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.

You Should Know...



More deep background research into Medicare Advantage costs came out last week—the kind of data that explicitly informs future payment models.

Two analyses released from the Congressional Budget Office (CBO) regarding pricing of physician fees and inpatient services surprisingly found little difference in payment rates between fee-for-service Medicare and Medicare Advantage.

One of the primary justifications for higher overall payments to insurers in the Medicare Advantage program has been the necessity to pay providers at rates closer to commercial in order entice them to participate in the program and not just forgo it and focus on traditional Medicare.

This data call the insurers’ justifications into question.

It seems with the penetration of Medicare Advantage into the Medicare market, most providers who can tolerate the rates are just contracting with both--and the insurers are beating down their commercial rates with these vendors to Medicare levels, the lowest most will accept.

The CBO explicitly states these studies will be used to inform near-term changes in payment calculations.

As we saw this year, substantial changes in payment calculations can occur suddenly and without warning. 

If you’re creating a new Medicare Advantage plan in the hopes of easy money—or if you have an existing system and aren’t working the cost side through effective risk-sharing with your primes—you could get hurt very quickly and very badly.

Forewarned is forearmed.

High-Value Insight

Acute rehab (a.k.a. inpatient rehab) is a complete waste.


Yeah, I know, I’m really going to catch it for saying so but we’re all creatures of our own experiences—and my experience bears it out 100%.

Acute rehab is a level of intense rehabilitation above “skilled nursing”—usually requiring at least five hours of rehab services daily, including Saturdays; whereas skilled nursing is usually required to supply only three hours daily five days a week.  The services are usually provided while the patient is residing in a separate, dedicated acute rehab hospital and administered only to patients who meet certain criteria, such as those with strokes or a complicated joint replacement.  It’s usually paid out of your revenue pool on a contracted per diem basis, offering all of the risks of an acute hospital stay with far fewer benefits.

My evidence?  My own eyes.

Back when every acute rehab day was coming directly out of my total-risk pool (and I didn't have much of a life otherwise), I spent several days across several different acute rehab facilities with several different patients who had several different indications for services.

Not once did any of them get anywhere near the contracted level of service and every one had some sort of nosocomial complication requiring an intervention.

Patients who "need" acute rehab are usually too infirm to keep up with the physical demands of such intense interventions.  And with per diem payment rates and daily patient co-pays much higher than a skilled level of care, even the most aggressive case management can’t prevent these facilities from being enormous money spinners for their sponsoring organizations.

Those rehab palaces aren't built on losses.

It's best to try to get your patients the rehab they need in a less intense, more easily tolerated venue--one where you can keep a close eye on them and the services they are supposed to receive.

If they simply must go to an acute rehab facility, advise their family of the concerns I outlined above and have them watch closely to make sure their loved ones are getting all the services they’re paying for.

Usually they'll be back in your SNF before you know it.

Pre-emptive discussions with the patient and family is an intervention that rarely fails, and I've never had a patient's outcome negatively impacted.

Not once.

Q&A with Dr. Tom

When your patients ask “what’s the single biggest benefit of Medicare Advantage over Medicare?” what do you say?


I advise them to ask their insurance agent.


Although it’s important to the long term viability of your practice to maintain a positive vibe for both the Medicare Advantage program and your commitment to the model, it’s also important to maintain your boundaries and not try to “sell” a patient on a specific insurance program within the exam room.


You’re not an licensed insurance agent and you probably don’t really know the answers to the questions.


Ethically, and for your own piece of mind, your goal is to have your patient to develop a relationship with a specific insurance agent.  Let them know that there’s a lot of scammers out there and that having one safe, dependable source of information to serve as their personal advisor is the key to keeping them from getting ripped off.


I don’t even recommend a specific agent—though I do have personal relationships with most of them in my area.


There's no need to shill for a specific insurance program, let your skill and expertise do the talking.


And the insurance agent will do the rest.

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