Monthly Review & Commentary On Health Issues From A Rural Perspective - August 1st, 1997

Beginning of a New Competitive Era
The following is from an article by Alice Ann Love, distributed by the Associated Press, 7/2/97:
"Senior citizens' health care is about to be transformed. Under plans endorsed by both Congress and the White House, more elderly Americans will get their health care through health maintenance organizations and other managed care plans. The change is the biggest since Medicare's birth in 1965 and 'it's going to put a lot more responsibility onto individual older persons to be more aggressive consumers,' said John Rother, for the American Association of Retired Persons."
"The House, Senate and Clinton this year have all supported opening Medicare to a much wider variety of plans willing to take on the government's risks and responsibilities for a standard per-patient fee. Changes in how the government sets payments also will give managed care companies incentive to open shop in rural America, which they have not found lucrative enough to do before."
"Traditional fee-for-service Medicare, in which the government pays senior citizens' medical bills as they come in, will continue to exist. But doctors and hospitals operating independently -- and receiving lower-than-expected payments from Medicare -- will face increasing competition from managed care. By tightly controlling services, managed care has proved it can stretch government dollars. It also has attracted seniors by offering such benefits as prescription drugs and fitness programs that Medicare doesn't normally cover."

The above illustration was developed from data taken from The Rural Implications of Medicare AAPCC Capitation Payment Changes, Background Assessment and Simulation Results of Key Legislative Proposals prepared by the Rural Policy Research Institute for the Senate Rural Health Caucus and the House Rural Health Care Coalition, 5/29/97. This illustration assumes that the simulation of H.R. 1189, the Rural Health Improvement Act of 1997 most closely approximates what will be signed into law following the current House-Senate conference process. The final language and resulting payment rates will differ from these projections but the overall direction and magnitude of the changes is not expected to be substantially different. While this graph illustrates what can be expected in Wisconsin, a similar effect can also be expected in rural counties across the country.
Welcome Expansion of the Medicare Debate
The following is from an editorial by Madison Powers and Ruth Faden in The Washington Post, 7/10/97. Madison Powers is a senior research scholar at the Kennedy Institute of Ethics, Georgetown University. Ruth Faden is director of the Bioethics Institute of Johns Hopkins University.
"Arguments of both Republican and Democratic proponents of change represent a turning point in the public dialogue. Senators Bob Kerrey (D-Neb.) and John Chafee (R-R.I.) raise the question of whether less well-off members of society, many of whom cannot afford health insurance for themselves, should be asked to subsidize Medicare benefits for the youngest (often still employed) elderly and, especially, for the elderly who are affluent."
"The grounds of debate now shift from accounting arguments to more basic questions of distributive justice. This shift is welcome and long overdue. Lasting progress on the Medicare issue is unlikely unless we also agree on the social goals the program should serve today. We think that three central issues need to be addressed in this new debate."
"First, Medicare is often portrayed as an implicit social contract among the generations. Nonetheless we must from time to time ask how the contract ought to be interpreted. In one view, the primary obligation of justice is to give priority to the health and other needs of the worst-off members of society. When Medicare was enacted, the elderly were clearly among the worst-off on any measure; approximately 20 percent were living below the poverty level, more elderly had unmet medical needs than almost any other segment of American society, and because of the higher probability of ill health, health insurance premiums were cost-prohibitive for many seniors."
"Today, in part because of Medicare, things are much different. The proportion of elderly below the poverty level has fallen to the level of poverty found in the general population, while the percentage of children living below the poverty level has increased to nearly 20 percent."
"On the other hand, some argue that Medicare should be seen as a kind of moral down payment on a larger social commitment to provide a basic level of health care for all citizens. Means-testing is especially objectionable; it represents a retreat from what society ought to be doing for everyone. That others, including young children, lack basic medical care is viewed as a separate and distinct moral failing, not one best remedied by diverting funds from one vulnerable segment of the population to another. Even relatively benign changes, such as the modification of the eligibility age, may be interpreted as a repudiation of the social goal of universal access to health care."
