Executive Director's Report: December 16th, 1995

A monthly report of experiences and observations to colleagues.

Animal House Food Fight - The Sequel

The same federal budget projections are used by both political parties to support contradictory sound bites. The Republicans (blue elephant) tend to compare their budget with current spending. The Democrats (rocking "donkey") tend to compare the Republican budget with what future spending would have been under current policy. Both are important perspectives but neither alone tells the whole story.

Republicans are correct that with their budget Medicare and Medicaid still grow from a current 18% of total federal spending to 23% by the year 2002; and that is before we baby boomers begin to hit retirement and cause our usual demographic burp.

Hopefully by the time you read this the sound bites will have been shelved and some leadership exercised away from the fringe, more reflective of most Americans:

The Fairness Question

From " 'Fairness' For Whom?" by Robert Samuelson in the Washington Post National Weekly Edition, 12/11-17/95:

"The 'fairness' question hangs over the budget debate. Democrats say that the Republicans plan to balance the budget by 2002 is skewed against the poor--and they are right. But the fairness issue goes further. There is also generational fairness, because the largest budget transfers are not between rich and poor but between workers and retirees. And generational fairness favors the Republicans. Today's policies are unfair to middle-aged and younger workers, because they are forced to pay for more generous benefits than they will ultimately enjoy themselves.

Rural Impact Of Medicare Policy Changes

As previously noted, I've had the privilege to work this Fall with the Rural Policy Research Institute to prepare an initial analysis of the Republican budget proposals for the Rural Health Care Coalition of the U.S. House of Representatives. Our first working report was completed on December 5th and presented to the Coalition on the 10th. While the analysis was done on a moving target with incomplete data, some general statements were possible and hopefully will be useful.

For more information you can contact the RUPRI Office at 314-882-0316. I have a half dozen extra copies that I will share on a first come first served basis.

Summary Of Primary Observations:

"The introduction of Medicare managed care organizations (MCOs) will hasten the expansion of MCOs into rural areas."

"Rural providers will compete effectively for MCO enrollment."

"There will be significant impacts of the expansion of MCOs on various sectors of the rural economy and the overall effect depends on how these countervailing forces balance out."

"Few rural residents would choose the Medisave (medical savings account) option, at least in the short run."

"Adverse selection between MedicarPlus choices and the traditional option will result in a triggering of the 'Failsafe' budget mechanisms. This is likely to lead to significant adverse consequences for rural residents who stay in traditional fee for service Medicare through cuts in provider reimbursement rates."

"The failure of managed care and other provisions to produce the savings necessary to achieve spending targets will trigger the further reductions in fee for service payments under the Failsafe budget mechanism, falling disproportionately on rural providers."

"In general, the financial capacity to adjust to across-the-board increases in beneficiary cost sharing is much less among the rural elderly than among the urban elderly."

"Increased beneficiary cost sharing is more likely to have a downward effect on rural economies than on urban economies."

"Reductions in the Medicare PPS update factor, current and ongoing non-MCO reimbursement system, will result in the closure and/or consolidation of some rural hospitals."

"Although the penetration of managed care in rural areas is limited, the expansion of PPO and HMO arrangements involving significant hospital discounts and resulting in decreased hospital (inpatient) volume represent an additional threat to the financial viability of some rural hospitals."

"Reductions in the Medicare PPS update will result in increased cost shifting to private payers. The effect of these cost shifts are likely to raise health insurance premiums for rural businesses and individuals."

"The reductions in the Medicare PPS updates will have a significant, negative effect on rural employment levels and wages."

"New criteria for qualifying as a limited service hospital, and continued use of rural referral and Medicare dependent designations, will increase the likelihood that rural hospitals will convert to new classifications. However, the criteria remain restrictive and will not be used by all hospitals which might otherwise consider changing."

"Physician payment policy changes will increase payments to rural primary care physicians, enhancing the ability of rural communities to recruit and retain such providers."

"The proposed GME funding changes would decrease the number of primary care providers available to work in rural communities. The proposal locks in place the current urban and specialty biased system."

"If the requirement for managed care organizations to provide care in reasonable proximity to beneficiaries' homes is enforced, rural provider recruitment and retention will be strengthened."

"Direct reimbursement to physician assistants and nurse practitioners in rural areas provides a marginally increased incentive to practice in underserved areas."

HCFA Opposes Medicare Equity Advance

The following was buried in the last few paragraphs of a long article in The New York Times National, 12/10/95:

"But to address the concerns of rural counties, the final (Republican) bill included a floor of $300 on monthly (HMO) payments regardless of local costs. The Administration opposes this approach. Bruce Vladeck, Administrator of the federal Health Care Financing Administration (HCFA) said, "In a number of those counties anybody who can get a Medicare contract has a good chance at a very significant windfall."

