HealthyCal.org

By Daniel Weintraub

Amid all the recent worry about people lacking health insurance, one vulnerable group of Californians appears to be suffering from too much, not too little coverage.

Low-income older adults qualify for both Medicare and Medi-Cal. That might sound like a good thing. But the lack of coordination between the federal program for seniors and the state-federal program for the poor may be hurting their health. It is also costing the taxpayers a ton of money.

Now the state is trying to fix the problem by combining all of the services available to these people under one administrative roof. That will include not only their health care but social services too, such as in-home workers who bathe and feed patients who can’t take care of themselves but don’t need to be in a nursing home.

Gov. Jerry Brown says the changes will be a boon to more than a million elderly and infirm Californians – including many formerly middle class people who spent down their savings until they qualified for Medi-Cal, which now pays their nursing home bills. Brown is also counting on big savings for the state. He estimates that the reforms could shave half a billion dollars from the California’s budget for health programs.

But the move also carries risk. If the managed care plans that will be taking charge of people’s needs are not up to the task, their health could suffer. And the health plans themselves might be saddled with unmanageable costs if the rates and rules for the program are not set just right, ultimately causing turmoil and confusion for the very people the changes are designed to help.

The heart of the problem is the fragmented nature of care for this fragile population.

Medicare pays for doctor visits, prescription drugs, and short-term hospitalizations, but does so using the traditional “fee-for-service” method. Patients are responsible for managing their own care, finding and choosing doctors and medication, and the federal government pays the tab.

If an older person is poor, they are also covered by Medi-Cal. The state-run program picks up any deductibles and co-payments charged by Medicare and pays for long-term care, including nursing homes.

But that means that a patient moving from a nursing home to a hospital or back to their own home will often be switching among doctors and caregivers, increasing the potential for confusion, errors or lapses in care. Social services, which many of these patients also need, are managed independently, usually by the counties.

Jane Ogle, deputy director of the state’s Department of Health Care Services, says focus groups with seniors in advance of the governor’s proposal turned up accounts of uncoordinated care at its worst. She said one person had 26 different doctors. Another was on 52 medications.

“These people spent most of their time trying to coordinate their own care, get doctors’ appointments, make sure their medication was proper, get their (in-home care) services, find out if they were eligible for adult day services,” Ogle said. “They were doing it all on their own. This is designed to get them help doing that, a phone number they can call and say, ‘I need this service,’ and someone will be on the other end of the line who knows the entire system.”

The state’s solution: managed care. A single health plan will be responsible for coordinating all of a patient’s services. The plans will have a financial incentive to keep patients out of nursing homes and hospitals whenever possible, to keep them as healthy and independent as they can be. The change is scheduled to begin sometime after Oct. 1 in eight counties, including Orange.

Orange County’s CalOptima health plan is one of the models for how the new system is supposed to work. The agency has been managing care for many of those eligible for both Medicare and Medi-Cal since 2005. But while there was one manager, the clients were enrolled in two separate health programs, with social services still managed separately. Now all of those services are supposed to be seamless.

Michael Schrader, CalOptima’s chief executive officer, said the new system should be much better for the patients than the current system.

“From a member’s perspective, I might be getting support at home, with bathing and feeding and general living,” he said. “I am getting that from the county. Perhaps I am fortunate to be one of 300 people in CalOptima’s program (eligible) to get some help installing bars in my bathroom. I am also dealing with Medicare for physician and hospital services, and if things worsen, and I get placed in a facility, now after 100 days I become dependent on CalOptima for long-term care.

“You’re dealing with three different agencies, four different programs, and this is our most vulnerable population. It’s complicated enough for most of us figuring out our single insurance plan, and we’re asking these folks to figure out three different agencies and four plans. It’s fragmented and it doesn’t work for people.”

Javier Sanchez, CalOptima’s chief network officer, said each patient will have an individualized care plan and a doctor in charge of their care. If they need help staying in their home – a ramp, or a safety bar, or a home health aide – the health plan will, in theory, help them get it. If they are in a nursing home and get sick, instead of being transported to an emergency room, the health plan might arrange for a doctor to visit them. The same might be true for an eye doctor or a lab procedure.

“We’ve had experience managing these programs in the fragmented system,” Sanchez said. “Now we have the opportunity to coordinate all of the services under one health plan. It’s really very beneficial to the members.”

But consumer advocates worry that the health plans might not be up the task. The National Senior Citizens Law Center, for example, pointed out that several of the health plans have been rated very poorly by both Medicare and Medi-Cal, and some have even been sanctioned for their care of older adults. While CalOptima has earned high marks from Medicare, surveys of patients in Medi-Cal have given the health plan a ranking of 1 out of 5 for its care and customer service.

That’s one reason the federal government has said that patients will be able to opt out of managed care and return to traditional Medicare at any time. But that turnover could wreak havoc with the new system, making budgeting difficult and introducing the same problems with uncoordinated care that exist today. The state’s nonpartisan legislative analyst has warned that if too many patients opt out of managed care, the savings the state is hoping for could vanish.

But Ogle, the state’s deputy health director, insisted that the state will closely monitor the health plans to ensure that they have adequate networks of doctors and hospitals and that they are treating their patients properly. She noted that the state has already scaled back its plan to ease the transition. The change, at least at first, will affect fewer than half of the 1.2 million Californians who are eligible for both Medicare and Medi-Cal.

“I think consumers will see this as an improvement,” she said.

