The Missouri House perfected HB 986, a Medicaid transformation-related bill, by voice vote this afternoon. HB 986 would:
- Create a Joint Interim Committee on Medicaid Transformation to facilitate bicameral discussion of what I believe is the most important issue facing our state over the interim.
- Extend the Ticket-to-Work program by six years. This program encourages disabled Missourians on welfare to obtain and keep employment.
- Increase eligibility for foster children to age 26 to match the insurance coverage available to other children in private insurance marketplaces.
- Streamline the income eligibility process by moving from AFDC with income set-asides to MAGI with an automatic five percent set-aside. This measure is a little like what federal tax reform would look like if Washington would get serious. We take a complicated formula full of exceptions, exemptions, and loopholes and replace with a simple one that’s easy to explain and apply.
Welfare reform continues to have broad bi-partisan support because Americans recognize the fundamental dignity that accompanies work. Welfare reform is good for taxpayers, and, just as important, it’s good for recipients. Unfortunately, a number of state have made efforts to undermine welfare reform by hiring third-party companies to pressure temporary welfare recipients into signing up for what are more-or-less permanent federal disability programs.
This American Life, a great radio show on NPR, exposed this problem in a show just a few weeks ago entitled, “Trends with Benefits.” For anyone with an interest in our country’s long-term fiscal viability, Trends with Benefits is a must listen. One of the segments of this show focused on the work of a company called Public Consulting Group – and mentioned in passing that PCG had just signed a contract with the state of Missouri.
Upon hearing the episode, the House Committee on Government Oversight and Accountability thought the contract was significant enough for a thorough review. Our inquiry was two-fold: first, could the contract be morally justified? And, second, would it actually save the state money?
Documents reviewed by the committee led us to the conclusion that it was neither moral nor fiscally responsible:
- The contract paid PCG a contingency fee for every Missourian it moved off of temporary welfare benefits and onto essentially permanent disability benefits – including children.
- One part of the response by PCG admitted that the company planned to encourage Missourians it knew would be denied disability benefits initially to apply anyway – and then PCG would represent them on appeal.
- Another section promised, “By helping DSS use the tools at their disposal – such as sanctioning of benefits for TANF participants – we will ensure maximum cooperation of our claimants.” In other words, we’ll threaten their temporary benefits if they don’t cooperate in our push to get them on permanent benefits.
- Overall, the contract did not distinguish between eligibility for SSI and SSDI. This is key to understanding the alleged cost-savings from shifting responsibility. Shifting a recipient to SSI saves money in the very short-term by taking them off the TANF roles and getting around some of the work participation requirements of welfare reform, but it also creates a huge long-term liability for the state because the recipient is eligible for Medicaid on an essentially permanent basis.
- Nor did the contract differentiate between those who are without a doubt disabled and those who might actually be able to work.
Two days after our hearing, the Department of Social Services has taken the responsible step of cancelling the vast majority of the contract it had entered into with the Public Consulting Group to funnel Missourians on temporary welfare programs into essentially permanent federal disability programs.
The Department has promised to amend the contract as follows:
- Limiting it to individuals receiving Medicaid who have already been determined to be disabled under Missouri law but are not receiving SSDI or Medicaid and who have receive excessive Medicaid services and have diagnoses which indicate a disease or medical condition very likely to make them eligible for federal disability.
- Eliminating children from the contract
- Eliminating TANF recipients from the contract
- PCG will not be given individually-identifiable information on Missouri Medicaid recipients unless the recipient contacts PCG first.
- Instead, PCG’s software will be used to identify the persons in the first bullet-point above.
- DSS will send a letter to those identified.
- The recipient will have the choice whether to contact PCG or not and will not be threatened if they choose not to.
- PCG will not be allowed to “cold call” any recipients.
- PCG will not be allowed to provide any incentives or make any threats to recipients to spur them to apply.
- DSS will not provide incentives or make any threats to recipients to spur them to apply, and
- PCG will record all calls and make recording available to DSS for spot-checking to ensure undue pressure is not placed on recipients.
The Department of Social Services deserves great credit for their quick response and general responsiveness throughout this project. They worked on a very quick time-frame to provide the committee with all the information it needed to make informed judgment on the contract. And when serious questions were raised about both the moral and fiscal soundness of the contract, the Department acted within a single day to fix the problem. Though I believe it was a mistake to have entered into the contract on the broad basis on which it did, I also know that the Department worked to an incredibly speedy solution for which I am grateful and believe Missourians should be as well.
