Our Superficial Public Policymaking

Considering it stands virtually no chance of going anywhere, State Senator Roger Breske (D-Eland) has received a pretty good amount of press (here and here) for his plan to introduce standalone legislation to bring back the hospital assessment.

In his press release, Breske notes the oddness of including a transfer from the patient compensation fund in the budget but not the hospital assessment that would generate millions more in matching federal dollars than it would cost. It would be interesting if his legislation actually includes a provision to dump the patient fund transfer.

Granted, I don't think dumping the transfer would make the bill any more palatable to the GOP Assembly, which is interesting considering how Republicans have gone after Doyle for segregated fund transfers in the past and how much attention the right has given to medical malpractice suits when it comes to rising health care costs.

To be sure, while the patient fund has had an average annual surplus of $130 million over the past two decades, it's been pointed out that a surplus is necessary to keep premium rates down.

As the Journal Sentinel noted yesterday regarding the patient fund transfer, "pulling $200 million from the fund will mean higher premiums going forward." And, as conservatives love to point out, those types of costs on businesses just get passed along to consumers in the form of higher costs.

Yet, in spite of all of this, the GOP leadership agreed to the patient fund transfer relatively early in the negotiation process -- about a month ago, to be exact -- while absolutely refusing to budge on the hospital assessment that would generate more funds than it would require, leading some health systems to pledge to lower health care costs if it was implemented.

This is the result of the budget process becoming about a final overall figure rather than what makes the most sense for the state.

The hospital assessment fell into the $1.7 billion figure Republicans were denouncing since February, and reducing that amount became the goal, which meant that the hospital assessment had to go, especially if the politically safe cigarette tax was going to be the one big tax that was allowed to stay.

The patient fund transfer, conversely, wasn't part of the $1.7 billion, so it wasn't as big of a problem if it stayed, even if it actually does what Republicans wrongly, for the most part, claimed the hospital assessment would do -- increase health care costs.

It's amazing, and quite sad, that the word "tax" is allowed, without much or any consideration for the actual effect, to have such a hold on public policymaking in the state.

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SIDE-NOTE: Just to clarify, I do think the patient fund transfer is a poor public policy choice, but that's separate from the issue of increasing funds for state health care initiatives, which is what the transfer is intended to do. Increasing those funds is a reasonable goal that is worthy of debate, but doing so through a transfer from a segregated fund -- particularly one that isn't funded by public dollars -- is unwise and should be unnecessary.

I don't mean to suggest in this post that it's the job of Republicans to reject a move like the fund transfer -- it shouldn't have been proposed in the first place -- but it is interesting to examine why the transfer wasn't given much or any resistance, while the far more sensible hospital assessment was somehow a deal breaker.

UPDATE: Check out the Recess Supervisor's excellent and interesting take on the Breske bill.

The New Hospital Assessment Is Much Improved

The big news on the budget this morning is the Wisconsin Hospital Association withdrawing its opposition to the hospital assessment that would be aimed at leveraging federal dollars to help increase the Medicaid reimbursement rates hospitals receive.

The Journal Sentinel covers it here, although the Wisconsin State Journal provides a bit more informative of an article here.

I expressed concern about the hospital assessment when it was initially proposed back in February, and that concern was tied to the fact that the plan relied on federal dollars that aren't the most stable; even a slight regulatory change in how the federal money can be spent could tank the entire equation.

That's what makes this new agreement a really good one. Rather than making the assessment permanent, the budget bill would have it expire after the biennium. This alleviates the concern about relying on federal dollars over the long haul.

At the same time, it does require that another potentially contentious debate take place in two years over where to get the money to continue the increased reimbursement rates. And considering the new agreement calls for a fixed assessment rather than a percentage tax on hospital revenue, it's almost certain that more money will be required to sustain the same reimbursement level as health care costs continue to rise.

Of course, a big piece of the puzzle that's still missing is GOP support. According to the WSJ, Speaker Huebsch declined to comment on the new plan yesterday.

An aide to Rep. Steve Nass -- who doesn't have a position in the GOP leadership -- did, however, express opposition to the new assessment plan and display a general lack of understanding about how health care costs operate. According to the aide, the new agreement "doesn't change the equation in that the assessment is still going to be paid by anyone who goes to those hospitals."

Actually, the assessment would very much change the equation, which right now has everything to do with the fact that a significant chunk of health care costs are derived from cost-shifting. Part of that cost-shifting is as result of the uninsured, and part of it is a result of low Medicaid reimbursement rates (Medicare rates are low, too, but not as low as Medicaid).

Here's a chart (page 13) that helps to explain the situation:

(Click for larger view.)

