Kentucky’s New Medicaid Program Imposes A Work Requirement. Is It Too Complex To Succeed?

Four days ago, published a blog post that praised the Commonwealth of Kentucky’s new Medicaid program for supporting the principles of flexibility and choice. And yet, with some trepidation, the post also suggested that the imposition of an “administrative deductible account” may make the program too complex to succeed.

Do you disagree? Do you believe, instead, that Kentucky’s deductible account is a manageable feature? Even if you do, you may wish to pause before expressing general support for the program. Regrettably, there is a different feature that is even more complex than the deductible account!

What is that feature? It is the work requirement that is imposed on Medicaid recipients. Although the Obama Administration refused to require employment as a precondition for receiving medical services, the Trump Administration has endorsed Kentucky’s decision to require it.

Reasonable minds may differ about the moral implications of requiring people with maladies to work for their medical care. But all reasonable individuals should be willing to agree that any work requirement — or any other requirement, for that matter — must be defined in a manner that isn’t hopelessly complex.

So … is Kentucky’s Medicaid work requirement too complex to succeed? Let’s review the guidelines of the HEALTH Program’s Requirements Specification and decide for ourselves.

First and foremost, because there is no way for the Commonwealth to guarantee the availability of work, the Program merely requires “Community Engagement” instead of work. At first glance, that sounds like a reasonable policy, doesn’t it?

But there’s a catch. To assess whether a Medicaid patient satisfies the Community Engagement requirement, program managers must complete a calculation. Thirty hours of employment per week may meet the requirement, but there are many reasons for claiming a “temporary good cause exception” from work. Inclement weather, for instance, is defined as a valid reason, although the guidelines do not explain how any particular storm would trigger an exception.

Nevertheless, all hours and exceptions must be registered through an online time accountability system. Various Forms are produced by the system, with Form 834 utilized to report deviations from the Community Engagement requirement.

How complex is the language that explains these guidelines? Clause represents a typical set of instructions:

MCO CE Communication.

Members CE status and required CE hours must be provided by MMIS to the MCO’s on the 834, on at least a monthly basis for the current month. The MCO’s may send communication and outreach to members based on CE status received from MMIS.

Information received by the CE module regarding member good cause exceptions involving incidents that may invoke third party liability (TPL) must be provided by MMIS to MCOs for purposes of pursuing TPL payments.

There are also time accrual guidelines, time exclusion guidelines, and non-compliance “curing” guidelines. In addition, there are program suspension guidelines, reactivation guidelines, and grace period guidelines. Not to mention the existence of a completely separate section of guidelines regarding time spent on Education and Training activities!

To reiterate the questions that we asked in our previous post regarding Kentucky’s deductible accounts feature: How many government employees will be required to manage this work requirement system? How many will even be able to explain the system to baffled Medicaid recipients?

Employment is undoubtedly a worthy goal. But if Kentucky’s work requirement is simply too complex to succeed, its Medicaid program will inevitably fail.

Kentucky’s New Medicaid Program Emphasizes Flexibility And Choice, But Is It Too Complex To Succeed?

Trump Administration officials have approved the Commonwealth of Kentucky’s request to increase the level of choice in its Medicaid program. Even critics will find it difficult to criticize the request too vociferously; after all, flexibility is a worthy principle.

But individuals on both sides of the political aisle may wish to scrutinize the manner in which the Bluegrass State will implement this principle in practice. Will their procedures be simple, efficient, and easily manageable? Or will they be so complex that state workers, medical providers, and recipients will struggle to understand them?

According to the program specifications, a $1,000 annual deductible will be imposed on each Medicaid health recipient. But it will not function as a standard deductible because Medicaid recipients possess extremely limited financial resources. They couldn’t possibly afford such costly burdens.

So who will finance their $1,000 deductibles? The amounts will be paid by government cash accounts, known as “administrative deductible accounts.”

The government, of course, will also pay the costs that exceed the deductibles. So why is the government bothering to create separate deductible cash accounts?

Because 50% of each recipient’s unused deductible dollars will be transferred into a My Rewards Account. And recipients will be permitted to select a variety of dental, vision, pharmaceutical, and gym membership services to be financed by those unused deductible dollars.

Could program managers have designed a less complex approach for providing Medicaid recipients with flexibility and choice? Indeed, they could have simply loaded $500 (or 50% of $1,000) in credit onto Medicaid identification cards, and then invited recipients to spend the credit on a menu of optional services. Such features are called cafeteria plans in the private sector; they represent relatively simple methods for offering flexibility and choice.