See the letter from DSS here: DSS Letter Canceling PCG Contract Provisions
In debate late Wednesday night I offered an amendment to HB 698 which would spur re-development at the old Missouri State Penitentiary in downtown Jefferson City. My amendment would require the state of Missouri to sell at least 70 percent of the land and provide state tax credits to spur investment in the area.
As our state capitol, every Missourian has an interest in spurring economic development in downtown Jefferson City. Many thanks to Reps. Mike Bernskoetter, Jeannie Riddle, and Chris Kelly for the comments in favor of the amendment.
On Monday, April 22, the House Committee on Government Oversight and Accountability will open an investigation into a contract between the Department of Social Services and the Public Consulting Group which undermines federal welfare reform legislation. The following is the text of the letter notifying the committee of the hearing:
In 1996, upon signing the Personal Responsibility and Work Opportunity Reconciliation Act, President Bill Clinton remarked that the bill was intended to “end welfare as we know it.” The goal of welfare reform was to facilitate moving Americans on welfare to work and the inherent dignity that comes with it. Seventeen years later, it appears many states and one prominent consulting company has found a way to stand welfare re reform on its head.
It has come to my attention that the Department of Social Services has entered into a contract with the Public Consulting Group (PCG) to encourage and facilitate moving Missourians from the state welfare rolls to federal disability status. As detailed in a recent letter from State Auditor Tom Schweich to our U.S. Senators Roy Blunt and Claire McCaskill, PCG estimates it will be able to achieve “success” by moving 4,600 Missourians into permanent welfare stats – a total which includes 12 percent of Missouri children in foster care. As reported by Rudi Keller of the Columbia Tribune, this contract will allegedly “save” Missouri taxpayers $80 million.
As chairman of the House Committee on Government Oversight and Accountability, I have serious concerns about this contract and the effort to move Missourians into permanent disability status that ultimately relegates them to a life of unending poverty. This is most especially true and most concerning for the children PCG attempts to shove into federal disability programs.
This letter is to inform you that the House Committee on Government Oversight and Accountability will call on your department to present the person(s) with the most detailed knowledge of this contract and its goals for testimony to the committee on Monday, April 22, 2013.
I look forward to hearing from you soon regarding this matter.
Yours in service,
Representative Jay Barnes
Next Monday, the House Committee on Government Oversight and Accountability will holding a hearing on recent information regarding the sharing of Missourians’ conceal-carry information with the federal government through the Social Security administration. The following is the text of the letter sent to the Director of Public Safety:
Dear Director Lee:
The House Committee on Government Oversight and Accountability will conduct a hearing Monday, April 15, 2013 at noon in our state capitol to discuss recent reports that the Highway Patrol shared the list of conceal-carry permits held by Missouri citizens with the federal government.
The committee is greatly concerned about these reports and looks forward to your attendance and candor.
Yours in service,
Representative Jay Barnes
The link above is to the House Committee Substitute for HB 700 to be considered tomorrow night.
This bill proposed to build a Medicaid mansion on a crumbling foundation. Our current Medicaid system is broken. In most geographical regions of the state, Medicaid works on a fee-for-service basis with no incentives for affordability for anyone. Worse, study after study has shown that Medicaid leads to worse results for recipients than for persons with private insurance coverage – even controlling for income.
We have a Medicaid foundation that’s bad for both Missouri taxpayers and recipients. The gentlemen’s amendment (to expand Medicaid on this crumbling foundation) does nothing to fix this problem. There is a better way.
There’s a way we can transform Medicaid to save money and improve health outcomes. We can turn recipients into participants in their own health care by introducing price competition for the first time in the history of the federal Medicaid program.
Mr. Speaker, let’s transform Missouri’s Medicaid system into the most market-based system in the history of Medicaid. We can build a system through HB 700 which would save Missouri taxpayers at least $742 million over eight years and perhaps over a billion dollars.
Mr. Speaker, I urge the body to reject the Gentleman’s attempt to build a mansion on this crumbling foundation. Let’s pour a new foundation, a stronger foundation, a foundation that is fiscally-sustainable and uses market forces to improve results.
The House is working on the state budget this afternoon, including state employee benefits. The great news is that health insurance costs will not be going up as much as health care inflation in other areas of the economy. The decent new is that there’s only a pay raise of $500 per employee.
