The Idaho legislature will decide in the 2017 legislative whether to expand traditional Medicaid or create an Idaho alternative to provide medical care to adults under 100% of the federal poverty level. The purpose of this paper is to explain the disadvantages of the former and the advantages of the latter.
If the legislature doesn’t expand traditional Medicaid, it will be much easier to reduce medical costs for all Idahoan by up to 50%; start the process of reforming selected federal entitlements; and, help move those in poverty permanently off government programs by helping them become productive, independent, and economically self-sufficient. The goals are listed as follows:
- Reduce medical costs for all
- Improve medical access for the poor
- Reform federal poverty programs through state-funded pilots
- Help the poor reach their full potential
If the legislature chooses to expand traditional Medicaid, it must use federal rules and it will be very difficult to achieve the foregoing goals. Before going into the details of what an Idaho alternative may look like, it is important to identify several of the reasons why Medicaid expansion is a poor choice. The reasons are both practical and economic.
Reasons not to Expand Medicaid
- Expanding Medicaid will continue the failures of the America’s 3rd party payer system where insurance companies and federal medical programs control 89% of medical spending. The disadvantage of the 3rd party payer system is that those receiving medical care are not invested in finding low cost alternatives thus assuring continued medical costs to increases. America now spends about 18% of its total GDP on medical care while other nations spend 9% or less. Creating an Idaho alternative allows us to refocus the discussion so that medical costs for all Idahoans will be reduced. Expanding Medicaid make it very difficult to reduce medical costs.
- Medicaid expansion will harm the economy by taking workers out of the labor force. Medicaid expansion encourages people not to work or remain underemployed. I recently visited with an employee of Treasure Valley Community College. This person said he sees young people all the time that decide not to take jobs or earn more money because they would earn too much money and lose their Medicaid benefits. A nation that does not expect its young people to work and contribute cannot survive. Medicaid expansion could be rightly viewed as national suicide.
- Expanding Medicaid will continue allocating resources to hospitals rather than primary care. If an organization were to go into a 3rd world country and wish to improve the health of that nation’s citizens, it would go through a three step process. First, it would make sure that everyone had access to clean water, proper sewage disposal, and vaccinations against disease. Second, investments would be made in primary care. Third, the construction of hospitals and access to other advanced medical care. The United States medical system has a good public health system; however, it has skipped over the importance of primary care and spends a majority of insurance, Medicaid, and Medicare funds on care delivered in hospitals. Expanding Medicaid will continue the emphasis on hospitals rather than primary care making it almost impossible to reduce the overall cost of health care.
- Expanding traditional Medicaid will benefit those in poverty; however, it will add another burden on the taxpayer. Expanding Medicaid is a win-lose policy. A win-win policy is achieved when those in poverty have increased access to primary care and taxpayers spend less money. Win-win cannot be achieved if Medicaid is expanded.
- Expanding Medicaid will not decrease the number of people dependent on government programs. Expanding Medicaid to adults in poverty will allow 28 year-old young men to stay in his parents’ basement, work at a minimum wage job, earn less than $11,000 per year, and have his medical care paid for by other taxpayers. Meanwhile, many working and self-employed individuals are paying $12,000 to $18,000 or more per year to have access to medical care when the cost of premiums and co-pays are added together. Those on Medicaid have no payment or deductibles. This creates, in the minds of Medicaid recipients, a $15,000 cliff or they will need to earn almost $25,000 to equal Medicaid coverage and an $11,000 income.
- Medicaid controls its budget by underpaying providers. I know of a dentist living in a small community that provides children on Medicaid free dental care because the cost of seeking reimbursement is greater than the reimbursement. Providers must charge private pay customers more to make up for the loss of income created by low Medicaid reimbursement rates. Increasing the number of people on Medicaid will accentuate this problem; not solve it.
- Expanding Medicaid will make the Idaho state government more dependent upon federal money. It will make it even harder to make necessary entitlement reforms. Not expanding Medicaid will allow Idaho to use its own money and write its own rules. If the legislature takes federal money, the federal government will write the rules and control the program in Idaho. One of the federal rules is that there can be no work requirement for people on Medicaid. How can we get people off Medicaid and other poverty programs if there is no work requirement?
- Expanding Medicaid will add to the national debt. All of the funds used to expand Medicaid come from borrowed money. This is not money taken from Idahoans that we are not getting back.
