At this point, with the Senate adjourned and the House rejecting the short-term extension, it is hard to see how the issue will get resolved. However, in a year that has featured several near shut-downs of government and routine 11th hour legislating, we can’t discount the possibility that some agreement will be reached. Still, it can’t be taken for granted that Congress will pull yet another rabbit out of its hat, and the cost of failure, in health care terms, will be high.

Although the most high profile health issue in the debate is preventing a 27 percent cut in the Medicare physician fee schedule, there are other important provisions at risk, including an extension of the “QI” program, which pays the Medicare Part B premium for low-income Medicare beneficiaries, and Transitional Medical Assistance, which allows families who would lose Medicaid eligibility as a result of an increase in earnings to temporarily retain that coverage. But the problem doesn’t stop there.

A failure to extend unemployment benefits and the payroll tax cut will have significant consequences for health care. First, at least some people losing unemployment insurance will end up on Medicaid, increasing the cost of that program as states struggle to recover from the recession and replace the lost federal Medicaid funds. Secondly, taking the purchasing power of unemployment benefits and the payroll tax cut out of the economy will be a drag on employment and will translate into further increases in the number of uninsured and people on Medicaid.

So what we are faced with is yet another example of Speaker Boehner and the House Republican caucus electing to play chicken, placing important health care programs and our fragile economic recovery at risk. This has become something of a pattern ever since they threatened to force a default on U.S. government debt earlier this year. Unfortunately, chicken is a risky game that often results in someone getting hurt.

– Michael Miller, Policy Director

Recently, two Florida insurers announced their intention to quit the non-group health insurance market in that state. The state of Florida is trying to use the exit to bolster its case for a waiver from the Affordable Care Act’s Medical Loss Ratio requirement. If the waiver is granted, it will cost Florida rate-payers millions of dollars. Given that the carriers in question cover well under one percent of the non-group market, their exit hardly makes for a compelling case in Florida. But setting the specifics of Florida aside for a moment, should we be worried about carriers leaving the market? In general, the answer is no.

When it comes to health insurance, the notion of “the more the merrier” is deeply flawed. Why? Because every insurer has to pay fixed costs for sales and marketing, claims processing, and underwriting. At the same time, unless you are talking about old-school HMOs where the insurer is essentially synonymous with the provider network, small insurers don’t have the ability to negotiate effectively with providers on price or to innovate with respect to quality. Basically, the insurers most likely to call it quits have a business model based on making sure that they don’t cover sick people. That business model is now obsolete thanks to the ACA. The only thing such insurers add to our health care system is cost, not value. (Click here for an economic model illustrating why too many insurers can be a problem.)

File under: “I’ve got some good news and some bad news”

The recent CMS decision to partially allow proposed cuts in California Medicaid rates is a mixed bag. First the good news: The state agreed to withdraw proposals to reduce reimbursements to pediatricians and for home health services. The state has also agreed to a first-of-its-kind Medicaid access monitoring plan to evaluate the impact of the cuts.

Now the bad news: CMS approved rate cuts to a broad cross-section of other providers. Although a few types of providers (family practitioners, internists and pediatricians) will see rate increases starting in 2013 courtesy of the ACA, most others will continue to be reimbursed at the lowest rates in the country. (Decisions on proposed benefit limits and increased cost-sharing are still pending.)

The decision elicited concern from consumer advocates and outrage from some providers. One worry is that cuts will undermine access and provider support in the run-up to the ACA’s Medicaid expansion. Another concern is that, notwithstanding the access monitoring plan agreed to by the state, the recent decision underscores the limits of CMS’s ability to block state cuts that could be harmful to patients. At the same time, the administration has taken a position on the wrong side of the question of whether individuals should have the right to pursue legal action to enforce access to care for Medicaid beneficiaries.

Unfortunately, what is most unusual about the California developments is the state access monitoring plan, not the cuts. Across the country states are cutting Medicaid benefits and rates. This is a dead end strategy. The bottom line is that states cannot solve their budget problems via Medicaid rate cuts. There is an urgent need for states to reform the delivery of care to maximize quality while reducing cost. At the same time, even the best crafted strategies will not be sufficient. Whether we are looking at the federal budget or the states, new revenue has to be part of the solution to balancing budgets without eviscerating services.

And speaking of revenue and budget balancing…

File this one under “What are they thinking (or smoking)?”

