Albany County & Orange County, NY Budget and Their County Nursing Homes

by John W Rodat on October 5, 2011 · 0 comments

Those who know me, know that for several years as the Albany County, NY Commissioner of Management & Budget, I developed and pushed very hard for a strategy to expand home and community based long-term care services and to close the Albany County Nursing Home. I thought and still think that this direction made much more sense for those needing some form of public long-term care support and it made vastly more sense financially and for taxpayers. The County Executive, Michael Breslin became a strong advocate of this strategy.

We won the first phase, expanding home and community based services, though not without a fight with the County Legislature. There were a number of elements to this phase, among them an expansion of Expanded In-Home Services for the Elderly Program (EISEP) services beyond what was required to achieve State matching funds and the creation of a crisis case management program.

We had a partial victory in the second phase when the “Berger Commission” required that the County close the smaller and older of its two nursing homes (the Ann Lee Home), which was not much more than a glorified adult home. It had the lowest case mix intensity of all nursing homes in New York. Moreover, the Berger Commission” required that the remaining Albany County Nursing Home downsize to no more than 250 beds. So the net reduction in nursing home beds, from 595 beds to 250, was 345.

But after that the fight was bitter and we lost. The County Legislature, in response to a half-dozen patient family members (oddly enough, led by a couple of Tea Party activists who hate government programs and spending except for their own) and unions representing the Nursing Home staff (about a third of whom live outside the County), repeatedly increased the County Budget enabling it to survive.

And here’s where it gets really interesting. The remaining building, built around 1972, is tired, and expensive to maintain and operate. So the Albany County Legislature pushed ahead to build a new nursing home. Their design is an expensive one and their own architects and consultants cost it out at about $82 million. Those same architects and consultants also estimated that the most the County could expect to recover in capital reimbursement would be about $58 million. Thus, the County will have to absorb a direct expense for the capital alone of about $24 million (amortized, I’m sure).

That increased capital expense is on top of an operating loss approaching $20 million per year. This is the direct cost to the County over and above Medicaid, Medicare, VA and private patient, and other third-party reimbursement. The administrator of one local not-for-profit nursing home of comparable size was rightly offended that the County loses a figure close to the private facility’s entire budget.

And this is for about 240 patients per year and a maximum of 250 patients at any given time.

And now it gets even more interesting …

There are several Legislators (who knows, it may be a majority), who are counting on New York State to turn down the County’s Certificate of Need (CON) application to build a new facility. There are good arguments for the State to do so and we’ll return to that later. But what these Legislators don’t understand is that such a State decision would not take them off the hook. It would force them into a deeper mess. How?

A New York State decision not to allow Albany County to build a new nursing home is not the same as the State requiring the County to close its existing facility. That decision would remain with the County … while it continued to operate a tired, unattractive, increasingly expensive to maintain physical plant.

And an Albany County Legislative decision to close down will be much harder politically today than it might have been before because they have already invested so much politically, substantively, and financially in maintaining the fiction that it’s essential. They’ve trapped themselves.

In the meantime, other New York Counties are rushing to get out of the nursing home business, but it’s getting harder and harder to sell because the long-term financial prospects for any nursing home are dimming. Suffolk County had a buyer for its facility, but the buyer backed out after legislative delays and after changes in State Medicaid policy which portend a financially dismal future.

The Orange County budget was just released and the property tax increase was less than the tax cap of two percent. How was that possible with everything else going on? What made it possible was the proposed closure or sale of the county nursing home. At least in this case, the legislative leadership, however regretfully, has recognized reality and agreed with the County Executive. Franklin County has agreed to turn over its nursing home to the local hospital and to pay the hospital to take it off its hands.

At a time when county officials in New York are complaining bitterly about “State mandates,” many have at least recognized that one of their most expensive services, nursing homes, is not mandated. Indeed the State would quietly prefer that they get out of the business.

Albany County is an exception to that and the reason is a failure of legislative leadership. Those needing long-term care services will pay and Albany County taxpayers will pay for decades.

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Cross posted at Public Signals

Tagged as: Albany County, Budget, Nursing Home, Orange County

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The Next Generation of Medicaid in New York

by John W Rodat on September 27, 2011 · 0 comments

I used to write a lot about New York’s Medicaid program here (here are the Medicaid posts).

But then, just as a cap on growth of local government (New York City and counties outside NYC) Medicaid liabilities was created, I went to work for one of those counties. The county liability is now fixed by statutory formula. Thus, there wasn’t much of anything that could be done operationally at the local level. Indeed, the incentives reversed and it made more sense to shift county costs into Medicaid, which of course we did from time-to-time. So make your formula calculations, budget for it and otherwise spend time and energy elsewhere. Employee health benefit costs were growing faster anyway.

Well, a couple things have happened this year and the game has changed again.

First, the State finally decided to bring the rest of the Medicaid population into some form of capitated, case-managed care. When the State originally imposed mandatory managed care in the mid-1990′s, it exempted, the elderly, those needing long-term care, those with behavioral/mental health issues, and those with other disabilties, i.e., everyone who was sick, i.e., those who used the vast majority of services and accounted for the vast majority of expenses.