- Expanding Medicaid will make it harder for other reforms to be made such as bringing a surgery center to Idaho that only takes cash payments. A surgery center that only operates on a cash basis can perform surgeries for 50 to 70% less than a traditional hospital.
The Community Primary Care Program or CPCP provides access to primary care for 15,000 or more of adults in the gap with chronic medical conditions. This program would be funded for less than $20 million. State funds would be used so that state rules would apply which would allow for life coaching and a three year lifetime limit.
The funding of $20 million would be split three ways: $7.5 million or $500 per year to pay for primary care, $500 per year to each person that had a life coach and/or a Medical Saving Account. The life coach is a volunteer position. The $500 would be used to pay for lab work and pharmaceuticals. The balance of the money would be used for administrative work or expansion of the program.
The goal of the program would be to help those in poverty reach a higher degree of economic self-sufficiency. It is estimated there are 78,000 adults in the Medicaid gap. Up to 35,000 of them may have chronic health conditions. Those with life coaches would be given preference to those without life coaches to help grow this important component of the next generation of poverty programs.
The program should probably be run at the local level by the county government. The program is not insurance. It would not provide access to hospital care. This is a separate issue and would be addressed separately; not in this program and not at this time.
Rationale for the Program
The overall goal of this effort is to both provide primary care to the poor and open the door to reduce medical costs for all Idahoans. The focus of this program is on increasing access to primary care and changing the way primary care is funded. It has been shown by Qlliance, a Washington state Direct Primary Care organization that provides primary care for a monthly fee, that downstream medical costs can be reduced by 20 percent or more with a primary care focus. Providing access to primary care is one of the first steps that can be taken to reduce overall medical costs. Providing primary care to those with chronic health conditions will also reduce the cost of uncompensated hospital care which is another cost driver for those with insurance. Reducing the number of individuals that access primary care through the hospital emergency room is a desired outcome.
The program does not use insurance to pay for primary care. Billing insurance for primary care is like billing car insurance for an oil change. It is costly and unnecessary. Those in the gap do not have money or choose not to use their money for primary care. Paying a yearly fee for primary care would open the door for more providers to take cash only for primary care thus changing the way primary care is funded and making primary care more profitable.
The American medical system focuses too much attention and funds on hospital care. A quality medical program needs to have a strong public health system (clean water and sewers) and then strengthen its primary care system. In the United States, there is a strong public health system; however, most of the funds and effort of the medical system skips primary care and jumps to hospital care. This unwise focus is one of the reasons medical costs are higher than they should be. This program is one way of changing that focus.
The CPCP program would have as one of its main goals to provide individualized assistance to achieve life goals. One of these goals is economic self-sufficiency. One of the great failures of the federal government’s poverty programs is the lack of ability of individuals to move off of poverty programs and into economic independence. The CPCP program creates a mechanism to do so by giving preference to those with life coaches.
The use of state funds is critical. State funds allows for work requirements, life coaching, and flexibility that is lacking if the Idaho legislature decides to expand Medicaid. Under Medicaid federal funds are used which gives the federal government the power to dictate how the program will be run. The federal government does not allow for the imposition of work requirements. It is a long and laborious process to change Medicaid design. The CPCP program would provide the flexibility to make changes on a yearly basis.
Idaho is in a unique position to change the way medical care is provided in Idaho and possibly the entire United States by implementing a pilot program that provides primary care to those in the Medicaid gap. If Medicaid is expanded, this opportunity disappears. Medicaid expansion condemns that those in the gap to be cared for under federal rules. It will continue the 3rd party payer system that largely ignores primary care. Little will change and costs will continue to rise.
The Idaho legislature has an opportunity to take a different path. A path that focuses on primary care, changes the way primary care is funded, and opens the door to other innovations not discussed in this paper such as cash surgery centers that charge ½ or less of a traditional hospital.
If this pilot does not work, there is no time limit to expanding Medicaid. Medicaid could be expanded at any time. However, if Medicaid expansion takes place, it will never be repealed and the opportunity to do an Idaho pilot will never come again.
Question: Expanding Medicaid would add $500 million to the budgets of Idaho hospitals. How can one justify turning down this federal money?
Answer: Rejecting federal money opens the door to bending the medical cost curve downward with the potential of reducing overall medical costs for all Idahoans by 50% or $5 billion. Saving Idaho citizens $5 billion is more important than increasing hospital budgets by $500 million.