But instead of opting for a cafeteria plan approach, the Kentucky HEALTH Program chose to create a deductible that is not truly a deductible, but that is financed by a government account that is called a deductible, that in turn produces dollars that are multiplied by 50% and then converted to Rewards points, that in turn are spent on services.

How many government employees will be required to manage that system? How many will even be able to explain the system to baffled Medicaid recipients?

Indeed, in the health care sector, it is relatively easy to applaud Kentucky’s principle of flexibility. But if it is unable  to implement that principle in practice, its initiative is likely to fail.

The Massachusetts Strategy: Medical Cost Budgets

As the American presidential contest barrels towards the Labor Day holiday weekend and the proverbial “home stretch” of the campaign, the candidates continue to fling charges at each other regarding the health care system.

Mitt Romney, of course, continues to refer to the President’s universal health care plan as a burden on American society and as an unnecessary tax on the middle class. And Barack Obama continues to riposte that his Affordable Care Act is actually modeled on the 2006 landmark Massachusetts law that Romney championed as Governor.

Lost in the squabbling, though, is the fact that the Massachusetts model of universal health care has now been in operation for six long years. So how is it doing? Is it achieving its goals?

Primary Goal: Mission Accomplished!

The primary goal of the Massachusetts law, of course, was to extend health insurance coverage to virtually all state residents. That mission has indeed been accomplished; over 98% of all residents are now enrolled in state-mandated and government approved health insurance plans.

The enrollment process for individual policy holders is managed through an online portal known as the Health Connector. Many industry specialists have praised the effectiveness of the portal; in fact, it has become a model for the state-based “exchanges” that are now being developed across the nation to comply with the provisions of the Affordable Care Act.

Regrettably, investigative reporters at the Boston Globe have noted thousands of cases of individuals who appear to be “gaming” the system by enrolling in health plans for brief periods of time in order to gain temporary coverage to receive medical services. Nevertheless, the vast majority of the 6.5 million residents of the Commonwealth of Massachusetts appear to be complying with the letter and the spirit of the 2006 insurance coverage law.

Secondary Goal: Yet To Be Achieved?

The secondary goal of the Massachusetts law was to reduce the cost of providing health care services to residents throughout the Commonwealth. And the actual results? Pragmatically speaking, the evidence is mixed at best that the costs of medical care are actually trending downwards.

In theory, as a result of the enrollment of all residents into insurance plans, the utilization rates (and thus the costs) of primary medical care and preventive care services should increase over time. Policy makers are hoping, though, that these increases will be offset by concomitant declines in the utilization rates (and thus the costs) of hospital emergency room services and preventable disease treatment regimens.

Many studies have confirmed that these utilization and cost trends are indeed occurring for certain clusters of individuals. But other studies have noted that the overall costs of providing medical services to the population may be increasing significantly.

Next Step: Government Cost Targets

So how do the current Governor Deval Patrick and the Massachusetts Legislature intend to address the challenge of controlling medical costs? Earlier this month, they signed a bill into law that establishes explicit cost reduction targets for levels of health spending throughout the state.

For the next five years, through 2017, the law is designed to limit inflationary increases in health spending to levels that are consistent with the growth of the Massachusetts economy. And thereafter, it is designed to reduce health inflation rates to annual levels that are one-half of one percent below the growth rates of the state’s gross domestic product.

According to government estimates, the aggregate costs of medical care will decline by up to $200 billion over the next fifteen years if the health system meets these targets. Whether or not the system will actually do so, though, is any one’s guess.

It May Take Years

Does the Massachusetts model of universal health care represent an approach that should be replicated across the nation? A successful Massachusetts initiative, of course, can serve as an effective model for the other 49 states.

On the one hand, government mandated universal cost budgets may distort the market for health care services. Let’s assume, for instance, that the Commonwealth experiences an outbreak of influenza in a year when its costs are budgeted to decline by one half of one percent. If it diverts funds from other initiatives to fight influenza, it may force itself to abandon health programs with significant long term benefits.

On the other hand, it is possible that the government of Massachusetts is the only entity that possesses the authority and the power to mandate cost reduction activities on a statewide basis. In other words, no other organization may be able to accomplish such broadly defined goals.