But this year, as part of the State budget process, New York decided it’s time for everyone to get into the case managed/managed care pool. They’re using lots of new names, lots of new program definitions and there are a lot of open issues, some of them pretty big, about how the transition is going to work, but clearly there’s a new direction. And the change of direction is a big one. There are many elements to these changes and I’ve had my doubts since the beginning about the aggressiveness of the schedule. (And that could become worse. The responsible Health Department offices are only partially staffed today and it’s entirely possible that they will lose more staff in layoffs.)

Second, the Legislature gave to the Commissioner of Health, what are referred to in Albany as “superpowers.” If the reforms do not lead to the targeted savings, the Commissioner, i.e., the Governor can do pretty much whatever’s necessary to reduce expenditures. In 30 years, I’ve never seen such a delegation of legislative authority to the executive, especially in health or Medicaid policymaking.

Third, for a couple reasons, the State began the planning to move the current administrative functions performed by local governments to itself. Many counties objected (ironic, huh?), but there are two sound reasons, namely that the State is increasingly the liable party, and second, because program and plan enrollment needs to be coordinated with health insurance exchanges required by the Affordable Care Act. We’ll return to that topic sometime.

Fourth, unrelated to Medicaid, the State imposed a cap on property tax growth for most local governments. Though there are technical elements and adjustments, generally the cap is about two percent per year. The cap can be exceeded but not with a simple majority vote of the county’s legislative body. Instead, additional process requirements are imposed and a 60 percent majority is required.

But in many counties two percent of the property tax levy is roughly equal to three percent of the base year Medicaid cost. Thus, the entire allowable growth allowed in property taxes will be eaten up by the State’s formula-driven Medicaid increase.

If I had to bet today, I would bet that many, perhaps a majority of counties, will submit budgets with property tax increases greater than two percent. They’ll go through the process and blame the State. But this time, their blame will be highly focused.

The county rebellion is already bubbling. Some county officials are talking about budgeting no increase in their Medicaid budgets and/or withholding payments. Some State Legislators are talking about taking over the Medicaid liability. That’s a good idea, but neither simple nor cheap ($7-8 billion). We’ve got some ideas on how to handle this, but will get to those later.

Clearly there’s more to come.

Tagged as: Medicaid, New York

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What happened around 1980, what happened the last half dozen years and why it still makes a difference

by John W Rodat on July 15, 2011 · 0 comments

Interesting chart (the second one) posted by Lane Kenworthy today and some interesting debates and here on when the US healthcare system performance began to look different from the rest of the world. Kenworthy’s chart depicts the relationship between health expenditures per capita and life expectancy.

Here’s my contribution (pardon the big ugly graphs – I did this in a big pre-vacation hurry):

When did the US begin to look different?

1980, give or take a few years, is about the time that the proportion of the US population with health insurance stopped growing and started declining. The data prior to that time aren’t great and clearly after stabilizing in the late 1950s and early 1960s, there would have been a large step increase with the advent of Medicare and Medicaid beginning in 1966. But then, with inflation in service costs and thus premiums and tax burden for public programs, the cost of coverage began to out run growth in economic capacity (however you want to measure that on either a micro or macro basis). Then came the inflection point and more people began draining out of the system than entered it.

No doubt, there are a number of factors that contributed. But we do know that coverage makes a difference in access to care.

Here are some posts I wrote back around 2005 about the impending acceleration in the loss of coverage and the crisis that would inevitably lead to political action:

Care and creation of the uninsured. An extremely important, but usually ignored aspect of this issue is that “the worse it gets, the worse it gets.” That’s part of the reason the proportion of uninsured is rising.

As more uncompensated care is provided it is subsidized either informally through price increase based cost-shifting or formally through such mechanisms are state indigent care pools, the costs of which are borne by health insurers and/or employers. Of course, as that happens, premiums rise. As premiums rise – especially in relation to income or other economic resources – coverage falls. That in turn, creates more uncompensated care … take a look at the Self-Reinforcing Coverage Loop – a vicious circle. Insurer/employer based subsidy programs are thus inherently self-defeating.

bdcc_coverage_loop.jpg

Why might coverage loss accelerate … and what then?. In my last post, regarding the loss of coverage and uncompensated care, I mentioned: As premiums rise – especially in relation to income or other economic resources – coverage falls.

The past decade at least, I’ve been convinced that this is the primary underlying cause of health insurance loss. Call it what you may, dress it up as much as you like, blame employers or public policy makers, coverage has simply gotten too expensive relative to the economic resources that pays for it. All you have to do is note that health care costs and therefore health coverage costs (both public and private) have been rising consistently faster than economy overall and thus the rest of the economy.

Think in terms of a ratio of coverage costs to other economic resources. Regardless of the specific measures you use, the more that ratio rises, the more people will drop out or be dropped out of the insurance system.

