Budget chicanery with Colorado Medicaid, hospital provider ‘fees’

November 16, 2015 by Linda Gorman · Leave a Comment
Filed under: Op-Eds, Publications 

Medicaid is the largest health care program in the United States. It spends a lot on relatively low quality care. Since 2007, Colorado officials have acceded to the federal government’s wishes, expanding both Medicaid and the role of government in Colorado health care. The feds said it would reduce health expenditures by improving health.

Now it’s time to pay the piper.

In 2016 and beyond, Colorado’s ill-considered expansions of Medicaid and other health programs are set to cause major state budget problems.

Colorado’s executive branch has proposed two solutions. First, it wants to raise taxes, by calling the Hospital Provider Fee Oversight and Advisory Board a “business enterprise.” The new designation would move almost $1 billion in tax disguised as fee revenue off the state budget. Under TABOR restrictions, the state then could requisition and spend an additional $1 billion in taxes and fees from the private sector. As Colorado collected about $12.2 billion in total taxes and fees in FY 2014, this first “solution” constitutes about an 8 percent raise for state bureaucracies.

This legislative chicanery builds on the sleight of hand used to create the Hospital Fee in 2009. Knowing the proposal would lose if it followed the law and subjected the new hospital bill tax to a vote of the people, the Democratic-controlled Legislature simply called the provider tax a provider “fee.” The rebranding didn’t fool the federal government. Its letter approving Medicaid payment of the “fee” called it a “provider tax.”

Allowing government to evade the plain meaning of language in 2009 has encouraged it to further flout the law by pretending that a group collecting mandatory taxes from sick people is a “business enterprise.”

The executive branch’s second state budget solution is to spend scarce funds “rebranding” Colorado Medicaid.

The Department of Health Care Policy and Financing (HCPF) employs a Medicaid “Rebrand Project Manager.” A “New Look & Feel Launch” to “overcome negative perceptions” about Medicaid is planned for 2016. The public relations campaign will use grant money, focus groups, polling, and “creative” efforts to “update communications materials” to prove that Medicaid, now known as Health First Colorado, is “different.”

Unlike Medicaid, Health First Colorado will offer “more Coloradans the foundation for a more secure life by providing greater access to integrated health care for improved physical, mental and social well-being.”

State hubris has grown to the point that officials propose that a government agency can provide a more secure life, and improve one’s physical, mental, and social well-being. Yet as recently as last April, HCPF violated Medicaid regulations by failing to provide basic primary care appointments for some of its Denver clients.

The people who propose such sorry programs tend to be more confident if other states are wasting public money in similar ways. Colorado’s plans for the Medicaid expansion and rebranding replicate many of the mistakes Tennessee made 20 years ago.

In 1994 Tennessee Medicaid became TennCare, a test bed for Obamacare Medicaid expansion. Advocates claimed that expertly managed care could reduce health expenditures without harming health. Expenditures would fall enough to offset the costs of TennCare’s Medicaid expansion.

Instead, TennCare spending exploded, increasing more than 146 percent during the first decade. In other states, Medicaid spending increases averaged 71 percent. Enrollment increased from 750,000 in 1992 to 1.4 million in 2001.

In 2002, major insurers and hospitals hired McKinsey & Company to study TennCare’s financial viability. McKinsey concluded that “without additional reform, the program is projected to become so costly that by fiscal year 2008 the state will find it difficult, if not impossible, to both support TennCare and meet its obligations in other critical state programs.”

In November 2004, Tennessee Gov. Phil Bredesen announced plans to dissolve TennCare and return to regular Medicaid. By pretending to cover more than a quarter of a million people than state revenues could support, Tennessee officials caused substantial pain and insecurity in the lives of program dependents, taxpayers, and those who care for patients.

The claims of Health First Colorado advocates are eerily similar to those made by their TennCare counterparts. One hopes that Colorado citizens will urge Colorado officials to learn from history. Otherwise, when they are doomed to repeat it, a lot of people will be harmed.

Linda Gorman directs the Health Care Policy Center at the Independence Institute, a free market think tank in Denver.

Colorado’s Obamacare exchange spends big for little new coverage

July 23, 2015 by Linda Gorman · Comments Off
Filed under: Op-Eds, Publications 

In the recent King v. Burwell decision, the U.S. Supreme Court said that the federal health benefits exchange can provide Obamacare premium subsidies. Given this, it may be time for Colorado officials to shut down the Colorado exchange and let people use the federal one.