The $3 trillion debt reduction proposal by the majority of the “Super Committee’s” Democratic members has, apparently, crashed and burned (though elements of it could still rise from the dead). The proposal had a lifespan even shorter than a Kardashian marriage, and was immediately panned by Republican members and criticized by many Democrats off the committee, as well.

Although details are hard to come by, the $475 billion in proposed Medicare and Medicaid cuts would certainly have included both significant cuts to beneficiaries and cost shifts onto state Medicaid programs, violating the key demands of consumer advocates.

Committee Democrats may have been hoping to get political credit for “being the adults in the room” willing to make tough choices. But it is more likely that the only thing they accomplished was to further arouse the fears of older voters—an important voting bloc that largely turned against the Democrats in 2010—that the Democratic Party was unwilling to defend their health care benefits.

In earlier blog posts, we’ve shown how to achieve substantial federal health savings without harming Medicare and Medicaid beneficiaries, which means supporting proposals that harm seniors is not only politically unwise, but also unnecessary. So in the future, please folks, no more negotiating with yourselves. There is simply no upside to making symbolic gestures toward debt reduction as long as there is “no partner for peace” in the room. As one Democratic Hill staffer put it recently, “Because the GOP is not engaged at all on revenues … this could go on forever and they would still stand there offering a giant middle finger.”

– Michael Miller, Policy Director

Reaction to the plan was almost entirely predictable. Republican lawmakers rejected it out of hand, while a wide range of health care interest groups offered up variations on the theme of: “I know we need to make an omelet but don’t break my egg.” The award for most cynical response among health care interests should probably go to the American Hospital Association which simultaneously attacked the President’s plan while embracing a proposal to raise the Medicare eligibility age—an idea that raises health care costs for everyone other than the federal government while also, not coincidentally, raising revenue for the hospital industry.

In fact the debate over raising the Medicare eligibility age underscores the danger of defining the health care cost issue narrowly as only a federal spending issue as opposed to taking a broader systematic approach. Community Catalyst laid out the core principles for sound health care cost containment here. Although there are a few unfortunate exceptions, most of the health care savings in the President’s plan come from good ideas that will reduce waste and inefficiency

Good News First
The president’s plan starts off on the right foot: it minimizes the cuts required in health and other entitlement programs by demanding a real contribution from the wealthiest Americans and corporations. New revenues, from sources such as closing corporate tax loopholes and cutting tax preferences for the wealthiest Americans, account for half ($1.5 trillion) of the total proposed deficit-reduction.

And while his proposal cuts $248 billion in Medicare spending and $73 billion in Medicaid and other health programs, it does so at least partially by targeting waste. For example, the president’s plan:

• – reduces overspending on prescription drugs by requiring drug manufacturers to pay the same rebates for low-income Medicare recipients as they do for Medicaid beneficiaries
• – improves access to low-cost generic drugs by ending “pay for delay” agreements, a practice that allows brand-name drug manufacturers to pay generic drugmakers to keep their products off the market
• – creates new incentives for nursing homes to provide better primary care to residents to avoid needless and costly hospitalizations

These policies not only save federal dollars, they move our health care system in a better direction; they are smart policy regardless of their deficit-reduction effects.

Here’s the “But”
While the president’s plan represents the most serious attempt yet to trim the deficit without harming the health of low-income Americans who rely on Medicaid and Medicare, some of his policies are worrisome.

Particularly concerning are proposals that would shift costs onto Medicaid mainly by reducing federal Medicaid matching rates and limiting the ability of states to use provider taxes to finance the program. Raising state Medicaid costs is likely to reduce access to health care for very vulnerable populations. And, because Medicaid is already the lowest-cost health insurer and states have much less ability than the federal government to finance the program, there is something perverse – embarrassing, even – about the federal government attempting to get its financial house in order by shifting costs onto states.

Although we haven’t seen the details, even here there appear to be some positive features of the president’s plan. Specifically, although he proposes to save about $15 billion by reducing federal Medicaid matching rates (a smaller number than in earlier proposals) he also proposes to automatically increase federal matching rates during economic downturns—an idea advocates fought for during the ACA that did not make it into the final legislation. He also proposes to give states an incentive to make the ACA work by rewarding states who sign up a higher share of newly-eligible Medicaid beneficiaries.

