Experimenting On the Poor

The left only knows two ways to constrain health care costs: Squeeze the providers and ration care through global budgets and everyone knows that there is a limit to how much you can squeeze providers. The HMO we predict is in your future is about to come to California, as reported by Suzy Khimm at the blog site of Ezra Klein, an enthusiastic supporter of Obama Care:

This week, California will begin to place all of its elderly and disabled Medicaid patients — the costliest, most illness-prone beneficiaries — into managed care programs under a waiver it received from the Obama administration in October. Although these long-term care patients make up only about a quarter of Medicaid patients nationwide, they’re responsible for two-thirds of the program’s expenditures. Certainly, the projected cost-savings of California’s plan are ambitious: The state budget calls for 10 percent savings through managed care over traditional fee-for-service, giving insurers a fixed lump sum for each Medicaid rather than directly paying doctors and other providers for individual services. Managed care proponents argue that these systemic changes — which include better care coordination, closer assessment of which services are necessary, and incentives for doctors to choose more cost-effective treatments — will save states money without sacrificing the quality of care.

Similarly desperate to rein in Medicaid costs, states including Tennessee, Rhode Island, Kentucky, New Jersey and Florida have also pushed to expand managed care to cut Medicaid costs. In recent months, for example, a handful of states have followed California’s lead by placing elderly and disabled Medicaid enrollees — known as “Seniors and People with Disabilities,” or SPDs — into mandatory managed care.

The worry among consumer advocates is that HMOs and other managed care companies will end up cutting corners at the expense of a particularly vulnerable population. “The details matter a lot. SPDs have unique needs we don’t meet particularly well,” says Harold Pollack, chair of the University of Chicago’s Center for Health Administration Studies. What’s more, some have cast doubt on the projected savings that HMOs have touted: A 2005 study by the Robert Wood Johnson Foundation, for example, showed that an earlier expansion of managed care in California’s Medicaid actually increased costs to the state by as much as 17 percent without improving health outcomes.

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