In 2012, the Colorado exchange predicted that its 2015-2018 expenditures would be $22 to $26 million. The exchange’s 2015-2016 Strategic Plan and Budget now predicts operating expenses of $53 million in fiscal year 2015 alone. Going forward, operating expenses are predicted to be about $45 million a year with 78 employees. By the end of 2015, the exchange will have also consumed over $272 million in public start-up funds.

The budget projects deficits of $4.5 million in FY 2016 and $3.7 million in FY 2018. In 2016, planned revenues will come from an administrative fee of 3.5 percent of premiums for all policies sold in the exchange, a Broad Market Assessment fee of $1.80 per member per month on every insurer in the state, and $2.5 million in funding from Colorado Medicaid.

In 2015, two items will account for an estimated 20 percent of the Colorado exchange’s operating budget. An enrollment “assistance network” of nonprofits will receive $6 million for producing far fewer enrollments than insurance brokers, and the exchange will spend $4.8 million advertising its monopoly.

If Colorado moves to the federal exchange, people who use it to buy policies would still pay the 3.5 percent administrative fee. Everyone else would be relieved of the $19 million-plus in “fees” levied on every policy in the state. Colorado Medicaid might save $2.5 million.

Though Colorado exchange costs are higher than predicted, its benefits are lower. When the exchange hired Gruber and Associates to predict enrollment in 2011, officials estimated that 470,000 lives would be covered by subsidized policies in 2016.

As of June 2015, only 126,159 people had paid a first month’s premium for exchange health insurance. Of that number, just 72,000 were eligible for federally subsidized policies when they applied.

The Spark Institute surveyed 6,068 people who purchased coverage through the Colorado exchange in the first half of 2014. Only 10 percent of them reported being previously uninsured. If correct, it means that the Colorado exchange has covered between 7,200 and 13,000 previously uninsured people, less than 2 percent of the Coloradans said to have been uninsured prior to Obamacare.

Most of the people receiving the subsidized policies used them to replace private coverage. In the exchange’s 2014 Annual Report, “Libby and her husband” say they were previously insured through Colorado’s public employee retirement plan. But the subsidized PERA coverage “was expensive.” Thanks to the exchange, she “can see my doctors without paying a fortune.”

Colorado exchange performance remains poor. In 2014, the State Auditor found serious deficiencies in exchange financial controls, including at least $15 million in contract overpayments.

Colorado Public Radio reported that 10 percent of those who buy coverage through the exchange end up stuck in bureaucratic snarls that take months to unravel.

This year, 9News reported that the software canceled 3,600 policies when people browsed other plans. After denying that the exchange knew about the problem, exchange representatives said that they knew about it but “didn’t think that it would happen and happen at this level with this group of people.”

Compared to the exchange, the state’s high-risk pool, CoverColorado, was a bargain. When it closed at the end of 2013 it covered enrollment and subsidies for 13,670 people with uninsurable pre-existing conditions—with 8.5 full-time equivalent employees at a total annual cost of $57 million.

Colorado exchange advocates should explain, in detail, why Colorado taxpayers need to continue subsidizing a costly underperformer. Switching to the federal exchange would provide the same subsidies without new taxes on everyone’s health coverage.

Linda Gorman is health care policy center director at the Independence Institute, a free market think tank in Denver.

Note to health reformers: Selling the same thing for a different price is normal market behavior

July 16, 2015 by Linda Gorman · Comments Off
Filed under: Updates 

Understanding the price of ketchup may go a long way towards explaining why mainstream health care reformers gives such bad reform advice.

Per-capita health spending varies a great deal. It varies by geography, it varies by health status, it varies by demographics, and it varies by individual patient characteristics. Academics and government officials decry this variation. They think that health care spending and utilization should be the same across the United States. Despite ritual hand waving about the importance of clinical differences, their policy recommendations generally attribute variation to inefficiency, overuse, and waste.

Systems controlled by central planners prize administrative simplicity. Everything is standardized in order to reduce complexity and clients must adapt to the system. The result is fewer choices, higher costs, and tremendous administrative friction.

Private markets, on the other hand, celebrate diversity by tailoring products, prices, and individual contractual arrangements to fit the client.

In Colorado, the legislature gave the All-Payer Claims Database rights to everyone’s medical records because influential health policy experts claimed that having information on everyone’s treatment would allow them to identify best practices and reduce spending variation. The Division of Insurance works hard to standardize regional pricing of health coverage even if it means higher premiums in lower income areas. At the national level, Obamacare standardized insurance to reduce variation, promotes comparative effective research to standardize treatment, and subsidizes Accountable Care Organizations to standardize the structure of medical practice.