By increasing the reimbursement rates for Medicaid patients, the hospital assessment would be able to pull down the rates paid by the privately insured. In fact, Children's Hospital -- which treats a large number of Medicaid patients as the only pediatric hospital in the Milwaukee area -- has already pledged to decrease health care costs for patients with private insurance if the assessment passes.

Of course, not every hospital would come out in the black. According to the WSJ article:

There would still be winners and losers under the plan, with about 50 Wisconsin hospitals receiving more money under the plan, 23 receiving less, and 72 remaining unaffected, according to figures provided by the Doyle administration. [WHA spokesperson Eric] Borgerding said the number of losers was actually lower, however, since about half of the losing hospitals were part of a hospital network that was an overall winner under the plan.

It's important to note, however, that even those 10-12 hospitals who would see a loss have the advantage of serving a smaller percentage of Medicaid patients, which means their privately insured patients aren't faced with the same cost-shifting that other privately insured patients face.

In other words, there are winners and losers involved in doing nothing, too.

In the end, if Huebsch and the rest of the GOP leadership do still oppose the assessment plan now that even the WHA has stepped out of the way, it'd be really interesting to see the justification. With the practical concerns absent from this new agreement, as evidenced by the WHA removing its opposition, any arguments remaining would have little to stand on aside from ideological purity.

WI Hospitals Fight for Their Right to the Privately Insured

The trend of hospital systems seeking privately insured patients over those on Medicaid is pretty obvious to most observers.

In the last year, for instance, Milwaukee has seen one of its city hospitals close -- St. Michael's -- while the big systems in the area have fought over control of outlying areas in Waukesha, Ozaukee, and Washington counties.

And, to be sure, the decision to move outward is a sound business strategy. The fact is privately insured patients pay more than Medicaid patients and significantly more than uninsured patients. Typically, you're going to find privately insured patients in the 'burbs and Medicaid patients in the city, so the move outward is clearly the way to go from a business standpoint.

Enter the governor's proposal to leverage an assessment on hospital revenues in an attempt to generate more federal matching dollars for Medicaid. The ultimate purpose of the plan is to increase the Medicaid reimbursement rate for hospitals from a paltry 63 percent to a more reasonable 83 percent.

Hospitals have questioned the likelihood that they'll be the sole benefactors of the matching federal dollars, while others -- myself included -- have questioned how wise it is to bank on the federal government for money, at least for the long term, considering even the slightest administrative change on its end can result in costly problems on the other end of the equation.

But all this is masking the broader shifting that's taking place in our existing fragmented health care system toward a focus on care for the privately insured on the provider side and coverage of the healthy on the payer side.

In spite of its questionable long term viability, one good thing that the governor's hospital assessment would do is close some of the cracks that create incentives for our health care system to cater to some segments of the population over others.

Indeed, those health systems that see a lot of Medicaid patients would do quite well under the hospital assessment. Children's Hospital, for instance, would be looking at a $50 million increase in revenue over the biennium. The Waukesha-based ProHealth Care, on the other hand, would lose $1.1 million over the biennium because it cares for a much smaller percentage of Medicaid patients.

Some may view this as unfair that some hospital systems would lose out over others, but it's not exactly a zero-sum game. For starters, there would be more winners than losers under the hospital assessment (again, at least in the short term); overall, the net increase for all systems and individual hospitals in the state, put together, would be $284 million.

Secondly, due to the existence of the "hidden health care tax" -- which is the amount privately insured patients pay to cover the loses hospitals take on by caring for Medicaid and uninsured patients -- what the hospital assessment is really doing is helping to level the playing field for those privately insured people who go to hospitals that also have a large Medicaid population.

In fact, according to the Journal Sentinel this morning, Children's Hospital has pledged to reduce prices for privately insured patients should the hospital assessment go through. The same should be true, ostensibly, for every health system that's coming out ahead under the assessment.

Nevertheless, Children's Hospital is remaining neutral on the hospital assessment. Why? If it can lower health care costs for its customers, why wouldn't it support the proposal?

The simple answer is that it's closing ranks. The Wisconsin Hospital Association is against the plan, so it would be a really bold move to go against the grain.

But, again, there's more to it than that. After all, the biggest health system of all, Aurora, is scheduled to make $47.7 million off the hospital assessment over the biennium. And not only is Aurora not supporting the plan, it's actually opposing it.

Why? For them the answer is likely a little different than the answer for Children's. While Aurora may be pulling in $47.7 million in 2007-2009, that number is probably going to be a lot less in the future when it gets its hospitals built in Waukesha and, eventually, Ozaukee counties.

And compared to how much it'll make from all those privately insured patients in the 'burbs, $47.7 million over two years is next to nothing.