Sunday, February 1, 2004

Ohio's seniors deserve more modern, less costly care

Guest column

J. Kenneth Blackwell

It was with great interest and amusement that I recently read chief nursing home lobbyist Peter Van Runkle's commentary defending the current Medicaid system in Ohio.

He claims to be the protector of our seniors. He is not. He is, however, the protector of a system mostly funded by taxpayer-subsidized Medicaid payments that rewards the most inefficient institutional care providers as opposed to serving the interests of our most vulnerable elderly.

Unfortunately, the costly status quo system he aggressively protects is driven by prices and a financing system centered on institutional care and limited patient choices.

This antiquated 20th-century Medicaid system is based on an insurance model that is more concerned with covering out-of-control institutional costs than the maintenance of good health and increased choices for care.

Instead, I offer a 21st-century model driven by values and centered on patient needs and in-home care. It would also save hundreds of millions of dollars and contribute to the spending reductions necessary to repeal the 20 percent increase in the state sales tax.

As it relates to health care for our seniors, Ohio needs to change its Medicaid system. Taxpayers can no longer afford to subsidize the inefficiencies and wasteful spending that have hijacked state budget after state budget, simply because the status quo is more agreeable to Mr. Van Runkle's powerful special interest.

We need to reintroduce market-centered incentives to regulate cost and develop a form of payment related to patient condition. Instead of paying nursing homes based on what individual facilities spend (cost), we need a system that pays based on the average cost for a specific condition.

In particular, the current Medicaid nursing home payment system operates on the principle of reimbursing a nursing home based on what the institution spends as opposed to what the residents actually need and use. Moreover, there are no ceilings as to what a nursing home can spend on direct care and protected costs. Instead, Medicaid reimbursement payments should be made to nursing homes based on actual resident needs.

Nursing home reimbursements from Medicaid used to be limited to "the lesser of cost or charges." Medicaid would not pay more than a nursing home charged a private client. The legislature eliminated this minimal element of market control over costs without instituting other adequate controls. We need a system that rewards, rather than penalizes, cost controls.

In effect, the state has given nursing home owners monopoly pricing power over an increasingly vital public health care issue. Nursing homes are reimbursed for whatever they spend for their direct care. With no incentive for efficiency, facilities with high Medicaid use simply pass on to the state whatever they spend for direct care.

Ohio could offer more quality care for seniors at a lower cost if we implemented any of the following best practices:

• Increasing coordination with private insurance.

• Improving care management for high-cost and chronically ill patients.

• Promoting disease prevention.

• Establishing effective provider reimbursement levels with incentives for better quality.

• Effective purchasing arrangements for managing prescription drug spending.

In addition, the vast majority of Ohioans would prefer to receive health care in their home and community rather than in a nursing home, if at all possible. The Passport program accomplishes this goal. It allows Ohioans eligible for Medicaid, and at risk of being placed in a nursing home, to live independently in their own homes. This widely popular and senior-friendly program is underutilized even though it is more efficient than funding nursing homes. In 2002, for example, the average annual Medicaid payment for a Passport client was $12,333, compared with $55,500 for institutional care.

However, with prodding from the powerful nursing home lobby, the legislature funded the less-efficient nursing home system with staggering disparity. Over the previous three fiscal years, Ohio spent $7.3 billion on institutional care, in contrast with $650 million over the same period for the patient-preferred Passport program.

In 2001, the Taft administration issued the Ohio Access for People with Disabilities Report, addressing the need for reform. The report stated that "expenditures for publicly funded care in Ohio are misaligned with expectations and desires of Ohio's consumers." The report went on to say that "this misalignment has been created by federal and state reliance on institutional services over many years, ... along with an absence in most systems of a comprehensive state policy in favor of community-based services."

Ohioans deserve better than a system that is outdated, is neither value-driven nor individual-centered, and lacks increased choices for care. The current provider/payer-centered system must be redesigned. This will only begin to happen through transforming the Medicaid reimbursement model. Ohio's nursing home lobby must not stand in the way of progress.

It is past time for Ohio political leaders to change our Medicaid system. Seniors and aging baby boomers deserve more than what the currently flawed system is offering. I hope Mr. Van Runkle and his association will be part of that solution. Right now they and their cohorts in the legislature are a big part of the problem.


J. Kenneth Blackwell is Ohio secretary of state.

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