Mainstream state health policy would be a lot less harmful if its adherents would stop trying to squash normal price and product variation and start thinking about how to give patients the power to control costs by controlling who gets paid for providing actual medical care.

Here’s the variation in average cost per service for MRIs done at the 21 highest volume MRI facilities in Colorado in 2012:

(Click to enlarge)

Here’s a chart from the Federal Reserve Bank of Richmond’s July 2015 Economic Brief showing price variation in 279 purchases of a 36-ounce bottle of Heinz Ketchup in Minneapolis in the first quarter of 2007. If ketchup varies this much, why shouldn’t MRIs?

(Click to enlarge)

Linda Gorman directs the Health Care Policy Center at the Independence Institute, a free market think tank in Denver.

Colorado invites Medicaid fraud: Pays hundreds of millions in claims without provider ID numbers

May 18, 2015 by Linda Gorman · Comments Off
Filed under: Updates 

The federal Health and Human Services Inspector General’s Office recently issued a report finding fault with Colorado Medicaid’s internal accounting controls. In 2011, it paid 798,411 Medicaid claims worth $425.4 million even though they were missing legally required National Provider Identification (NPI) numbers.

Services provided under the Home & Community Based Services Waiver generated 767,936 claims without NPIs. There were another 4,715 claims with invalid NPIs.

NPI numbers, issued by the federal government, uniquely identify physicians, health plans, suppliers and other organizations that provide health care, and all organizations and individuals covered by the federal Health Insurance Portability and Accountability Act (HIPAA). The audit notes that by paying claims without valid NPIs, the state may pay people who have been banned from the Medicaid program and limit “the success of reviews and fraud investigations.”

icon_blog_noteThe Colorado Department of Health Care Policy and Financing (HCPF) told the auditors that many of the claims with missing NPIs were associated with “atypical” providers, those who were not required to get NPIs. The audit states that the State was “unable to specifically identify” atypical claims. Though the state cited claims associated with transportation as an example of atypical claims, the audit notes that claims for emergency transportation generally would include ambulance companies required to have NPIs.

In FY 2007, taxpayers provided the Colorado Medicaid program $2.1 million in mostly Federal funds to upgrade the Colorado Medicaid Management Information System to accept NPIs. At the time, the state did not include controls to check that the NPIs were valid. In 2010, the federal Affordable Care Act (aka Obamacare) required that the state include internal controls to check that NPIs submitted are valid.

HCPF’s response claims that the audit finding relates “only to a technical issue and that the audit does not provide any finding that services were rendered improperly or that payments were made in error.” It wrote that it plans to introduce a new Medicaid Management Information System in 2016 that will comply with the state and federal regulations that were passed in March 2010.

As HCPF undoubtedly knows, desk audits of internal accounting controls are not designed to detect fraud or “improper payments.” Malcom Sparrow, a Harvard expert on health care fraud, has testified that state and federal programs that emphasize fast claims payments by automated systems need fraud detection programs that include visiting suppliers and making actual contact with those listed as patients. Otherwise, taxpayers are paying for a system in which “If you want to steal from Medicare or Medicaid,” all you have to do is “learn to bill your lies correctly.”

For example, in South Florida in 2007, unannounced visits to 1,581 durable medical equipment suppliers found that 31 percent either did not maintain a physical facility or were not open.

In 2014, investigators in Washington, DC discovered that the Maryland and District of Columbia Medicaid programs paid the owner of three home care agencies $75 million even though she had been banned from federal health care programs after her nursing license was revoked. One DC home care scam encouraged Medicaid beneficiaries to qualify for Medicaid home care by faking or exaggerating their symptoms and then paid them $200 every two weeks to sign false timesheets used to bill for phantom care.

In Florida, a $63 million fraud scheme fabricated records for the treatment of severe mental illness from 2004 through 2011. “Patients” at the facilities watched Disney movies, played bingo, and attended barbeques.”

Colorado Medicaid has had at least one case of fraud in which it paid $3.8 million to people who continued billing the program after an owner was put on the federal banned list in 2001.

Colorado is inviting Medicaid fraud by paying claims without provider identifier numbers. But never fear, the state hopes to start complying with rules passed in 2010 meant to prevent such fraud sometime next year.

Linda Gorman is health care policy center director at the Independence Institute, a free market think tank in Denver.

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