Another concern is that under the president’s plan, Medicare cost-sharing requirements would increase. Not only will this create barriers to care for low-income Medicare beneficiaries, it will also increase state Medicaid costs since Medicaid pays the Medicare cost-sharing requirements for the “dually-eligible.”

Finally, the president’s plan cuts $3.5 billion from the $15 billion Prevention and Public Health Fund. This is particularly shortsighted because improving the underlying health of the American people is one of the three key pillars of a long term cost containment strategy.

What’s particularly unfortunate is that the White House missed an opportunity to do more to improve the health care system (click here and here to read about missed savings opportunities).

Where does this leave us?
What’s most striking about POTUS Debt Reduction Plan is what it does not do. Most of the egregious proposals that were bandied about in the context of the debt ceiling debate this summer – such as raising the Medicare eligibility age or cutting federal matching rates more significantly – have been eliminated or dramatically scaled back. It appears that administration strategists have concluded (and let’s be glad they did) that there was no advantage in unilaterally offering up cuts that would anger important constituencies while Republicans remain entirely intransigent on new revenue.

If the president had given up a lot of ground by offering up cuts to entitlement programs that would harm health security for low-income and older Americans, that would have undercut the ability of Democrats on the Super Committee to protect Medicare and Medicaid. It also would have blurred a key Democratic message point going into the 2012 election — Democrats are committed to preserving Medicare and Medicaid while Republicans have committed essentially to eliminating them and replacing them with programs that, even if they had the same names, lack key beneficiary protections.

Of course the President’s plan itself is dead on arrival — the Super Committee members will likely ignore the details of the President’s proposal as they develop (or attempt to develop, or attempt to appear as though they’re attempting to develop) a deficit-reduction plan of their own. But at least it offers us a tolerable, if imperfect, vision of how serious progress could be made on debt reduction without slashing programs that provide health security to the most vulnerable Americans.

–Michael Miller, Policy Director
–Katherine Howitt, Senior Policy Analyst

What’s this all about? Mostly, it’s about shaking up the status quo in the way we pay for health care services. Today, most health care is paid for on a fee-for-service basis. Under this system, doctors, hospitals and clinics are paid “a-la-carte” for care, meaning that they get paid for each individual service they provide — a lab test, an office visit, an MRI – without regard to whether the patient’s health improves. This system gives providers full decision making power, along with the financial incentive to order whatever services they choose regardless of efficacy or expense. The incentive also tends to undervalue lower-paying services such as primary care and important patient supports such as care coordination, home visits, and 24/7 access .

The new initiative seeks to change the status quo by paying providers a fee for all the services a patient receives over the course of an “episode” of care, for example, a hip replacement, rather than paying each provider separately for every service related to the episode (e.g. inpatient stay, lab tests, post-discharge services). The Innovation Center spelled out four models it wants to test. These models vary in terms of episode length, services in the bundle and payment type.

The idea of bundling payments gained traction during the health reform debate primarily based on the experience at Geisinger Health System, a health system out of Pennsylvania (and where it should be noted, the head of The Innovation Center used to work). Years ago, Geisinger launched an episode-based care model for its heart bypass patients. Under this program – called “ProvenCare” – the health system calculated the total cost for all of the preoperative, post-operative and rehabilitation services associated with bypass surgery and paid providers this price. It also created new systems to ensure that doctors were following best clinical practices for the surgery. As a result of implementing this program, there was a 21 percent reduction in all complications from the surgery, a 25 percent reduction in surgical site infections and a 44 percent decrease in hospital readmissions. Geisinger has since expanded this program to other episodes of care such as hip replacement surgery, cataract surgery, obesity surgery, prenatal care for babies and mothers, and heart catheterization.

While the results of this new initiative are still a few years away, bundling payments clearly represents a step toward better care at lower cost. If done well, it will improve the quality of care by encouraging coordination and the use of care management services, such as transition planning, home visits or social service supports. However, if done without strong measures of transparency and accountability for improved quality, it could be a failed experiment. Advocates have a unique role to play in ensuring that the voices of patients and their families are represented in shaping this program, especially in making sure the right quality measures are used.

Given the current pressures in Washington and in the states to reduce health care costs, we hope this bundling program results in lower costs and better care, making it a true bundle of joy.

