Insurer Says, “Mother, May I?”

The Providence Journal has a story on the fact that Blue Cross & Blue Shield of Rhode Island and the attorney general’s office have agreed on how much the insurer can increase its premiums.

Think “the free market” has failed us in health care? We’ve hardly got a market when the state’s number two politician (after all, attorneys general are often called “aspiring governors”) is in a position to tell a company how much it can charge.

This isn’t to say that BC/BS is a model corporate citizen. I don’t know their reputation in Rhode Island, or their history. But the agreement points to the need, when it comes to insurance, to have a competitive market. In such markets, there’s no legal or political wrangling between government and business when it comes to setting prices. The free interaction of buyers and sellers, ideally in a situation where there are many buyers and sellers, takes care of that.

If you want to buy tutoring services or piano lessons for your child, you don’t need a government office to determine what price you’re going to pay. The same for dry cleaning, fast-food meals, and many other services we depend on every day. There are a number of policy brambles to clear away when it comes to health insurance (the third-party problem, barriers to entry, etc.), but if we got them removed, the question of “how much will insurance cost” will be settled in the market, not in government offices.

Fixing the Long-Term Care Financing Problem

The State of Rhode Island took a daring leap into radical Medicaid reform last year. The state requested and the Centers for Medicare and Medicaid Services (CMS) granted a “global Medicaid waiver.” Under this unique plan, Rhode Island agreed to a cap on Medicaid matching funds for five years in exchange for more flexibility to administer the program than federal law and regulations otherwise allow. Among other objectives, the state is using the global waiver to increase Medicaid-financed home and community-based services while reducing nursing home utilization.

Rhode Island’s gutsy move and noble goals for long-term care (LTC) are praiseworthy. But will they save money or break the bank? Will offering more services people want (home care) and fewer they’d rather avoid (nursing homes) swell Medicaid ranks? Can Rhode Island get it right and become a model for the rest of the country?

Our new report, titled “Doing LTC Right,” released in collaboration with the Providence-based Ocean State Policy Research Institute, answers all these questions. Read the whole report here (PDF).

With state and federal budgets in crisis, public officials will have to address Medicaid and long-term care costs sooner rather than later. The good news is the problem of financing long-term care is easy to fix. Our report explains the solution. If Rhode Island follows our recommendations, it can become a model for long-term care reform the rest of the country should follow. So, roar Rhode Island, show the rest of America how it’s done. Save the Medicaid LTC safety net and unleash the potential of private market alternatives.

Reforming Health Care Without Breaking the Bank

If, as as often mentioned on this site, the health “reform” proposals in Congress are bad news, what’s the alternative? The Ocean State Policy Research Institute, of Rhode Island, is one group offering some other ideas.

The institute’s president, William Felkner, says “fiscal conservatives have a positive role to play in the national and local debate on health care.” He went on to say that his group wants to “reform health care by empowering individuals, expanding choices for doctors and patients, and eliminating waste and abuse in the system without making government even bigger and taxes more burdensome.”

The institute offers 9 principles for reform:

1. Tax breaks for health insurance.
2. Expand use of Health Savings Accounts.
3. Allow interstate purchasing of insurance.
4. Reduce mandated benefits.
5. Create Medicaid vouchers.
6. Promote health insurance cooperatives or exchanges.
7. Eliminate unnecessary scope-of-practice laws.
8. Tort reform.
9. Long-term care reform.

Rhode Island Medicaid Reform Could be Costly

The good news is that Americans are living longer than ever. The bad news is that this fact, combined with laws that encourage dependency on government to pay for long-term care, is putting a great strain on state budgets.

Last year, Rhode Island received a "global waiver" from the U.S. Health and Human Services department, which lets it revamp its Medicaid program. Medicaid is a common way for nursing home residents and others to pay for long-term care.

The Ocean State Policy Research Institute recently released a new report calling for addressing the state's rising costs of paying for long-term care.

Here's the press release:

Today, the Ocean State Policy Research Institute released a new report titled "The Age Wave, The Ocean State, and Long-Term Care" regarding the future of long-term care and Medicaid reform in Rhode Island. The report was based upon an in-depth study of Rhode Island's health care industry conducted by Steve Moses, OSPRI Fellow for Health Care Policy and President of the Center for Long-Term Care Reform.

"Rhode Island is fortunate to have a one-of-a-kind opportunity to reform our health care system with the Global Medicaid Waiver," said OSPRI President William Felkner. "Steve [Moses] is an expert in the field of Long-Term Care, and when I contacted him about the Global Medicaid Waiver, he immediately saw the opportunity to bring real reform to the Ocean State."

Moses spent a number of days interviewing dozens of public officials and related professionals about the state of Rhode Island's health care system and the impact that the Global Medicaid Waiver could have on long-term care. The report outlines the immediate and underlying problems that the state is facing and proposes potential solutions that would reduce costs to both the state and taxpayers while providing more efficient and effective services.

"Our state government has reached the crest of the wave, and if we don't act soon to find and implement viable solutions to our health care crisis, it's all going to come crashing down on us," Felkner said. "Steve and I look forward to working with both public and private sectors to reform the long-term care system in our state."

The full report can be found on the Ocean State Policy Research Institute's website: www.oceanstatepolicy.org/docs/AgeWave.pdf.

Here's the short summary:

Rhode Island's current plan under the global Medicaid waiver to expand home and community-based services while reducing nursing home use without controlling the state's wide-open LTC eligibility system is, however unintentionally, highly likely to increase costs and undermine private-sector LTC financing sources. Careful study and further review of the issues raised in this report will identify corrective actions that can reduce costs by targeting Medicaid benefits under the global waiver to people most in need and by encouraging private, market-based solutions based on savings, investment and insurance to fund long-term care.

