competitiveness.


Jan
14

Coventry-First Health – last barriers to the deal

January 28th is the date set for the First Health shareholder vote on the proposed acquisition by Coventry. With regulatory approvals out of the way, the vote should be a formality.
The last remaining obstacle was the outstanding shareholder lawsuit demanding more information about the deal, which executives get what benefits, and may even lead to a public airing of FH’s financial adviser.
The reasoning behind the lawsuit appears to be FH shareholders’s (and Coventry owners as well) objecting to FH executives’ payouts under the deal, coupled with a perception that FH may not have marketed itself effectively.
Regardless, the deal is done. The next, and much more interesting phase, will be to see what Tom McDonough, the Coventry exec tasked with managing the acquistion, does next.


Jan
13

Possible changes in Medicare

The Medicare Payment Advisory Commission released its recommendations for changes to Medicare, and they aren’t just playing around at the margins.
Key recommendations include –
–instituting a pay-for-performance scheme for hospitals, doctors, and home-care facilities (no details provided…)
–extend the moratorium on building specialty hospitals for an additional 18 months, which would end the prohibition at the end of 2006
–reduce hospital reimbursement below the overall increase of the market-basket 3.3% to just 2.9%.
Hospitals will certainly breathe a bit easier with the extension of the moratorium on construction, at least those hospitals facing competition from privately-funded ambulatory surgical, cancer, and orthopedic centers.
As suggested here before, prepare for a significant change in government-funded health care programs. And, prepare for the downstream effect of these changes as providers seek to recoup lost revenue from private payers.


Jan
12

Hospital Cost Drivers

Consolidation in geographic areas appears to increase hospital costs, without any apparent impact on quality. The latest issue of Health Affairs includes a report on an analysis that proves what many have thought for some time – the growth of health systems (as they acquire or eliminate independent hospitals) is associated with higher costs.
Note the wording – “is associated with”, not “results in”. Not that I’m trying to be circumspect, far from it – but the study stops short of proving a definitive linkage between consolidation and increased cost.
However, the study does conclude with the statement, “This analysis suggests that consumers were worse off as a result of hospital consolidations.”
The pace of consolidation has slowed, from over 300 hospitals merged or acuired in in 1997, to just over 100 in 2002. Thus, the consolidation wave may have peaked. That does not mean the impact has; oligopolies tend to test their pricing power carefully; the increased cost noted in the article may not be the final word.
One point that goes unmentioned – in all the rhetoric surrounding the typical hospital merger/acquisition, you always hear about how joint purchasing, contracting, and integration of IT and administration is going to save money.
When? and for whom?


Joe Paduda is the principal of Health Strategy Associates

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