– Renée Markus Hodin, Project Director

Putting the debate in context
There was a real concern about the nation’s pediatric workforce in the late 1990s after the American Board of Pediatrics noted that the number of pediatric residents had seen a decline of more than 13 percent, and the Pediatric Education Task Force concluded that the lack of adequate federal funding for graduate medical education at independent children’s hospitals was a significant threat to maintaining an adequate number of pediatricians going forward.

To address this issue, Congress created CHGME 1999 so that independent children’s hospitals could receive federal support to train resident pediatricians and pediatric specialists similar to the support provided to adult hospitals through the Graduate Medical Education Program (GME) through Medicare. Prior to the enactment of CHGME, independent children’s hospitals were receiving only half of a percent of the federal funding provided to adult hospitals for GME as well as unstable and varying support from Medicaid.

And CHGME has worked exactly as Congress intended by increasing the number of pediatric residents and pediatric resident specialists training at independent children’s hospitals, meeting pediatric workforce development needs in geographic regions across the country, and ensuring that even children living in states without independent children’s hospitals have some access to well-trained pediatricians and pediatric specialists.

Success begets success
Given CHGME’s track record of success, advocates must remain vigilant to ensure that the program is reauthorized before it expires at the end of September. This becomes even more important given the shortage of pediatric specialists in many areas of the countrydespite the impressive progress made as a result of CHGME. Advocates can play an important role in the coming weeks by weighing in with their Congressional delegation.

For more information on CHGME, check out the new paper from our New England Alliance for Children’s Health program that outlines in greater detail the past success of CHGME, makes the case for why it is still needed, and offers some ideas about how to improve the program.

Training for docs for grown-ups needs help too…
It’s also worth noting that, unlike CHGME, the GME Program (aimed at training physicians who serve adults) receives a majority of its funding from Medicare to train medical residents. Currently, GME does not produce enough primary care providers to meet the country’s needs. Primary care is critical to fixing the health care system, and GME is one untapped tool for primary care workforce expansion, as outlined in another new paper we recently released. More can be done to redesign GME so that it is more nimble in its response to regional and national workforce needs. Policy makers have an opportunity to develop a framework of accountability that preserves our tradition of excellent medical education while tying it directly to the needs of consumers.

—Eva Marie Stahl, Policy Analyst
—Patrick M. Tigue, Senior Policy Analyst

What’s the deal?
In short, the final compromise lifts the debt ceiling enough to last until after the 2012 election and puts in place two stages of cuts in government spending.

In the first stage, caps are immediately placed on discretionary spending, saving $917 billion over 10 years.

In the second stage, a bipartisan joint committee is tasked with developing legislation to reduce the deficit by another $1.2 – $1.5 trillion over 10 years. Failure by the committee to produce an agreement by Thanksgiving or by Congress to enact their plan by December 23 would trigger automatic across-the-board cuts in federal spending to achieve $1.2 trillion in savings. If the Committee agrees on – and Congress enacts – less than $1.2 trillion in deficit-reduction, the across-the-board cuts will be triggered to make up the difference.

Let’s start with some good news
Medicaid and Medicare were spared any immediate cuts in the first stage. That said, the first stage cuts include significant short-run spending reductions; any serious economist will tell you that cutting federal spending in the midst of an economic downturn will only worsen the nation’s employment outlook. These larger economic forces certainly have implications for state budgets and Medicaid, but that’s a blog for another day.

The picture is murkier in the second stage. While Medicaid and Medicare are very much at risk for major cuts in a compromise that the joint committee might broker (more on that below), Medicaid is completely exempt from the automatic across-the-board cuts that would be triggered if the committee fails to achieve $1.2 trillion in deficit-reduction. Medicare benefits are also largely protected: across-the-board cuts to Medicare are limited to 2 percent of the programs’ costs and can only come from cuts to providers and insurers.

This is an important victory. Inside reports suggest that Republican negotiators demanded that Medicaid be added to the mix of programs that could face cuts in the event of the trigger, but the Obama administration refused to budge on this point. Consumer advocates deserve credit: they worked tirelessly over the past few months to send a strong message to Congress and to the White House that Medicaid matters. It’s clear that Obama took that message to heart.

Now the bad news – we’re not even close to out of the woods
Relief that Medicaid will escape unscathed should across-the-board cuts be triggered must be tempered by the understanding that the trigger may not be pulled, and that committee members will consider deep cuts to Medicaid in their efforts to broker a deal.