"Second, no discussion of fairness in the design of a program that transfers costs and benefits across generations is possible without taking account of the dramatically different economic and demographic characteristics of the generations. Baby Boomers tend to save much less for their own retirement needs than previous generations of Americans and those of similar age in other industrialized nations. As a group, they contribute less to their own children's higher education costs, leaving the next generation with more debt at the start of its work life. Moreover, the massive costs of the public programs benefiting the boomer generation will fall smack during the prime work years of the much smaller Generation X."
"Third, consequences also matter morally. If means-testing is prohibitively expensive, then a policy guided by a principle of priority to the worst-off would be self-defeating. If means-testing erodes public support, Medicare may become (as some have described Medicaid) a poor program because it is a program for poor people. Moreover, changes must be evaluated in light of their potential for disproportionate negative impact on segments of the elderly population. In particular, older women are much more likely to be poor, more likely to bear the burdens of care-giving to other elderly family members, more likely to spend the end of their own lives in a nursing home, and less likely to be able to pay privately for services Medicare will not provide."
The Medicare HMO Revolving Door
From an editorial by Marcia Angell, M.D. in The New England Journal of Medicine, 7/17/97:
"In this issue of the Journal, Morgan and his colleagues document how prepaid Medicare HMOs and enrollees in southern Florida manipulate the payment system. The gambit is based on the fact that Medicare recipients who enroll in HMOs are younger and healthier than average. Yet, the plans receive for each enrollee, regardless of health status, 95 percent of the average fee-for-service expenditures for Medicare recipients in their region. That premium, termed the 'adjusted average per capita cost,' also includes a mark-up for the costs of graduate medical education and the teaching-hospital expenses associated with it, even though the plans bear none of the costs of education. Thus, HMOs that serve Medicare patients can expect to receive substantially more than their costs."
"For their part, the enrollees can also do very well -- if their timing is good. They can join risk plans while they are relatively healthy, thus taking advantage of the generally lower copayments and the prescription-drug benefits that are a part of many such plans. When they become sick, however, they can disenroll and obtain their acute care in the less restrictive fee-for-service sector. If they like, they can reenroll in a risk plan after the acute illness is treated."
"This revolving-door approach, which is not unique to southern Florida, not only enables Medicare recipients to enjoy the best of both the managed-care and fee-for-service worlds, but it also doubly rewards the risk plans: first, they are assured of not having to care for their share of sick patients, and second, their premiums are pegged to the average cost of the fee-for-service system, which must care for most of the sick patients. The arrangement amounts to a large subsidization of private risk plans by Medicare; one recent study estimated that the government spends 12 percent more for Medicare beneficiaries in risk plans than if the same people were in the fee-for-service sector."
Enee, Menee, Minee, Minee, Mo
Most school kids can recognize this recitation as an example of double counting; rural health would be helped if our federal Medicare agency, the Health Care Financing Administration (HCFA), would do likewise. It is fair that urban medical centers are compensated by Medicare for the additional costs of hiring the specialized staff needed for some of the patients they treat. It is inequitable and wasteful that urban hospitals (and HMOs) are rewarded twice for the same additional costs.
This substantial double payment is the result of a technical flaw that has long been recognized in the calculation of the Medicare "wage index." The wage index is supposed to adjust for the different wage prices hospitals face when they are in different wage markets. It is not supposed to adjust for differences in the mix of labor hired (that is the task done well by a separate "case mix adjustment").
The below graph presents a simplified illustration (based on shopping for food rather than labor) to show when prices are the same, a different mix of what is purchased results in a different cost to the buyer and to Medicare who then adjusts its average payments up or down to protect urban hospitals from their "upscale purchases." The result is that a formula that was intended to only adjust for differences in price has had the unintended consequence that it also adjusts for differences in what is purchased.