Question: Where will the $20 million come from to fund Community Primary Care Program?
Answer: The money could come from the general fund. There are several options. The phase out of the CAT Fund would free up $22 million and leave up to $2 million to spare. Remember, the expansion of Medicaid would cost Idaho taxpayers 10% of the $500 million or $50 million. The same question could be asked of those who wish to expand Medicaid. Where will the $50 million come from? The Community Primary Care Program will expend $30 million less than expanding Medicaid.
Question: What about those that need operations and have medical needs that require treatment in a hospital setting? The Community Primary Care Program (CPCP) only provides primary care.
Answer: The Community Primary Care Program’s focus is primary care. The American medical system needs to refocus its energy on primary care in order to improve access and reduce costs. This means that the first step is to rebuild our primary care system.
The CPCP program does not stop communities, hospitals, or the state to address this issue in another way. The reality is that government programs cannot both provide care for everyone in every situation and maintain a low cost system. Under the American system of limited government, the needs of the poor are to be met through charity care and through self-help.
In the future, the medical needs of the poor that need to be addressed in a hospital can be addressed. Some of the options that could be pursued are: first, bring in an Oklahoma type surgery center into Idaho. These surgery centers only take cash and the cost is 50% or less than that of a regular hospital; second, allow the county indigent funds to be used for such purposes; third, create a program where the state can match locally raised funds for such purposes; fourth, create a network of providers that would be willing to do charity operations at no or reduced costs; fifth, the county indigent funds could be used to buy a risk instrument for those in poverty (see below for more details); sixth, help people get to the position where they can pay for their own care; and seventh, work with the federal government to use Medicaid dollars in the hospital setting while only state dollars are used for primary care.
Question: What will happen to the state CAT Fund that was created to provide medical care for the poor and reduce uncompensated hospital care?
Answer: The eventual goal is to eliminate the state CAT Fund. The theory is that investing $20 million on primary care is another way of reducing hospital uncompensated care by keeping people out of the hospital by taking care of medical needs in a primary care setting rather than in a hospital setting. Two of the major hospital networks in Idaho have a combined budget of over $4 billion. The CAT Fund only adds $20 million to their budgets or less than 1/2 of 1 percent. This is a rounding error for hospitals. A refocus on primary care will reduce uncompensated care more than the CAT Fund is now doing with less paperwork.
Question: What will happen to the county indigent program and funds?
Answer: Under the CPCP program the program would shift to providing primary care. The funds would be repurposed and could be used in several ways: provide life coaches, buy a non-qualifying health insurance product, fund needed hospital care, or others. This question will be fleshed out as the discussion progresses.
Question: What are some of the other advantages of the CPCP program?
Answer: One of the advantages is that it would create a market for a true health insurance product that does not qualify under the ACA. Insurance is supposed to help each individual manage risk. The ACA is a 3rd party, pre-paid medical care program and is not insurance. If a market was created for those in the gap where they could buy a produce that covered a limited number of medical issues, the cost could be as little as $100 per month. If such a market of non-ACA qualifying policies were created, other private Idaho citizens could purchase non-ACA qualifying products. It would reintroduce true insurance back in the equation. Some are concerned about the ACA penalty for not having qualifying insurance. This penalty can only be assessed and collected if a taxpayer has a refund. Don’t have a refund and the penalty is not an issue.
Question: Life coaches are part of the CPCP program. Where will they come from?
Answer: There are several organizations that exist in Idaho that could provide life coaching. They include churches and LOVE INC. in Nampa. Stars of Courage is national organization that was created specifically for the purpose of providing life coaches to those in poverty. Under the CPCP program life coaches would volunteer their time, usually an hour a week for a year. Funds will probably be needed to provide training.
There are not 15,000 life coaches ready to provide coaching which mean that not all participants in the program would have a life coach at the program’s inception. To encourage the growth of the life coach movement, preference would be given to those with life coaches.
Question: Isn’t having insurance important?
Answer: Yes, however it is important not to confuse health insurance and access to medical care. An example will show this point. Two young fathers had wives that each had a baby at the same time. One young father did not have insurance; he paid $9,500 in cash for the birth of his baby. The other young father had insurance also paid $9,500 out of pocket; however, he had to pay $14,000 in premiums for the privilege of having insurance that did him absolutely no good.