It is difficult to predict whether the committee will succeed. On the one hand, the terms of the process were constructed specifically to put immense pressure on both parties to avoid the across-the-board cuts. If committee fails to reach a compromise, all $1.2 trillion in deficit-reduction would come from program cuts – violating Democrats’ vows to ensure revenue increases are part of any deficit-reduction package. And 50 percent of the triggered across-the-board cuts must come from the defense budget – a painful prospect for Republicans.

On the other hand, competing pressures may prevent the committee from reaching a compromise. Republicans may prefer cuts in military spending to a compromise that includes tax-increases. And if they can’t broker a deal that includes tax-increases, Democrats may prefer to allow the across-the-board cuts to be triggered since at least Medicaid and Medicare benefits are protected from those cuts.

While there is considerable debate about the likelihood that the committee will succeed, the prospects for Medicaid are grim if a deal is brokered. Having already slashed discretionary spending by nearly a trillion dollars in the first stage, it will be difficult for the committee to find more savings in those programs. That leaves revenue increases and entitlement spending as the only real options for significant deficit-reduction.

Both parties have already drawn lines in the sand around revenue increases, with Democrats insisting on including them as part of a final deal, and Republicans vowing to vote against any package that includes them. But if significant revenue increases are not part of the solution, for the committee to succeed the cuts required to Medicaid and Medicare would absolutely devastate these programs. According to a statement by Robert Greenstein, president of the Center on Budget and Policy Priorities: “The deal that President Obama and Speaker Boehner were negotiating several weeks ago would have raised Medicare’s eligibility age, raised Medicare cost-sharing charges, shifted significant Medicaid costs to states, modified cost-of-living adjustments in Social Security and other benefit programs (and in the tax code), and instituted other entitlement savings. Those steps would have saved $650 billion to $700 billion over ten years. The joint committee would have to produce cuts twice as deep.”

And even if Democrats succeed at ensuring revenues are part of a deal, Medicaid would still likely sustain very significant cuts, such as the ones that were already on the table during earlier negotiations. Those cuts would jeopardize the health and financial security of millions of seniors, people living with disabilities, and low-income children who rely on Medicaid, and they would shift new cost burdens onto already-strained state budgets.

Making a dark picture worse, Congress needs to act this December to avert an automatic cut in Medicare doctor reimbursement rates (the “doc-fix”). While this is unrelated to the debt-ceiling negotiations, Congress will need to offset the costs of the doc-fix – about $300 billion for a 10-year fix – and they will likely look to find these savings in Medicaid and Medicare. These savings would be in addition to whatever cuts the deficit-reduction committee enacts.

Where does that leave us?
Medicaid lives to fight another day, and we should celebrate this success. But let’s celebrate while we roll up our sleeves. The fight starts anew today, and it’s not going to be easy.

– Katherine Howitt, Senior Policy Analyst

You may ask yourself, well, how did I get here?
Back in April, along with a spirited defense of the role for government in the economy, the President laid out a comprehensive approach to debt reduction. The deal he outlined included cuts in military spending, and tax increases. It also included a fix for the Medicare physician payment formula to end the annual ritual of finding funding for a temporary rate patch. Although one can question whether it is either fair or logical to use cuts in Medicaid to partially pay for an increase in Medicare physician payments, as the administration proposed, at least there was some overall balance to the approach. The concern is that as the negotiations continue, the same scope of Medicare and Medicaid cuts would remain on the table without the other elements of the deal.

Equally concerning is the composition of the proposed cuts. Although definitive information about the negotiations is hard to come by, the health care proposals identified in the media are mostly a combination of missed opportunities and bad ideas.

Let’s take a look at each category:

Missed Opportunities

Graduate Medical Education
One proposal on the table is to reduce federal funding for graduate medical education. Instead of focusing on reducing GME funding, a better approach would be to make better use of existing funding by redirecting funding to increase the supply of primary care physicians as outlined here.

Medicare Bad Debt
Another proposal is to eliminate funding for Medicare bad debt. This is another missed opportunity. A reduction in bad debt should contain an explicit exclusion that free care given pursuant to a financial assistance policy would still be reimbursed, giving hospitals an incentive to actually qualify people for financial assistance. This would not only help Medicare beneficiaries, but also low-income underinsured people who often have a hard time obtaining financial assistance.