In other words, promises to "save money" through reform may end up costing more.

U.S. Index of Health Ownership 2nd Edition Is Here

Pacific Research Institute has published the 2nd edition of the U.S. Index of Health Ownership, the only ranking of health care in the states that uses criteria of individual choice.

Americans lack the basic freedom to make their own health care decisions. The Index measures the degree to which individuals, be they patients, health professionals, entrepreneurs, or taxpayers, “own” the health care in their states.

The lack of health ownership is a real problem. Almost half of the country’s health care spending is in the hands of the government, instead of patients themselves. The other half is governed by regulations inflicted upon doctors, health plans and patients.

The Index uses 24 variables to quantify how state laws and regulations affect the liberty of citizens involved in state government health plans (primarily Medicaid), the private health-insurance market, and the provision of medical services. It also assesses the effect of medical tort on people’s freedom to engage health services.

Alabama, Montana, Nebraska, North Dakota, and New Hampshire finished in the top five, as the states that allow their citizens the highest degree of health ownership. Alabama leads the pack primarily because of a lightly regulated private insurance market, and good control of state government programs. Also, the state performs well on medical tort indicators. Alabama’s regulatory environment for providers favors competition, and government health programs run more effectively than in most states.

New York, Massachusetts, Rhode Island, Vermont, and North Carolina rounded out the bottom five, as the states in which the government has taken the most undue control of health care from its citizens. This is the second year that New York was in last place. The state suffers from government health-care programs that are out of control, a grossly overregulated private-insurance market, and almost completely uncompetitive provider markets.

A full listing of all 50 states and their rankings is contained in the Index.

The Index will give concerned citizens a good basis to demand reforms from their state politicians that will put American families in charge of American health care, instead of government and special interests.

Rhode Island has a Chance to Fix Medicaid

Despite conventional wisdom that Medicaid long-term care benefits require total impoverishment, the truth is much different.

Anyone with income below the cost of a nursing home ($6,000 per month on average nationally) is eligible for Medicaid long-term care based on income, and the rules are even more generous in most states. There is no limit on assets held in exempt form such as home equity, one business, one auto, prepaid burial plans and term life insurance.

Medicaid planning lawyers specialize in artificially impoverishing affluent clients to qualify them for Medicaid LTC benefits and simultaneously getting them into the best nursing homes by taking beds more properly reserved for the truly needy. As a result, Medicaid crowds out 2/3 to 90 percent of the potential market for private long-term care insurance (Brown and Finkelstein, www.nber.org).

Medicaid's huge home equity exemption–$500,000 to $750,000, depending on the state, and 15 times as big as in the UK, a socialized health system–precludes the use of seniors' biggest asset (home equity) to fund their own LTC thus placing this huge liability on Medicaid, ostensibly a welfare program. Because of easy, highly elastic Medicaid eligibility rules and the lack of strong estate recovery, we have a welfare-financed, nursing home based long-term care system in the wealthiest country in the world where no one wants to go to a nursing home but the public remains mostly unaware of the risk and cost of LTC.

This dysfunctional system persists because federal law and regulations do not allow states to target Medicaid to people in need so they could use the savings to incentivize responsible LTC planning including private insurance and the use of home equity conversion to fund LTC.

Rhode Island's global Medicaid waiver is a unique and marvelous opportunity to fix LTC financing in a state by controlling LTC eligibility, expanding home and community-based care, and maximizing (1) tax revenue from private insurers and reverse mortgage lenders and (2) non-tax revenue from estate recoveries. If RI can do it, so can the whole country, so we have the opportunity here to create a model for reform that can do for Medicaid and long-term care financing what welfare reform did for public assistance. Island with a special study currently in the planning stage.

Rhode Island Rejects Rate Increases

Christopher S. Koller, the health insurance commissioner in Rhode Island, has denied three insurance companies the right to raise their prices (that is, premiums).

Koller says "Rhode Island employers and employees have reached a tipping point with respect to their ability to pay for health insurance. We are in a crisis."

Rhode Island’s Medicaid Makeover

The Ocean State Policy Research Institute hopes to take use Rhode Island's Medicaid waiver as an opportunity to introduce some much-needed reforms to the state.

To that end it has hired StateHouseCall.org contributor Stephen Moses. The institute quote him as saying in part,

"This state can show what can happen when a state Medicaid program eliminates perverse public policy incentives that have trapped millions in nursing homes on welfare, created the long-term care system's institutional bias, diminished access and quality of care, and created a cottage industry of 'advisors' who overload Medicaid by artificially impoverishing vulnerable elderly clients."

Rhode Island Approves Medical Marijuana

Though the trend in health care these days is one of more government control, the Rhode Island General Assembly has cracked open the door to personal choice just a bit. By nearly unanimous votes, the two legislative bodies voted to override a gubernatorial veto of a plan to to establish "compassion centers" to dispense medical marijuana.

A Call for Competition

The Providence Journal reports on a public hearing in Rhode Island, during which a functionary gathered information on whether to let insurance companies raise their premiums.

(Pause for a minute to let that sink in. Maybe next we will have public hearings where a government official decides how much the local grocery store can charge for a gallon of milk or a loaf of bread.)

The article tells of a few people who testified against rate increases. They may face a difficult situation, facing 5-figure annual premiums. On the other hand, there's no mention of possible causes of the high prices (including government policy) or alternatives, such as regional compact for insurance purchases.