This is not enough, but I’m not one to make the perfect the enemy of the good. It’s still a step in the right direction after state employees went five years between raises until we secured one in last year’s budget.
The following are the prepared remarks I made on the floor:
Mr. Speaker, as you and other members of this body are aware Missouri state employees rank 50th out of 50 in state employee pay. This budget includes a pay raise of $500 per employee. This is a step in the right direction, but, in my opinion, it’s not enough.
Over the last five years, the governor has cut thousands of state employee jobs. Some of these were justified, others not. But regardless of the propriety of any of these cuts, one thing is undeniably true: state employees are being asked to do more, but not being compensated accordingly for it.
Mr. Speaker, Missouri is not New York. It’s not California and thank God it’s not Illinois. We don’t need and in fact should not be one of the nation’s top-paying states because our cost-of-living just isn’t that high. But we shouldn’t be ranked below Mississippi, Arkansas, Kansas and every other state in the country. We should be closer to where we are in national cost-of-living standards.
This budget keeps us moving forward. One-quarter glass of water is much better than on water at all. On behalf of 5,000+ state employees who I represent, I thank the Budget Committee for this quarter glass. But it’s my great hope that we can build on this in this budget and in future years to get state employee pay out of the national cellar.
Explain the bill in one paragraph. This proposal would force Governor Nixon to request a waiver out of ObamaCare. It would eliminate Medicaid as the world has known it and replace it with the most free market public health system in the entire country. For the first time in history, Medicaid recipients would be empowered to make their own health care choices and incentivized to choose affordable health insurance plans by the injection of price competition into Medicaid.
Explain the price competition. When a recipient signs up for Medicaid, they will be presented with a list of available health insurance plans with a list of corresponding prices. If the recipient picks the lowest case plan, they will be allowed to keep a portion of the difference between that plan and the highest cost plan offered. In other words, recipients will be given the same price incentives that other Missourians face every time they decide which health insurance plan will work best for them. Price will matter for the first time in the history of our federal Medicaid program.
Has any state ever done this before? Not to my knowledge. Indiana introduced the concept of high-deductible health plans in 2008 when it created the Healthy Indiana Plan, but it did not introduce direct price competition on premiums for managed care plans in Medicaid.
If no state has ever done it before, how do we know it’s possible? There is no federal law or rule which directly prohibits incentive payments based on choosing an affordable plan. There is precedent for cash payments to Medicaid recipients as incentive to engage in healthy activities – and thereby bring down costs. These waivers have been granted in Florida and New York. Because there is no federal law or rule directly prohibiting the injection of price competition into Medicaid, the federal government has the legal authority to grant a waiver. Whether it does or not depends on whether the Obama administration is willing to put ideology aside and let Missouri reject the one-size-fits-all central-planning ObamaCare model.
What happens if we don’t get the Market-Based Medicaid waiver? If the federal government refuses to allow true price competition into Medicaid for the first time in history, then this legislation has no effect. It’s an all-or-nothing proposition.
Why not just scrap Medicaid altogether? The current situation presents a unique opportunity to craft the most market-based Medicaid program in the entire country. In the Cold War, we had a great battle between an economic system based on decentralized decision-making that relied on the wisdom of ordinary people to make economic decisions versus one that was centrally-planned with so-called experts making all pricing decisions. As Ronald Reagan would put it, “We won. They lost.” Unfortunately, central planning lives on in many ways in American governance, including through state Medicaid programs with prices set by government bureaucrats. We know from history that central planning does not work – and yet it persists in Medicaid. We also know that Medicaid is here to stay. The program has been in existence for 47 years with no serious effort ever made to repeal it. No matter what Missouri does on the ObamaCare expansion of this broken system, Medicaid will march on – consuming more and more of the state and federal budget. This legislation sets up another great test, with Missouri leading the way for a free market model that can save billions and perhaps trillions of dollars across the nation by introducing price competition to Medicaid for the first time in the 47 year history of the program.
What will this do to the federal deficit? According to the Heritage Foundation, the federal government spent $3.6 trillion in 2012. If Market-Based Medicaid becomes law, the federal share for Missouri would be increased by $1.2 billion in 2014 – a total which represents 1 / 3,000 share or 0.0003 percent of total federal spending. Further, according to Kaiser, the state of New York’s Medicaid program cost $52.1 billion and California’s cost $42.1 billion in 2010. Total Medicaid spending in 2010, according to Kaiser, was $389 billion. This bill could serve as a catalyst to save money by proving how injecting real free market measures into Medicaid could save billions of dollars if adopted nationwide. Just as businesses are willing to invest portions of the budgets in research and development of products and systems which can save their own company and their consumers money, so too should conservatives be willing to force the Obama administration to invest in Market-Based Medicaid with Missouri as the laboratory of democracy to prove, once again, that decentralized decision-making beats central planning every time.