Bad ideas

The main bad ideas on the table are variations on the theme of shifting costs onto Medicare and Medicaid beneficiaries, including blended rate (combining regular federal Medicaid match, CHIP match and enhanced match for new eligibles under the ACA into a single rate); eliminating or curtailing states’ use of provider taxes; and increases in Medicare cost sharing, all of which will shift costs onto state Medicaid programs and result in cuts in rates or benefits.

A better way
In a plan presented to the Senate Democratic caucus, Budget Chair Kent Conrad outlined a better approach that relies more on progressive taxes and less on health care cuts.

Nor does Conrad’s proposal exhaust the opportunities. In a future post we will look at some of the policy options that could generate federal health care savings that improve quality, efficiency and the underlying health of the public without hurting Medicare and Medicaid beneficiaries.

– Michael Miller, Policy Director

One Medicare reform provision that has proved wildly controversial is the creation of the Independent Payment Advisory Board (IPAB). The board is meant to assure that the Medicare cost containment goals of the ACA are met. If they are not, IPAB is tasked with making recommendations to Congress for reducing program costs.

IPAB, heralded by some as the ACA’s “most promising cost control” and by others as a “death panel,” has been under heavy attack in recent months and its repeal is gaining supporters on both sides of the aisle. Yet, interestingly, the latest tracking poll from the Kaiser Family Foundation shows that the public places more trust in an IPAB-like body than in Congress or even the Centers for Medicare and Medicaid Services to make proposals about ways to reduce Medicare spending and keep the program sustainable in the future.

So, what’s all the fuss about? The Hub will explore the debate around IPAB, find out what’s really underneath the controversy and help advocates sort through the rhetoric. Stay tuned.

– Renée Markus Hodin, Director, Integrated Care Advocacy Project

Saving Money, Saving Lives:
Maryland Paves the Way on Payment Reform

As policymakers across the country look to balance their budgets, some are turning to Medicaid, recycling the same harmful policies they’ve used year-after-year: eliminating coverage for vulnerable Americans, restricting critical benefits like prescription drug coverage, imposing premiums on those who can’t afford them, and slashing already-low provider reimbursement rates.

Community Catalyst and Georgetown University Health Policy Institute Center for Children and Families created the States of Innovation blog series to shine a spotlight on states that are trying to find a better way. We will highlight states that are pioneering new approaches to making Medicaid more sustainable without harming – and often by improving – care for the millions of vulnerable seniors, people with disabilities, children and low-income parents that rely on Medicaid. Our inaugural blog focuses on an initiative in Maryland to reduce the incidence of costly hospital-acquired infections and other medical errors.

By improving how Medicaid and other health insurers reimburse hospitals, Maryland dramatically lowered its rates of costly, potentially avoidable events (PAEs) such as hospital-acquired infections. Maryland’s initiative is far more exciting than that sentence would lead you to believe, and we’ll tell you why.

What’s Really at Stake
Wonky terms like “potentially avoidable events” – and even wonkier acronyms like “PAEs” – obscure what this is really about: the hundreds of thousands of people each year whose lives are shortened and who endure needless pain or lengthy hospital stays because of preventable medical errors.

Indeed, “PAE” takes on personal meaning to people like Ginny Harvey. In 1996, Ginny broke her ankle stepping off a curb and had surgery at a prominent hospital in Boston. That’s where her story should have ended.

But during her hospital stay she acquired a staph infection, which quickly escalated into a fast-moving bone infection. After enduring 28 surgeries over the course of five years – including painful bone and muscle graphs – Ginny was forced to amputate her leg to save her life. “The staph infection did not ruin my life,” she says, “but it has altered my life forever.” For more on Ginny’s story, click here.

Maryland vs. Medical Errors
Maryland is tackling this type of hospital-acquired infection and other medical errors head on. Before we talk about how the state is doing it, let’s start with why we selected Maryland for our debut blog in the series. The state achieved tremendous results across the health care system (not just in Medicaid) in just the first year of their initiative:

• – A nearly 20 percent reduction in hospital-acquired infections, like the type that Ginny suffered from.
• – A 12 percent drop in overall hospital-acquired complication rates. This includes infections but also other harmful preventable events like accidental punctures during invasive procedures.
• – More than $60 million in savings. Because the health care needed to treat these types of preventable complications is extremely costly, as Maryland’s complication rates dropped so did its health care costs.