It is, regrettably, too early to assess whether the cost budgeting law will prove to be effective. That is not surprising; after all, it took years to conclude that the original 2006 law could succeed at enrolling most residents in insurance plans. It may likewise take years to assess whether medical cost inflation can be controlled through the use of budgetary targets.

Health Insurance: Counting The Under-Insured

Are you concerned that your favorite baseball player isn’t pulling his weight for the home team? Our parents would have been content to track his batting average, but today you would undoubtedly follow his on base percentage as well. It’s an arithmetic enhancement of the original ratio; instead of simply dividing his hits by the number of times at bat, you’d include his walks in the numerator too.

What if it’s too cold to sit outside and watch the game? You’d better check the wind chill temperature before you leave home! Although our parents would have been content to simply note the actual temperature, you’d prefer to subtract a few degrees to account for the impact of air currents.

Economists make the same mathematical adjustments when assessing our economic health. They no longer simply note the inflation rate; they now modify it to calculate the core rate, which excludes highly volatile items such as food and gasoline. Likewise, they modify unemployment rates by counting individuals who are working, but who are nevertheless under-employed.

And what about the health care industry, the economic sector that is threatening to devour our government budgets? Years ago, policy analysts simply tracked (and hoped to minimize) the rate of the uninsured. Today, though, they’re modifying that statistic to include another group.

Counting The Under-Insured

Once upon a time, health insurance was health insurance; citizens either possessed it or lacked it. Generally speaking, if Americans were covered by health insurance policies, they knew that they would be reimbursed for the costs of all medically necessary services.

To be sure, there were (and still are) annual cost caps on coverage levels. But years ago, the costs of care were much lower, and thus the caps were very rarely reached. And even when that occurred, insurers could often be persuaded to waive the caps for charitable purposes, or providers could be persuaded to provide the services without billing the insurers.

Today, though, uninsured Americans are not the only citizens who are concerned about obtaining access to medically necessary services. The medically under-insured must be concerned as well, given that truly comprehensive health insurance policies are becoming much rarer.

Et Tu, Empire Blue?

By the next quarter, for instance, many small business owners in New York State who are insured by Empire Blue Cross Blue Shield will be trading down to much skimpier health insurance policies. They’re not doing so on a voluntary basis; instead, Empire is phasing out many of its traditional full-fledged plans and transitioning firms to a handful of less desirable ones.

Can’t those business owners switch to plans offered by other insurance companies? Well, yes … but only four other insurers are still serving New York’s small business community. And according to Crain’s New York Business, only three (Oxford, Emblem, and Aetna) are maintaining a sizable commitment to the market.

A total of three firms cannot possibly maintain a truly competitive economic market. And considering that Blue Cross Blue Shield traditionally played the role of the nation’s “safety net” insurance provider, its retrenchment from New York’s small business market is undoubtedly complicating health policy.

Aflac, Aflac!

Although the rate of the uninsured is closely tracked — it’s now 16.3% of the American population, or 49.9 million citizens, and climbing — the rate of the “not fully insured” is not as well known. And yet that’s the true number of Americans who are at risk of coverage denials for medically necessary services.

Many of the small businesses that are reluctantly trading down to less desirable Empire policies would probably be included in this statistic. The tens of millions of consumers who are covered by Aflac would likely be included as well. Interestingly, the firm explicitly acknowledges that its product “helps pay (for) what Major Medical Insurance doesn’t.”

How important is the plight of the under-insured? From a health care policy perspective, they might be even more costly to the nation’s health care system than the uninsured. That’s because the uninsured will often “make do” without any care at all, or will learn to utilize charitable programs such as Federally Qualified Health Centers. The under-insured, though, will tend to rely on their limited coverage options until their coverage “caps” are triggered, and then throw themselves into our overburdened system of hospital emergency rooms.

A Quarter Of The Population

Last September, the Commonwealth Fund defined the “under-insured”  as citizens who possess health insurance policies, but who must spend a very large amount of their income on medical expenses. They estimated that 29 million Americans were underinsured in 2010, 80% more than the 16 million who were underinsured in 2003.

With America’s population now standing at 312 million, they represent 9.3% of all Americans; thus, a staggering 25.6% (i.e. 16.3% + 9.3%) of all citizens are not fully insured. With firms like Empire continuing to withdraw from major market segments, this rate will likely continue to increase for the foreseeable future.