What happens if the federal government breaks its promise? There’s an automatic trigger in the bill which rescinds all eligibility increases if the federal government breaks its funding promises.
How can Missouri taxpayers afford this? The legislation has a tremendous positive fiscal note for Missouri taxpayers. In its first eight years, the bill would save Missouri taxpayers at least $741.9 billion. In 2021, the first year Missouri would be responsible for its full 10 percent share, the bill has a positive fiscal note of $83.5 million. If we assume savings of just 1.5 percent from high-deductible health plans and a mere three percent for the introduction of price competition for the first time in the history of Medicaid, the bill would save Missouri taxpayers approximately $927.8 million over the first eight years and $109.1 million in 2021. In addition, a provision increasing cost-sharing for pharmaceuticals and specialist doctors visits has not been scored yet.
What does this do to the total number of Missourians eligible for Medicaid? Under this proposal, the number of Missourians eligible for Medicaid will decrease.
Can Missouri get an enhanced match rate at 100 percent of the federal poverty level? In December, eleven Republican governors wrote a letter to HHS Secretary Kathleen Sebelius requesting clarification on whether the enhanced federal match rate would be available at 100 FPL. Sebelius said no. That decision was a political decision, however, not a legal decision. As explained by Charles Miller, senior counsel at Covington & Burling, a mega-law firm in Washington D.C., the NFIB v. Sebelius case gave the Obama administration the legal authority it needs to deviate from the 138 percent requirement. Miller told the Washington Post:
“The court said . . . we’re not allowing you to enforce this so-called mandate,” Miller said. “So what is a mandate when you can’t enforce it? I think it’s not un-sensible to say that a mandate then becomes an option. . . . And in that context does it have to be all-or-nothing? Neither the Supreme Court nor the original statute addressed that point.”
Even assuming the Obama administration refuses to drop its ideological one-size-fits-all edict on this part of the law, there are other things states can do to require recipients to share costs when they make more than 100 percent of the federal poverty level. A new proposed federal regulation, for example, would allow states to require recipients to pay 50 percent of their costs from the first day of hospitalization. Existing federal rules allow states to require recipients between 100 and 138 percent of the federal poverty level to pay up to 10 percent of the cost of a service through co-payments and up to 5 percent of total family income. The subsidies available through a federal health insurance exchange for these populations would be less than the cost-sharing allowed by federal law. By adopting all cost-sharing requirements allowed in existing federal law, a state can make Medicaid a less affordable option for health insurance coverage than a private plan through a federally-facilitated exchange which would require the individual to choose their own plan and pay monthly premiums.
Why reduce Medicaid eligibility for some groups? Won’t this deny them access to healthcare? The bill reduces eligibility for groups above 100 percent of the federal poverty level because, by definition, people above the poverty level do not live in poverty. They should be expected to make personally responsible decisions to purchase their own health insurance plans. The reductions in eligibility are contingent upon the existence and functioning of a federal health insurance exchange which is offering subsidies for insurance coverage for the populations with reduced eligibility. Under these subsides, for example, a single mother who makes $20,628 per year (133 percent of the federal poverty level) will only have to pay two percent of her income, or $34.38 per month on premiums for an insurance plan in the exchange that covers her family. See this memo from Kaiser re: exchange subsidies. Reducing eligibility for Medicaid for these populations will result in better care as these Missourians choose their own private health insurance plans.
Why not just do reform only? First, because Governor Nixon is highly unlikely to sign a reform only bill, and would not have anything to offer the Obama administration when he demands the ObamaCare Medicaid opt-out. Second, because the powerful provider lobbies in our state hold enough sway in our state capitol that they could – and would – kill any effort at a reform-only bill. Third, reform-only does not solve the serious problem faced by rural hospitals in Missouri losing disproportionate share payments from the federal government to reduce the costs of charity care which federal law (EMTALA) requires them to provide. (Yes, this is a problem caused by the Obama administration and not us. But the argument that “because someone else did it, it’s not our responsibility to help” is like saying that we should ignore a person bleeding in the street after getting mugged because, well, “we didn’t do it, it’s not our responsibility to help clean up that mess.”) In order for real reform with price competition to ever become law, some increases in eligibility are necessary.