How Did Maryland Do It?
Maryland’s reforms build on a common-sense concept: hospitals should get paid more for providing higher quality care, and less for providing harmful care. This may seem obvious, but many states’ Medicaid payment methodologies fully reimburse hospitals for the costs associated with treating harmful conditions that could have been prevented. Those payment systems fail to reward hospitals for investing in preventing the types of infections Ginny endured.

The Affordable Care Act will soon require all states to take the first step: stop paying for the costs associated with a handful of medical errors that are virtually always preventable, such as operating on the wrong body-part. But these particularly egregious and extremely rare medical errors represent only a tiny sliver of the potentially preventable hospital-acquired complications that alter families’ lives and drive up our nations’ health care costs every day.

Maryland is the first state to tackle a broader list of 49 adverse events including ones that are usually – but not always – preventable, such as the type of infection that invaded Ginny’s bones. Because these infections are not always preventable, and no hospital could be expected to lower its rate to zero, Maryland did not eliminate payment altogether for the costs associated with them. Instead, it adjusted a portion of hospital payments based on the rates of these complications; hospitals that do a good job at avoiding these events relative to their peers get a little extra money, and hospitals with a relatively high rate get a little less. This provides hospitals with the incentive to lower their overall rates of complications – saving money and saving lives.

The Real Question: Why Aren’t Other States Doing It?
Remarkably few states are following Maryland’s lead. And while they leave this cost-saving option on the table, Republican Governors are flocking to Capitol Hill and insisting that they need to cut vulnerable Americans off Medicaid to get their budgets under control. For example, Governor Christie is requesting that CMS allow New Jersey to freeze Medicaid enrollment for parents earning more than $439 a month. This proposal would result in 23,000 people being denied health coverage, and would save the state only nine million dollars.

Harmful eligibility cuts like these are unconscionable, particularly when New Jersey – and other states like it – could save even more money through payment reforms like Maryland’s that improve health care quality and better families’ lives.

To learn more about moving payment reform in your state’s Medicaid program, please read Community Catalyst’s policy brief. Over the summer, Community Catalyst will also be releasing model Medicaid payment reform legislation, as well as a state-by-state report card to help you track which states are following Maryland’s lead.

-Katherine Howitt, Policy Analyst
Community Catalyst

This blog was based partly on an interview with Robert Murray, Executive Director of Maryland’s Health Services Cost Review Commission.

From a health care point of view, cap proposals that establish an arbitrary ceiling on federal health spending as a specific percentage of GDP are just as bad as specific proposals for Medicaid block grants or Medicare vouchers. Block grants and vouchers become the inevitable mechanism to enforce a cap, shifting costs onto states, providers and beneficiaries. A cap is also a bad idea because it undermines the “countercyclical” effect of federal health spending. Public health spending rises during an economic slowdown as more people qualify for Medicaid (and in the future for ACA tax credits). This natural increase in public health care spending during tough times stabilizes the health care system and the economy. A cap would interfere and make the health and economic consequences of recession much worse.

Battle for hearts and minds—untangling the polls
As the debate unfolds over the future of federal health programs, there are questions about where the public stands. For example, a recent Kaiser poll seems to indicate that the public is very malleable on the issue of Medicare changes. But what results really show is that it is possible to mislead the public with incomplete information. A NPR analysis of the Kaiser polling found the devil is in the details, or how polling questions are framed. Pollsters gave supporters of a voucher program an anti-voucher talking point and were able to move most of them to opposition. Those who opposed vouchers also moved to pro-voucher in response to a pro-voucher point, though not as much. But here’s the rub – the anti-voucher point did not go far enough. It did not point out that the amount of savings from health care cuts was essentially equal to cost of tax cuts for wealthy Americans, and they didn’t offer alternative debt reduction plans for people to choose from. IF people understand the plan, they overwhelmingly oppose it. The question is not whether the public supports Medicare cuts (they don’t). It’s how effective the disinformation campaign will be in fooling the public and how strong the defense of health programs will be.

With that defense in mind, it’s encouraging to see organizations such as AARP getting into the fray. The reaction at town hall meetings from the recent Congressional recess is also encouraging. And public pushback seems to be having an effect. Even Tea Party darling Rep. Michele Bachmann (R-Minnesota) has waffled on her position, and Republicans seem to be losing their appetite for a showdown over Medicare.

– Michael Miller, Policy Director