HCFA Publishes Pro-Rural Series

Maybe if Bruce Vladeck had read the recently released issue of his agency's quarterly journal, Health Care Financing Review, he would have a more sympathetic ear for rural demands to raise rural HMO rates, maybe not. In any event, the Fall 1995 issue focuses on "Access to Health Care Services in Rural areas: Delivery and Financing Issues." Articles focus on hospitals (impact of closures, transition grants, networks, variations in cost), managed care (why so few in rural, rural HMO service areas), telemedicine and mental health. This single issue can be purchased for $15 from the Superintendent of Documents, P.O. Box 371954, Pittsburgh, PA 15250-7954.

Healthcare Providers' Bi-Political Identity

To the degree that your work influences your political identity, health care providers have a tough job. Many don't comfortably self-identify as either conservative Republican or liberal Democrat, the primary institutionalized choices of the day. We tend to be drawn to the entrepreneurial liberty of the right but the public funding of the left. The "Radical Center Or Moderate Middle?" by Michael Lind in the 12/3/95 New York Times Magazine leads me to believe that any organization of the middle or center will continue to leave health care providers with a political identity crisis.

"A substantial number of Americans are indeed alienated by a two-party system that tends to present only two options--conservative Republican or liberal Democrat. But the growing number of disaffected voters do not form a cohesive block with a shared viewpoint that might serve as the basis for a third party. On the contrary, alienated voters tend to divide into distinct and incompatible camps: the moderate middle and radical center."

"The ranks of the moderate middle are heavy with managers and professionals with advanced degrees. They tend to combine liberal views on social issues like abortion and gay rights with concern about excess government spending on welfare and middle-class entitlements. The radical center consists largely of alienated Democrats who broke away from the New Deal coalition to vote for George Wallace, Nixon and Reagan. They are liberal, even radical in matters of economics, but conservative in morals and mores."

"The moderate middle, by and large, is satisfied with the American private sector... The radical center hates big business (and big labor) as much as big government... The political spectrum, like American society in general, is divided by class, so that the rationalistic moderate middle, in socioeconomic terms, are 'above' the angry populists of the radical center.

The difference is reminiscent of the class and cultural divide between upper-middle-class metropolitan Progressives and rural and small-town Populists at the turn of the last century, who viewed each other with suspicion even though they shared many criticisms of the existing order."

Health care providers may be drawn with fellow professionals to the more "rationale" moderate center and be uncomfortable with "conservative" mores of the radical middle. On the other hand there will be discomfort with the moderate middle's opposition to Medicare and Medicaid spending and support for the radical middle's opposition to big business and big government.

Balancing "Competition vs. Collaboration"

The Wisconsin Network for Health Policy Research is sponsoring an invitational policy forum in January to explore implementation and oversight issues related to Wisconsin's Certificate of Advantage (CPA) Legislation. CPA statutes have been implemented by States interested in shielding certain health care collaborative behaviors from federal or state anti-trust enforcement.

The forum's intent is to help to clarify state policy goals at a time when our existing statute is recognized as needing amendment and rule making to be useable. A working paper (more questions than answers) has been prepared for this meeting by Nancy Cross Dunham, WNHPR Deputy Director and myself entitled "Balancing 'Competitive vs. Collaborative' Forces In Rural Wisconsin Health Care Markets: Toward Clarification Of State Policy Goals."

Privatization Supports Mega-Corp. Growth

"Airlines, railroads, banking, entertainment, defense, utilities, health care, hotels, restaurants and telecommunications--wherever you turn these days this same process of specialization, nationalization and rapid consolidation is in full swing. Small businesses continue to find a place in the economy, serving specialized niches or out-of-the way places. But more midsized companies are finding themselves in a competitive no-man's land, too big to hide in protected niches, but too small to compete against the more efficient giants." From "The Behemoths Specialize and Conquer" by Steven Pearlstein in the Washington Post National Weekly Edition, 12/11-17/95.

When giants are efficient, it is due to "economies of scale"--which is the result of the existence of fixed costs. Fixed costs do not increase as fast as revenue when business increases; this lowers the average cost of production which in turn allows for a lower and more competitive price. The higher the proportion of fixed costs within an industry, the more likely large firms will dominate.

Health care has long benefited by major fixed costs being subsidized by the public sector: research and development, provider training-education, and health care information. To the degree that these responsibilities are privatized they will raise the fixed costs within the "healthcare industry" and increase the competitive advantage and subsequent market domination of national firms against local ones, urban against rural.

WI Medicaid HMO Changes Accepted

The State has made the three significant changes in its Medicaid HMO initiative previously requested by RWHC and an informal coalition of provider and consumer groups.

Medicaid is unlike Medicare in the degree of its effect on rural residents and providers. Nonetheless, Medicaid is a significant program for rural Wisconsin and fundamental changes in its structure and operations need to be planned and implemented with care.

Earlier this year, a number of very troubling aspects of the HMO's expansion initiative's apparent direction had emerged. "Apparent" as the clock seemed to have been running down with trial balloons continuing to be floated without resolution.

The three sought after changes in the State's draft proposal that have been accepted according to various sources include:

A recently discovered concern that rural hospitals may not be reimbursed for inappropriate emergency room use by Medicaid HMO enrollees is still being discussed.