Why a high-deductible health plan? The high-deductible health plan is modeled after the Healthy Indiana Plan, a successful program started by Indians Gov. Mitch Daniels. Recipients are incentivized not to waste health care dollars because accessing care requires them to use funds in the Health Savings Accounts attached to their high-deductible plans.
What about the elderly, persons with disabilities, and those with chronic conditions? This bill does not impact elderly Missourians on Medicaid. Persons with disability and chronic conditions are carved out of managed-care and given “health care homes,” a care-coordination model started in Missouri by former Gov. Matt Blunt which has proven to save money.
Why is pharmacy carved-out of managed care? The Department of Social Services can manage pharmacy benefits through an ASO cheaper than managed care companies can because DSS gets pharmacy discounts for buying in bulk.
Why do the benefits of the transformed Medicaid plans match the benefits to be offered by plans in a federally-facilitated exchange? The benefits match in an effort to remove disincentives that Medicaid recipients currently have to taking a better job or working more hours. Unfortunately, the welfare state is set up so that it is morally repugnant but economically rationale for some welfare recipients to choose not to increase their income when they have the opportunity. We match the incentives so that a recipient on the verge of “churning-out” of Medicaid does not have the disincentive of losing health insurance coverage. Instead, their Medicaid plan will be rolled-over into an exchange plan with the recipient now responsible for premium payments.
Why provide for commercial rates of reimbursement to providers? Medicaid critics from both the right and the left have long decried that measly reimbursement rates for providers reduce the ability of recipients to actually receive care in rural areas because so few providers participate in Medicaid. In order to have a program which actually works for those who need it, provider reimbursement rates have to be competitive. This legislation presumes commercial rates of reimbursement which should increase the willingness of doctors to participate.
How will this cut down on fraud? Recipients will be given an electronic card which they will have to use when accessing health care services. These cards will allow DSS to track spending in real-time. Just as credit card companies are able to shut off a customer’s credit card after unusual activity, so too should DSS be able to identify unusual patterns of activity to prevent fraud. Perhaps even more importantly, managed care companies have incentives to reduce fraud and will likely do a better job of it.
What evidence is there that private plans produce better health outcomes for recipients than centrally-planned Medicaid?
Here are just a few of many studies on the issue:
– Children with asthma on Medicaid more likely to endure long hospital stays with “significantly poorer outpatient care.” Quality of Hospital Care of Children with Asthma: Medicaid Versus Privately Insured Patients, J. of HC for the Poor and Underserved, Vol. 12, No. 2 (2001), pp. 192–207.
– Medicaid recipients diagnosed later with cancer, less likely to receive cancer-related surgery, and have higher mortality rates. The Relation Between Health Insurance Coverage and Clinical Outcomes Among Women with Breast Cancer,”New Eng. Journ. of Medicine, July 29, 1993, pp. 326–331; Effects of Health Insurance and Race on Colorectal Cancer Treatments and Outcomes, American Journal of Public Health, 90 (2000), pp. 1746–1754; Disparities in Cancer Diagnosis and Survival, Cancer, Vol. 91 (2001), pp. 178–188; Cancer Survival in Kentucky and Health Insurance Coverage, Archives of Internal Medicine, Vol. 163 (2003), pp. 2135–2144
– Higher mortality rates for non-cancer patients for heart attack, stroke, and pneumonia – even adjusting for age, gender, income, other illnesses, and severity. Insurance Status and Hospital Care for Myocardial Infarction, Stroke, and Pneumonia, Journal of Hospital Medicine, Vol. 5, No. 8 (2010), pp. 452–459
How will this transformed system differ from managed care in the existing I-70 corridor? In the current managed care corridor, price is centrally-planned and set by the Department of Social Services. Bidders compete on the basis of the breadth of their network and services provided. In the transformed system, bidders will be required to compete on price, with the lowest cost conforming bid guaranteed acceptance. Bidders will be incentivized to make their plans as affordable as possible for Missouri taxpayers because they will want to win the guaranteed slot. In addition, they will compete for market-share on the basis of price from recipients who will be told that they will be rewarded for making affordable health care choices for the first time in the history of the federal Medicaid program.