Both Congress's own Medicare advisory panel, the Prospective Payment Commission and Department of Health and Human Services Secretary Donna Shalala's National Advisory Committee on Rural Health have repeatedly asked for an occupational mix adjustment--that data on hospital wages be collected by occupational category to allow for the correction of the Medicare hospital wage index for the inappropriate effects of including differences in the mix of occupations employed.
HCFA has just as repeatedly refused to expend the effort necessary to implement a system to collect the needed wage data. Urban hospitals have opposed the change as it would require that additional data be submitted and would ultimately mean a reduction (minimal) in their Medicare payment rates. While it is estimated that on average rural hospitals would gain several percentage points on their Medicare reimbursement, the particulary technical nature of this payment inequity has also stymied rural advocacy.
The issue has gained a new importance as congressional proposals are advanced that use the hospital wage index to modify Medicare HMO payment rates. HCFA has saved themselves the trouble of correcting this long-standing technical error but they have done so at the cost of a significant institutional credibility.
Competitors Can Cooperate
The Wisconsin Rural Zones of Collaboration Task Force has been established by health insurers and providers active in southern and central Wisconsin. While there is more competition in health care, the "Zones" Task Force is looking for opportunities where cooperation can improve rural health. Its support for the nation-wide Woman's Health Initiative (WHI) is one example.
WHI is a major research study of woman's health. It will help decide how diet, hormone therapy, calcium and vitamin D might prevent heart disease, cancer, and bone fractures. It will also help identify any risks for these diseases. This is the first such study to examine the health of a very large number of women over a long period of time. About 160,000 women across the United States will take part in the study. The University of Wisconsin Medical School is one of 40 participating centers. WHI is seeking volunteers who are a woman 60 - 79 years old, past menopause or the "change of life" and planning to live in the area for at least 3 years.
They are particularly interested that Wisconsin women in the following (predominantly rural) counties be well represented:

 Adams  Grant  Outagamie
 Brown  Green  Richland
 Calumat  Green Lake  Rock
 Columbia  Iowa  Sauk
 Crawford  Jefferson  Walworth
 Dane  Juneau  Waupaca
 Dodge  Lafayette  Waushara
 Fond du Lac  Marquette  Winnebago

Participation in this research study absolutely does not require the volunteer to change physician, HMO or insurance company; it will not interfere with any of their current medical care. More information is available from the Woman's Health Initiative at 608-263-3237 or 800-944-9472. The Task Force members include:

The Alliance

Community Physicians Network

Dean Health Plan

Franciscan Skemp Healthcare, Inc.

Gundersen Lutheran Health Plan

Physicians Plus

Rural Wisconsin Health Cooperative

Unity Health Plans

Wisconsin Bureau of Public Health

Wisconsin Health & Hospital Association

Obtaining the Best Financing Proposals
The following is from the Wisconsin Health and Educational Facilities Authority's Capital Comments, 6/97:
"The Wisconsin Health and Educational Facilities Authority (WHEFA) Small Project Program has continued to grow. So far in 1997, nine borrowers have utilized this process for obtaining competitive financing proposals. The first step in this program is to determine eligibility by discussing your projects with WHEFA. A complete borrower profile, including information on the borrower and project, is completed by the borrower. WHEFA will distribute this package to as many as twelve possible financing alternatives."
"All interested parties then submit their proposals to both the borrower and WHEFA. The borrower chooses the plan it prefers working off the original proposals received and summaries provided by WHEFA. The outcome is that you have a financing with a very reasonable cost of borrowing, a closing that occurs usually within 60 days of selection of a plan of finance and assurance that the best plan of finance has been chosen."
To learn more about the Small Project Program or start the process, contact WHEFA at (414) 792-0466.
The Ultimate Slippery Slope Argument
From note by David Schenk, The New Yorker, 7/21/97:
"Though the film Men In Black may demonize cock roaches, the director Barry Sonnefield, wants to make clear they went to great pains to show respect for the living roaches on the set. Needless to say when Will Smith crushes a number of roaches underfoot, those are stunt doubles, mustard packs... The Humane Societies attitude is that it can't draw the line anywhere--You let those guys kill those roaches, the next thing you know they're killing dogs and horses and stuff."
Friends & Family Drive Health Care Choices
The development of comparative information about the quality of health care has become a major American industry. But a recent national survey indicates that while quality is important to consumers they place more weight on the opinion of family and friends and their own experience than they do "expert opinion."
Princeton Survey Research Associates' survey was published as a report October, 1996, sponsored by the Kaiser Family Foundation and the Agency for Health Care Policy and Research. The adjacent graph shows three of their findings: (1) quality is the most important concern when choosing a health plan for 46% of the respondents; (2) friends and family are cited most often as "very believable" sources of information and (3) when asked to choose between a hospital they have used for many years without problem or one that is rated higher by experts, 72% choose the hospital with which they are familiar. Implications of their overall findings are:

