Kentucky Medicaid is a Mess.

Slow-Payments or No-Payments for medical care.

A week ago I was pretty tough on a possibly hypothetical physician who was said at a Frankfort hearing to have abandoned two child patients because one of the three new Kentucky Medicaid Managed care vendors had not paid him for three months. What is not hypothetical is that the Medicaid system is now in shambles. There are now four independent Medicaid managed care systems in Kentucky plus original Medicaid itself to deal with. Each of these has its own bureaucracy and unique systems. Thats a lot of different hoops for physicians and other healthcare providers to jump through. I have no doubt all are pulling their hair out. By all accounts, all three new vendors are in the pay-slow, pay-low mode. Cynics will point out that this is an easy way for an insurer to make a profit. After all, even Kentucky government uses the gimmick of paying healthcare providers late as a way to balance the books and make it look like they have actually been doing their jobs.

It is easy to assume that the three new managed care companies are to blame. That does not easily explain why all three seem to have failed at the same time, or why they appear successful in other states in which they work. When I worked in Kentucky Medicaid in the 1990s during my first-ever sabbatical and later as a faculty fellow, it was clear to me that there were major inadequacies in the state’s Medicaid computer systems and their ability to transfer and analyze information. I hope things have improved since then. Remember that all information about eligible beneficiaries, hospitals, and other providers has to be transferred to the managed care companies and continually updated so they know who to pay and for what. The three vendors have been silent publicly, but I will bet a martini in your favorite Louisville bar that internally they are struggling to interface with the state’s system. When you consider that each hospital and doctor’s office may also have their own computer system, it is no surprise that Kentucky Medicaid is staggering under its own weight and complexity. I hope we can pull out of this death spiral of cost and confusion. I still expect the state and providers to hold patients harmless, but that cannot continue infinitely. What a mess!

Low payments for medical care.

Slow-pay is bad enough but low-pay will destroy Medicaid, as it will any insurance program. The small local drug stores make a good case that the unilateral payment reductions by the managed care companies makes it impossible for them to serve Medicaid beneficiaries. Given the large numbers of Medicaid patients in some localities, the ability of the stores to stay in business at all is threatened. Big chain stores offer generic drugs at minimal prices as a loss-leader because once the buyer is in the store they can make it up on other purchases. Little stores can only push so much liquor and cosmetics.  Deborah Yetter and Mike Wynn recently reported in the Courier-Journal that mom-and-pop drugstores (some owned by legislators) are now paid only $1 to $3 per Medicaid prescription compared to $4.50 to $5 previously. The case is made that little or no profit is made on the drug itself. I have no personal knowledge if this is true and would appreciate if someone who knows will inform the rest of us in the comment section below how valid the small drug store’s arguments are. I do know that the mechanism of drug pricing is so bizarre as to be corrupt. It is a pricing structure based on rebates and vastly different prices to different customers. It is a pricing structure that along with insurers will determine what drugstores look like in the future.

Primary care doctors take another beating.

The problem of low pay is not unique to Medicaid, but has the same ability to distort or destroy existing systems of medical care. Consider how much one doctor’s office is paid for for two of their their most common medical services for existing patients.  A primary-care physician reader shared the following.

CPT 99213 -Office visit 15 min.

  • Medicare $65.97
  • Anthem    $66.50
  • Humana  $50.40

CPT 99214 -Office Visit 25 min.

  • Medicare $98.00
  • Anthem    $96.32
  • Humana  $78.60

In my experience, private insurance companies can generally get away with paying something close to what Medicare pays. (I do not have any current information about what Medicaid pays. Any volunteers?)  Thus it is not surprising to see that Anthem pays about the same as that big-bad government in Washington for primary care. What frankly surprised me was how much less Humana was paying. What troubled me terribly was the likelihood that Humana is paying equally competent physicians very different fees for the same service.

Like many of you, I was affected as a patient by the dispute that University of Louisville physicians had with Humana over their payments. The new union for University physicians asserted that they deserved more pay than other local doctors although no justifications of quality or access were mentioned to justify that claim. A few weeks ago I got a jubilant letter from one or more of the University physician groups stating that they had a new contract with Humana and were back in business. No mention was made of how they made out from their dispute: did they get more or less money? Did any success they had as a big negotiating group get taken out of the hide of smaller non-affiliated physician groups like the correspondent’s above? How much will our insurance premiums change?  Did specialty and hospital-based physicians get another big win at the expense of primary care physicians, an apparently unstoppable trend even though all policy experts of whom I am aware bemoan that fact?

Were there similar consequences of the dispute a few years ago between Norton and Anthem?  Because so many physicians are employees of Norton, that dispute about the hospital not getting paid enough for its in-patient services caused someone close to me to have to switch doctors in the middle of an illness.  It happened to some of you too.  In the battles of the Titans, it is the little guys that get squashed, even if they are sick.  In today’s healthcare, the battles are between hospital systems and insurers.  Physicians, other healthcare providers, and patients are on-lookers or bugs.

Physicians as employees.

I am told that 80% or more of primary care physicians in Louisville are now employees of hospitals. A rapidly increasing number of specialists are also now hospital employees. Are they getting paid more of less than their self-employed peers? Are they making money for their employers?  Does having a stable of physicians improve the bargaining power of hospitals with insurers? Do we have a right to know? Do we the public have any say in how medical care is to be organized? Should our our governments to try to speak for us?

I am not against employment of physicians. Full disclosure: I have myself been employed by the federal government, a state government university, an insurance company and a private physician’s group.  Better coordination between providers is a good thing.  For as long as I have been alive, physicians have raised the straw men of socialized medicine and corporate practice of medicine to protect themselves from outside influence while at the same time we were making increasingly good livings accepting government payments and corporate employment. Those horses are out of the barn and the barn has burned down. It is time to be thinking about who the health care system is intended to serve.  Obama-care or not, our healthcare system is rapidly changing beneath our feet. We need not fear that change, but we must direct it towards our desired goals and hold it accountable.

Evolution of healthcare or intelligent design?

As with most things, you get what you pay for. It is also true that the way we are paying for medical care shapes the services that are offered and guarantees that we get an inferior product.  Who among us thinks that primary care physicians should be valued so much less than specialists, and yet we allow our intermediates to pay them so little in comparison. There is no mystery why increasingly fewer young physicians see any future for themselves in primary care, yet it is there where any real physician shortage lies.  It is all about what we are willing to pay for and who we let call the shots.  I have already committed myself to what I think our health care system should look like.  Personally, I think a single payor system not unlike Medicare is the most reasonable way to proceed.  There, I’ve said it!   We are wasting too much of our energy and money on the no-holds-bared, every-man-for-himself, non-system we have now.  It is absolutely insane that we squander so much on duplicative and non-productive overhead.  It is irrational that we allow our hard-earned tax dollars and insurance premiums to pay for unnecessary medical treatment.  I do not claim that any change will be easy: in fact it may be impossible short of a melt-down from which to build.  But aren’t we melting now?

Peter Hasselbacher, MD
Feb 11, 2012

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