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The Medi-Medi problem

Pills on money symbolizes costs of U.S. health care

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Kai Ryssdal: This just in: There's disagreement about how much the health care reform law's going to cost. Today's specific line item is what the expansion of Medicaid is going to cost states over the next decade.

That expansion's part of health care reform, and like many things having to do with that law, there's much disagreement, depending on which side of the political aisle you call home.

At the state level, though, there is general agreement on this. States are already so deeply in debt that any increase in costs feels unaffordable and the rules about who pays for what are screwy. Medicaid and Medicare, for instance, conflict with each other in some very expensive ways.

From KQED, Sarah Varney reports.


Sarah Varney: Health policy wonks have a term for people covered by both Medicare and Medicaid: they call them "Medi-Medis." And their potential for busting state and federal budgets is enormous. While they make up just 16 percent of beneficiaries, they account for more than a third of all Medicare and Medicaid spending.

That's in part because they're often old, and can be pretty sick. But there's another reason: Medicare and Medicaid are often at odds with each other. Rules that apply to one program conflict with rules for the other. And that drive costs up even more.

Marty Lynch deals with those conflicting rules just about every day. He runs LifeLong Medical Care, a group of health clinics in Berkeley, Calif.

Marty Lynch: There's really very little coordination between the different kinds of care that a person needs.

For instance, Medicare pays for doctor's visits, hospital stays and prescription drugs. But it doesn't cover nursing home stays or some in-home care. Medicaid picks up those bills.

But here's the real messy part: the federal government runs and pays for Medicare -- 100 percent. A doctor's bill goes straight to Washington. But Medicaid? The states pay up to half the bill and the federal government pays the other half. So each one is always trying to stick the other with the check, says Lynch.

Lynch: Medicaid state people will see, 'Well if we can shift the cost to Medicare, it's less that we're spending,' and everybody knows the state and a lot of states are in a real difficult financial situation. The feds, on the other hand, are happy to shift a few costs to Medicaid because the state pays part of that.

And that tug-of-war can lead to some perverse incentives. For example, Medicaid doesn't pay nursing homes extra when their patients get sick.
So what do many nursing homes do? They send their patients to the hospital, even if they don't really need that level of care because Medicare will pick up the tab. And there are a lot of examples like that.

But there is a sense that logic may finally prevail in Wonderland. As part of the health law, a new federal office is cataloging the many inconsistencies that irk providers and drive up costs. The list is a long one.

Sharon Donovan: Actually, I'm looking at it right now. It's 15 pages and growing, very small font, 8-point font.

Sharon Donovan helps run the federal effort to make the programs easier and cheaper to run. She says one proposal is to give states the authority -- and money -- to administer Medicare. Then, they could hire managed care companies to provide both Medicare and Medicaid services.

Toby Douglas oversees California's Department of Health Care Services. He thinks the idea has promise.

Toby Douglas: They would be responsible for coordinating all the care and receiving one payment that's both from Medicare and Medicaid that would better align the incentives to provide more preventive care, keep individuals out of an institution, and ideally drive down the costs that would result in savings to both the state and federal government.

It would also result in giving all the decision-making to the states, and that makes consumer advocates a little nervous.

Karen Davenport is director of health policy for the Center for American Progress. She says for the proposal to work, you'd need strict safeguards.

Karen Davenport: So that you're not looking at states which are facing a lot of budget issues using Medicare money to replace what they would have been spending otherwise through the Medicaid program.

And, says Davenport, even if everyone behaves, straightening out Medicare and Medicaid is just a first step. The private health care system -- insurance companies, drug makers, doctors and hospitals -- is also littered with perverse incentives. And costs will continue to climb, economists say, until someone starts making sense of those contradictions too.

In San Francisco, I'm Sarah Varney for Marketplace.

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Single payer would eliminate this problem, which undoubtedly is the most efficient and economical form of health care. The system as is - described - additionally adds considerable tension to those who are burdened enough with their medical needs.

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