Managed Care Backlash Continues
The following is from an article by David S. Hilzenrath in The Washington Post, 6/30/97:
"A political backlash is building against managed care across the country as doctors and patients protest what they see as potentially dangerous penny-pinching by the health-care industry. Officials in dozens of states have responded by stitching together a patchwork quilt of new regulations. Some of the measures have passed by overwhelming, even unanimous, margins."
"The legislation reflects consumer frustration with managed care, the cost-conscious form of health insurance that has grown over the past decade from obscurity to cover an estimated three-quarters of the nation's private-sector workers. Doctors and patients have been calling for curbs on the managed-care industry's powers, arguing that some companies are profiteering at the expense of patient care, making it difficult for people to get quality medical attention."
"Opponents are worried that the movement threatens to undermine managed care's success in containing health-care costs. Many of the 'patient protections' are more like 'doctor protections,' inspired by physicians who are feeling the financial squeeze, the opponents said. But even some representatives of the managed-care industry acknowledge that the campaign has gained considerable momentum."
"Four years ago, President Clinton tried and failed to overhaul a health-care system in which costs were virtually unchecked and rising faster than the nation's ability to pay. Managed care filled the void with a variety of cost-saving measures, such as restricting patients' access to medical specialists; limiting patients' choice of physicians; and reducing the length and frequency of hospital stays. Other cost-saving techniques include: giving doctors pay incentives to practice efficient -- critics say parsimonious -- medicine; measuring individual physicians' use of medical resources; and requiring doctors and patients to obtain approval for coverage of expensive tests and treatments."
"From 1992 and 1996, the percentage of workers covered by managed care grew to 77 percent from 49 percent at businesses with 10 or more employees, according to surveys by the consulting firm Foster Higgins. The cost of health-care benefits, which was climbing by 10.1 percent in 1992, rose by 2.5 percent last year, slower than the economy's overall 2.9 percent inflation rate, Foster Higgins reported."
"Now, with some voters chafing at the trade-offs, worrying less about costs and crying foul over the alleged excesses and abuses of some health plans, many contend that the solution has become the problem. In a February poll by Louis Harris and Associates, 38 percent of respondents said they believe managed-care companies such as HMOs 'generally do a bad job of serving their customers.' In a November survey by the Kaiser Family Foundation and the Harvard School of Public Health, 54 percent said 'government needs to protect consumers from being treated unfairly and not getting the care they should from managed-care plans.' "
"Managed-care executives and lobbyists say their own research finds a high level of customer satisfaction. Nonetheless, they say, the system takes getting used to. 'This is a transition that is clearly very difficult for many people,' said Susan Pisano, spokeswoman for the American Association of Health Plans, which represents HMOs and preferred-provider organizations. Part of the difficulty, Pisano said, is that consumers came to associate quality with an excess of care under the old health insurance system, which imposed few if any checks on physicians."
FBI Raids the Raider
From an article by Karin Miller in the Associated Press, 7/16/97:
"Federal investigators swept into Columbia/HCA Healthcare Corp. operations in six states Wednesday, searching records at 35 hospitals and offices of the nation's largest for-profit hospital chain. The surprise sweep focused on hospital laboratory billing and home care operations, said the Nashville-based company, which is already under investigation in El Paso, Texas, for possible Medicare fraud, particularly in home health care."
"FBI spokesman Derek McGraw would only say that Wednesday's search was part of an ongoing investigation. Search warrants were issued for current and former Columbia/HCA hospitals or their business offices in Tennessee, Florida, North Carolina, Texas, Oklahoma and Utah."
"News of the investigation sent Columbia stock plunging $4.75, to close at $34.18 3/4 Wednesday on the New York Stock Exchange. Former Columbia officials have said the company provided financial incentives for physicians to admit more patients, and encouraged administrators to inflate their billings to the federal government's Medicare program."
"The New York Times in March reported that federal regulators also may be looking into whether the company broke the law by getting doctors to indirectly invest in, and then refer patients to, its outpatient care facilities, which include home health care."
"Searches were conducted by the Federal Bureau of Investigation, Department of Health and Human Services, Defense Criminal Investigative Services, U.S. Postal Inspectors Service and the Utah Department of Investigation's medical fraud unit, McGraw said."
Health Law Program Celebrates 25th Year
The following is from <>:
"The National Health Law Program is a national public interest law firm that seeks to improve health care for America's working and unemployed poor, minorities, the elderly and people with disabilities. NHeLP serves legal services programs, community-based organizations, the private bar, providers and individuals who work to preserve a health care safety net for the millions of uninsured or underinsured low-income people."
"The care-giving safety net that has propped up health care for the poor and uninsured is breaking apart, as government responsibility cascades from federal to state to local authorities, as health care marketplace consolidation continues largely unregulated and as states are pressured to cut costs and find quick savings. In the midst of these changes, it is critical to focus on preserving health care coverage for those most in need and with fewest resources. NHeLP seeks to provide a seat at the table for representatives of low-income people, to protect consumers in the emerging managed care systems, and to find creative financing solutions that also preserve government's responsibility as provider of last resort."
U.S. Bureau of Census On-line Resource
The next time you need to prepare a presentation for a statewide audience, check out the U.S. Bureau of the Census at: <>.