UW-Extension Information Partnerships

Rural communities need a critical mass of users to start a local community information network. They need to be able to access the internet via a local number, access taken for granted in Madison and other Wisconsin cities. A rural hospital in New Hampshire, Lakes Region General Hospital is part of a local coalition developed to solve these twin problems. Closer to home, after talking with New Hampshire, I learned that Wisconsin has initiated a similar initiative.

Extension Chancellor Don Hanna brought to my attention that the Wisconsin Community Information Partnership has initiated pilots in Dane and Grant counties with plans for replication in all 72 counties and its description on the Internet. "It is a cooperative effort between the State of Wisconsin Educational Communications Board (ECB), the University of Wisconsin - Extension (UWEX), and local communities to develop local community information networks. The community information network will provide a means for individuals and groups in a community to share information in a timely and cost effective manner. Basic levels of the system require only a telephone and higher levels are designed for computer access."

"Public access to computers and modems that connect to a local bulletin board will be made available at public sites such as libraries, governmental agencies, schools, and high traffic public locations such as shopping malls, grocery stores, banks, etc. A higher level would provide user access to information located in data bases throughout the world. Access would be provided via world wide computer networks such as Internet."

"The highest level would provide video and computer based information and education to workstation in homes and businesses. Users will be able to engage in a live video conference with experts from around the world, or take a class that is being presented by a local school and delivered via the community networks to sites around the community."

For Additional Information Contact:
Terry Gibson Director of Program Support
Cooperative Extension Service
Phone: 608 262-4877 FAX: 608 262-9166
Email: GibsonT@Wisplan.UWEX.wisc.edu

AHEC Seeks Rural Training Partners

The Wisconsin Area Health Education System has received a planning grant from the Robert Wood Johnson Foundation initiative, "Partnerships for Training." The resulting Wisconsin Program for Training Regionally Employed Care Providers (WIS-TREC) will promote "partnerships made up of educational institutions, employers of health professionals, and public and private agencies to strengthen and expand the education and practice infrastructure for nurse practitioners, certified nurse midwives and physician assistants." RWHC is participating on the WIS-TREC Advisory Committee.

Program goals include increasing the "numbers of graduates who come from and return to practice in underserved areas" and enhancing the "retention of providers and viability of practices in underserved areas by creating new models of recruitment and placement of students." Up to 8 of the initial 12 grantees will be funded for implementation. The time available for completing the planning phase and submitting the implementation proposal is significantly less than first anticipated so local employer understanding and cooperation necessary to make this program a success will be much needed and highly appreciated.

Ruff & Donkle Present At HFMA 50th

Pat Ruff, RWHC Deputy Director and Rich Donkle, CPA, Health Care Partner, McGladrey and Pullen will have been invited to present at the 50th annual meeting of the Healthcare Financial Management Association this June in San Diego. There session will be entitled: "Cooperating in Order to Compete: A Rural Healthcare Case Study."

NRHA '96 National Conference In Midwest

Save your travel dollars in 1996. The National Rural Health Association's 19th Annual National Conference will be next door in Minneapolis, May 15th to 18th. The theme this year is "Keeping Rural Healthy: A Community Challenge"

Bill Beach Honored

Bill Beach, administrator at Sauk Prairie Memorial Hospital for 28 years and the last founding RWHC board member, is retiring at the end of the month. At a reception this month, his service and leadership to the hospital, community and state was acknowledged with many testimonials. A number of notables sent proclamations, including: Governor Thompson, Congressman Scott Klug and the Wisconsin Senate (presented by Senator Dale Schultz). Bob Taylor spoke on behalf of the Wisconsin Hospital Association and I for the Cooperative. Bill has been a critical mentor for me and his active participation in the Coop will be missed.

Tommy & Truman

The following is taken from "Tommy: who & why" by Bill Kraus in Madison [magazine], December, 1995:

"Tommy was a Trumanesque kind of star. The position shone on him more than he on the position. He was a star because he was governor. He was not governor because he was a star."

"But, not unlike Harry Truman, he surprised some of the people and astonished the rest with his political savvy and his executive talent. Whether he was truly a major talent or the beneficiary of low expectations is still debated and debatable. What is indisputable is that he knew how to accumulate, concentrate and use executive power."

"His 67 percent of the vote days are probably behind him (in politics as in everything else, friends come and go, but enemies accumulate), but only a fool would bet against him if he ran for governor again. But let's take his word for it. He says this is his last term. A dazzling set of options remain."

"... on almost every Republican's short list for vice president... if a Republican wins, he is surely on an even shorter list for a cabinet job... run against Russ Feingold for the US Senate... he is in position to become a big time lawyer in a major city... "

"He has been a successful manager of a very large, enormously complicated enterprise. This is a credential that executive recruiters for and boards of directors of big corporations seek and revere."

May Your Holiday Time Be Equally Joyful

In any competition between Life and Art, Life wins hands down:

My youngest son, Sean (17), told me the other night what his friends thought of my work. Evidently "unexplained" absences from home, a history of foreign travel, constant computer use and strange phone conversations (to many of you) has left them convinced that his father's a secret agent. Of course, my only response had to be "how do you know I'm not?"

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