Medicare Primer

Medicaid Primer

1. Who is covered by Medicaid?

Roughly 60 million low-income Americans. The eligible groups are children, parents with dependent children, pregnant women, people with severe disabilities, and seniors. The breakdown is:

• 29 million children
• 15 million adults under age 65 (primarily parents)
• 6 million seniors
• 9 million people with disabilities (roughly half are children)

2. How does spending map to these groups?

15 million seniors and disabled patients represent about $250B of Medicaid's $400B annual spending. Using round numbers, here is how spending maps to groups:

• Children: 50% of enrollees, 20% of costs ($80B)
• Adults: 25% of enrollees, 12% of costs ($48B) 
• Seniors: 10% of enrollees, 25% of costs ($125B)
• Disabled: 15% of enrollees, 42% of costs ($168B)

3. What is the average annual per capita spending per group?

• Children: $2,135
• Adults: $2,541
• Seniors: $12,499 (about 80% in Long Term Care costs)
• Disabled: $14,481 (about 40% in Long Term Care costs)

4. How concentrated is the spending?

Roughly 5% of enrollees account for over 50% of Medicaid spending -- mainly driven by 2.5 million seniors and disabled people 

5. How is Medicaid financed?

Costs are shared between the federal and state governments. The federal share ("Federal Medical Assistance Percentage") is at least 50% and can reach 76% in poorer states. Overall, the federal government covers about 57% of Medicaid costs.

6. How will Medicaid be impacted by health reform?

Beginning in 2014, roughly 16 million people will become eligible for Medicaid. If you are under the age of 65 and have an income that is at or below 133% of the federal poverty level, you will likely be eligible for Medicaid under health reform. This means that non-disabled adults that do not have dependent children will no longer be categorically excluded. Eligibility rules for the elderly and disabled will not change.

The federal government will cover 100% of the costs of the newly eligible enrollees for the first three years (2014-2016) and will gradually phase down thereafter.

For more, see: The Kaiser Commission on Medicaid and the Uninsured

7 astonishing facts about readmission

1. Direct communication between hospital physicians and primary care physicians occurs in only 3 to 20 percent of cases. -Journal of the American Medical Association, 2007

2. Only 12-34% of doctors received discharge summaries by the time patients make their first post-discharge visits. The range rises to only 51-77% after four weeks, affecting the quality of care in about a quarter of follow-up visits. - Journal of the American Medical Association, 2007

3. 78% of patients discharged from the ER do not understand their diagnosis, their ER treatment, home care instructions, or warning signs of when to return to the hospital. – Annals of Emergency Medicine, June 2000

4. At discharge, only 42% of patients are able to state their diagnosis, and 37% are able to state the purpose of all of their medications. – Mayo Clinic Proceedings, 2005

5. A 20% reduction in the national readmission rate would prevent approximately 7,000 readmissions per year for AMI, 22,000 for heart failure, and 14,000 for pneumonia. –The Centers for Medicare and Medicaid

6. 41% of inpatients are discharged with a pending test result. 2/3 of physicians are unaware of the results of the pending tests. –Annals of Internal Medicine, 2005

7. 75% of discharge summaries do not mention any pending test results. Only 13% of discharge summaries document all pending tests.  –The Journal of General Internal Medicine, September 2009

Hospitals are learning to love patients

US hospitals take in more than $500B annually, which is more than twice the amount Americans spend to clothe themselves. What if clothing stores and their websites offered a consumer experience similar to that of hospitals? Think pricing opacity, limited information on quality, perplexing store navigation, and a sense that customer experience is a low priority. I suspect that the apparel industry would be much smaller if this were the case. We would simply make do with fewer clothes.

Why, then, do hospitals continue to capture such a large slice of the US economy? Why haven't more patient-friendly institutions grown up to compete with conventional hospitals on the basis of patient experience? [1] The answer is that, on average, patients pay for just 5% of hospital services. Medicare and commercial insurers are hospitals' real customers. And these customers are demanding a stronger focus on patient experience. In particular, starting this year, Medicare's Value Based Purchasing program will use patient survey results to determine incentive payments to hospitals.

Combine this trend with the rise of high deductible plans -- which have tripled in the last five years -- and you have a more consumer-driven market for hospital services. And since higher patient satisfaction is correlated with higher care quality, this could be a good trend for hospitals, payers, and patients alike.

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[1] To some extent this has happened in the form of surgical hospitals, which dominate the list of hospitals with the highest patient satisfaction scores.

Most hospital software sucks. The day of reckoning approaches.

Today's Wall Street Journal cuts to the heart of the care coordination challenge. Coordination is good for patients, providers, and payers, but will require a redesign of healthcare workflows and the health IT systems that support them.