As an example, the above slide below gives a quick snap shot of a number of key demographic variables that effect a state's provision of health care. (From this data, Wisconsin can be seen as particularly advantaged compared to other states with the very notable exception of a relatively high infant death rate.)
"Medical Associations: Guilds or Leaders?"
From an editorial by Don Berwick, President of the Institute for Healthcare Improvement in the British Medical Journal, 5/31/97:
"Any honest review of the literature in clinical science and health services research must conclude that there is a huge gap between how health care could perform and how it does perform. Medical care error rates are too high, waste is too pervasive, technically correct clinical services are too often withheld, and technically incorrect procedures are too often used."
"Therein lies the opportunity for new leadership from medical associations: not to explain why we cannot do better but to act to set about the task of leading improvements. Leading improvements requires most medical associations to change both their attitude and agenda. The change in attitude is necessary because the associations traditional aim--to perfect and protect the professional--will not suffice to meet the social need for improved care. To improve health care we require not better professions but better systems to work."
"Great doctors do not make great health care. Great doctors interacting well with all other elements of the healthcare system make great healthcare... Doctors and their medical associations have a choice: to become citizens in system improvement or to play the role of victim."
A Decision-Maker Researcher Dialogue
The first annual Wisconsin Health Services Research Conference will be October 23-24 at Madison's just opened Monona Terrace Convention Center (initially designed by Frank Lloyd Wright). The target audience includes policy makers, health system managers, clinicians, health care purchasers and consumer advocates. You should attend ...
For more information, contact Penny Anderson at 608-263-6294 or
WI Rural Leadership Program Opportunity
Applications for Group VIII of the highly regarded Wisconsin Rural Leadership Program (WRLP) are due by December 1st. Information can be obtained by calling 608-263-5024.
"Rural people are effected by what happens in our cities, throughout our nation and the world. An understanding of these trends can help rural leaders shape policies and programs that will benefit Wisconsin's rural people."
"Struggling with new careers and young families, potential rural leaders have limited opportunities to learn about the major forces, issues and decisions that are critical to rural Wisconsin's future welfare. WRLP wants to change that situation. Its goal is to develop articulate young leaders who will initiate decisions and action that will benefit Wisconsin's rural people."

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