Daniel Weintraub has covered California Public Policy for 25 years. He is editor of the California Health Report at www.healthycal.org

By Daniel Weintraub

California has led the nation in implementing President Obama’s health reform law, and Californians are among its biggest supporters. Will that support be sustained as voters learn more about how the law will work?

That’s a tough question. But the answer may help determine the ultimate fate of the law as its still-vague promises become reality. If Californians turn against the Affordable Care Act, the rest of the nation, which is already more skeptical, will likely be in full revolt.

The law, as many people know, will expand public coverage to low-income people, subsidize private insurance premiums for middle-income people, and prevent insurance companies from denying you coverage – or charging you more — if you have been sick.

Some of the law’s most popular provisions are already in place. Insurers, for example, are now required to let families keep their adult children on their coverage through age 26. And limits on how much a policy will pay out in a year, or a lifetime, are being phased out, saving consumers from having to face possible bankruptcy if their medical bills outrun their coverage.

The state, meanwhile, is close to expanding public coverage for more than a million people, with most of the cost of that care paid for by the federal government.

But the real test will come this fall, when the state’s new online insurance exchange, known as Covered California, opens for business. The law requires nearly everyone to have coverage either through their employer, the government or the exchange by Jan. 1, 2014, and Covered California plans to start offering policies to the public on Oct. 1.

All of the policies sold on the exchange will cover the same ten “essential benefits,” but the plans will offer different levels of premiums, deductibles and co-payments. They will be ranked as platinum, gold, silver, or bronze according to how big the deductibles and co-payments will be, allowing consumers to comparison shop without worrying about missing a crucial detail in the fine print of a policy. As a general rule, the more you pay up front in premiums, the less you will be at risk for paying later in out-of-pocket costs.

No one yet knows exactly how much those monthly premiums will be. The insurance industry has been warning about sticker shock, saying the law is going to drive up costs. The law’s supporters, on the other hand, insist those claims are exaggerated.

State officials shed some light on the question last month by releasing an independent study of how the changes are likely to affect rates for different groups of people.

The bottom line is that low-income people who can’t afford insurance today are going to benefit the most. Most middle-income consumers will also see lower rates. And those who are better off –-families earning more than about $90,000 a year — are almost certainly going to pay more for their coverage.

Another wrinkle: young, healthy people will pay more than they do today, while older, sicker people will pay less. But many of those young people will also be poor, so they will qualify for subsidies that will erase the increase they would otherwise be required to pay.

These impacts flow from the core principles embodied in the law. One is that everybody should be able to get insurance, whether you are rich or poor, young or old, healthy or sick. In order to make that happen, the law creates a system in which more of the risk and the cost of insurance is shared among us all. The idea is that you will pay more if you are healthy and wealthy, and in return, the coverage will be there for you if you are sick or lose your job.

The eye-popping number that jumps from the study is 41 percent – the amount that the average California premium, without subsidies, is expected to climb in 2014 for people who don’t get their coverage through their employer.

A little less than one-fourth of that, or 9 percent overall, is due to health cost increases that would have been passed along to consumers anyway, even if the new federal law had never been enacted. The rest, or an average increase of about 32 percent, is due to changes brought about by the law.

The biggest factor putting upward pressure on rates will be the new provision prohibiting insurance companies from denying people coverage or charging them more based on their health. This means that sick people who today can’t get insurance, pay very high rates for it or get it through a special government program will be joining the same insurance pool as healthy people, driving up costs for those consumers.

Other factors pushing up costs: people with pent-up demand for care will see the doctor more often; some people will get better benefits – everyone will have prescription drug coverage, for example; and a higher share of everyone’s costs (a minimum of 60 percent) will be covered by insurance.

But there will also be downward pressure on rates. The study suggests we’ll save an average of 6 percent because health providers, including doctors and hospitals, will charge less than they do today. One reason: they won’t have as many charity patients because nearly everyone will be insured, so they won’t need to shift those costs to people who are paying for their care. Administrative costs – including marketing – are also expected to be lower.

That average increase in premiums, though, is before the effects of the big federal subsidies that will be available to people with incomes up to 400 percent of the federal poverty level, or about $90,000 for a family of four.

Thanks to those subsidies, people with incomes of less than 250 percent of the poverty level, or about $56,000 for a family of four, can expect premiums that are, on average, 84 percent less expensive than they pay today, and total costs, after deductibles and co-pays, that are 76 percent cheaper than today.

People with incomes between 250 percent and 400 percent of the poverty level will likely pay 47 percent less for their premiums and 40 percent less overall. A typical premium for an individual earning $34,000 a year, for example, might be $273 per month.

People who earn more than 400 percent of the poverty level will be the ones taking the biggest hit, because they will not be eligible for subsidies. Their upfront costs will increase by an average of 30 percent, and their total charges, after out-of-pocket payments, will increase by 20 percent.

As these numbers show, the law is full of trade-offs. For people who have nothing now, the changes promise affordable coverage for the first time. For people who are doing okay under the current system, the law will require them to pay more now while offering them more security later. They won’t lose coverage if they lose a job or get sick, and they won’t face a financial catastrophe because their coverage runs out.

Having survived a Supreme Court test and a presidential election, the Affordable Care Act is probably here to stay, at least until Obama leaves office. But its ultimate staying power may hinge on whether enough voters are willing to pay more today in exchange for security down the road.

That’s what insurance is supposed to be about. Until now, most of us have had something that looked like insurance but did not always work that way. The real thing, it turns out, costs more. It will be interesting to see if Californians, and other Americans, are willing to pay the price.

Daniel Weintraub has covered California public policy for 25 years. He is editor of the California Health Report at www.healthycal.org