From Tom's Desk
How to Put Out a Dumpster Fire
Individual states are attempting to control the costs of their Medicaid program through privatization.
Specifically, their paying lump sums to private insurers in exchange for those insurers accepting the financial responsibility of providing healthcare to the Medicaid population. The state can make sure beneficiaries are getting coverage and the private insurers get a chance to make a profit.
To help achieve the latter goal, these agreements are usually accompanied by statutory cuts in benefits to as low as Federal guidelines allow.
Since over the past 40 years executing commercial contracts (with much fatter margins) these same insurers demonstrated a complete lack of effectiveness in top-down cost control, it’s no surprise that most of these new Medicaid arrangements are losing enormous amounts of cash.
I believe the term being thrown around is “dumpster fire”.
The insurer’s responses; such slow walking payments, delaying authorizations and obscuring data, have done little to reassure observers of the viability of this model of funding healthcare.
The lawsuits and recriminations have already begun—sure to consume far more resources than any possible cost savings privatization could provide.
At first, privatizing Medicaid sounded pretty good. After all, the analogous Medicare Advantage system is turning into one of the most popular Federal programs in a long, long time.
But of course the money available for Medicaid is much more limited—its potential margins much thinner. Unlike the Federal government, states can't dump endless amounts of money into their healthcare programs. And with healthcare spending again accelerating, some sort of sustainability must be found.
I have yet to see all the essential components of Medicare Advantage—patient attribution to a prime, illness-burden adjusted payments and full risk-sharing with the clinician—implemented in a Medicaid program. Several state programs pick and chose, but not have gone whole hog.
Experience is showing that’s a mistake.
Even with narrow margins, having an autonomous personal clinician with skin in the game can make all the difference in controlling costs and increasing the healthfulness of beneficiaries.
That’s how you put out a dumpster fire.
Try it and see for yourself.