The reality is that providers have poured millions into EHR systems that were designed to keep information locked down behind institution walls. These EHR systems will struggle mightily to accommodate a care model that is characterized by cross-institutional coordination and proactive patient engagement. Unfortunately, many hospitals will pay these vendors millions more for a suboptimal care coordination solution.

Now that we have the largest commercial payer (UnitedHealth) along with the largest overall payer (Centers for Medicare and Medicaid Services) rolling out compensation plans tied to coordination and value, change is inevitable.

The Wall Street Journal reported the following UnitedHealth factoid:

"UnitedHealth said that it will ramp up what it calls "value-based" contracts over the next few years, so that between 50% and 70% of the carrier's commercially insured members could be affected by 2015, up from about 1% to 2% this year."


Keep in mind that UnitedHealth is connected to more than 5,000 hospitals.

In order to thrive in a "pay-for-quality" world, hospitals and clinics will need to start thinking beyond their walled garden EHR systems and elusive state HIEs. At the very least, they will need:

• an EHR-agnostic means of sharing clinical information that is uniquely edited for the recipient based on context. In other words, they need more than just an ability to share a Continuity of Care Document (CCD). They need to be able to invoke software logic that understands: 
• who should know about this event? 
• what is the best way to alert the recipients? 
• and what information elements are most appropriate for each recipient?

• patient-engagement that goes beyond a conventional patient portal. Providers not only need to help patients -- particularly hospitalized patients -- understand their condition, but they also need to enlist the ongoing support of the patient's broader circle of care. This includes friends and family members, skilled nursing facilities, and other community resources.

• an early warning system that helps to direct scarce clinical resources to at-risk patients before they fall into a costly care cycle.

Literacy and the empowered patient

There was a time when I assumed that virtually all US adults could read reasonably well. After all, the US has a literacy rate of 97%. Then I started building tools for hospitalized patients. Essentially, a quarter of our country's population is functionally illiterate. Half of Detroit basically can't read.

How, then, do we go about empowering this population of patients with information about their health?

Even if you avoid the vast sea of jargon and acronyms, understanding health requires some knowledge of basic biology. (I had an interesting discussion with some medical officers at a major commercial insurer on this very topic earlier today.) The solution must involve more time with the patient. But hiring more patient-facing staff is expensive. This is where software comes in. Software that adapts to the patient's unique literacy level and helps the hospital staff know where to target human intervention. We are building it.

Here are some of the metrics we seek to improve:

• Just 22% of patients discharged from the ER understand their diagnosis. (Annals of Emergency Medicine, 2005)

• Just 37% of patients can state the purpose of their medications at inpatient discharge (Mayo Clinic Proceedings, 2005)

• The average time spent with patients reviewing discharge instructions is just 8 minutes. (Boston University Medical Center, Project RED)

Start-up funding for ACOs

In the process of reading through the 400+ page proposed rule on Accountable Care Organizations, a thought consistently surfaces: this program has the potential to change health care in this country. 

If ACOs succeed in motivating providers to improve outcomes and lower costs for a population of Medicare beneficiaries, then I suspect the private insurers will follow and a new era of care will begin.

But how do we get there from here? Even with certified EHRs and state HIEs in place, providers need new applications in order to deliver on the ACO vision. A new category of technology will likely emerge that optimizes the performance of cross-functional and cross-organizational teams. As opposed to legacy EHR and HIE technology, ACO technology will enable the otherwise disparate group to manage itself as a single entity with aligned clinical and economic goals. For example, ACO software might include: 

• Reporting: not just a mechanism that the 65 quality measure reports, but also a means to report against underlying trends on a single patient and/or provider level. For example, a provider should be able to ask the system how many MRIs a particular patient has had over a certain time period. Moreover, the system should be able to forecast progress against financial goals and estimate potential bonus payments.

• Collaboration: a care team should be able to quickly assemble around not only a particular patient, but also a particular episode for a particular patient. The distribution of information for the care team should be as seamless as sharing photos on Facebook, but with the security and authentication of a mission critical clinical system. Information from encounters and consults should be automatically captured by the system so that minimal incremental data entry is required.

• Patient engagement: not to be confused with a mechanism by which a patient can make an appointment and request medical records, this software would be complement to care management. Providers might use it not only to offer virtual patient visits, but they also might use the portal to conduct video conferences among a larger care team, including PCP, specialist, case manager, and patient. Some patients might use the portal as a tool to manage and monitor their ongoing health. 

And these examples are likely just the tip of the iceberg. CMS estimates that ACO start-up costs will fall in the $1-2 million range. If ACOs have the potential to transform health care, should CMS subsidize the start-up costs for providers? I plan to offer that suggestion during the public comment period. Many of the providers I know are already spending their limited spare time and resources on EHR upgrades in order to meet Meaningful Use requirements. For many, investing in ACO technology is simply not possible without outside help.