And as that ratio begins to cut at higher and higher income levels, it will affect an increasing proportions of the population. I don’t know where the inflection point on the upslope (the left side of the peak) is in this graphic, but until we reach it, each increase in that ratio will affect an accelerating number of people. Then the rate of increase will fall, but the numbers of newly uninsured will continue to increase until we hit the peak.Population_insurance_distribution

Think of the Cutting Edge “Coverage Blades” in the graphic moving to the right and slicing off increasing numbers of currently insured.

Of course, when we do hit the peak, we will be deep into the middle class – being uninsured. At some point just to the left of the peak, I expect we will arrive at the political crisis and deal with the issue.

But, like earthquakes in California, while we know this crisis is coming, we don’t know exactly when.

population_insurance_distribution.jpg

It’s only a matter of when. This post is about behavioral change, particularly as it relates to health economics and the healthcare system. The essentials, the mechanics if you will, apply similarly to individuals, organizations, and the place of healthcare in general economy.

The next couple of posts will be based on it and I’ll likely refer to it many times in the future.

Before we get started, answer the following questions:

If you and your family had (or have) to pay for your healthcare coverage directly, at what percentage of your family income would you be forced to seek less expensive coverage, even if it were more restrictive? Answer: __________
If you and your family had (or have) to pay for your healthcare coverage directly, at what percentage of your family income would you be forced to drop your coverage? Answer: __________

Put your answers aside for a moment. We’ll return to them shortly.

Some of this may look fairly complex, but it’s not really. Just follow it step-by-step and you’ll see what’s going on both in the post and, more importantly, you will see how trouble is inevitable or perhaps why we’re already in trouble. So don’t bail out on me quite yet.

The economy grows and healthcare costs grow. When healthcare costs grow, premiums, employer burdens, and taxpayer burdens grow in parallel as well.

Take a look at the following Chart 1, The Impending US Healthcare Crisis: Why it is Only a Matter of When: Hc_as__pct_of_economy_base_c1 What do we see?

We see economic growth E (with the random ups and downs taken out for simplicity). As is typically the case, it curves upward, representing exponential or compounding growth. We see D “$ at Some Percentage of the Economy” which parallels the economy itself. For example, this curve might represent 10 or 20 percent of the economy. Because it’s a percentage, it grows at exactly the same rate as the economy. We also see H, Healthcare Spending. Note that, consistent with a lengthening history in the US, the rate of growth is faster than the economy (E) and faster than at $ at Some Percentage of the Economy (D). Because it grows faster, eventually it overtakes and crosses D at a point we have labeled “Decision/Behavioral Change Threshold.” Then something changes.

Now what might that “Decision/Behavioral Change Threshold” be? Let’s return to the questions you answered at the beginning. (You did answer them didn’t you?) Let’s assume that you answered that at 15 percent of your family income you would have to drop coverage. Beyond that, regardless of the risk, it would be just too expensive to pay the monthly premiums. Your family circumstances and decision behavioral change are represented in Chart 1. Here’s how. Your income is represented by Economy (E). Your 15 percent personal decision threshold is represented by “$ at Some Percentage of the Economy” (D). Premium growth is represented by Healthcare Spending (H). You drop coverage where the lines cross and at time T1.

You may use the same chart to think of movement to more restrictive coverage. Assume that as the cost of coverage approached your 15 percent threshold (say at 12 or 13 percent), straining to maintain some form of protection, you might seek less expensive coverage. The chart will work in exactly the same way.

Now what happens if economic growth slows, healthcare costs accelerate, or you ability to devote a set percentage of your economic capacity to healthcare diminishes?

hc_as__pct_of_economy_base_c1.jpg

Chart 2 shows slower economic growth combined with healthcare cost growth the same as in the base case in Chart 1. hc_as__pct_of_economy_slow_c2.jpg

Chart 3 shows the base case economic growth and even faster healthcare cost growth. hc_as__pct_of_economy_fast_hc_c3.jpg

Chart 4 shows a lower Decision/Behavior Change Threshold. For example, if you would be forced to drop coverage at five or 10 rather than 15 percent of your family income as would generally be the case for lower income families, then the Threshold would be lower relative to the family Economy. What Charts 2 through 4 have in common is that all produce a change in behavior at an earlier time. Slower economic growth, faster healthcare cost growth, or a lower percentage of your economic resources that can be devoted to healthcare all cause you to drop coverage earlier. hc_as__pct_of_economy_diff_thresh_c4.jpg

Pick your own markets of economic growth. Pick your own measures of economic capacity. Consider this at the most macro-economic level or at the personal level. The same effects result.

If a system consistently grows faster than a larger system in which it resides, eventually an intersection is reached at which the behaviors of one or the other, or both change less the larger system be overwhelmed. But even being overwhelmed will generally yield a behavioral change (think uncontrolled cancerous cells overwhelming an organ or body and eventually killing it).

What has been happening is that healthcare costs consistently outgrow the rest of the economy – which pays for healthcare. Increasingly individuals, families, employers, and governments capacity to carry the cost are being overwhelmed. So their behavior changes. In some cases, they seek increasingly stronger means of maintaining a financial relationship with the healthcare system. But in other instances, their behavioral change is to simply walk away. Thus, increasing numbers of uninsured.

We don’t all reach the intersection at the same time or at the same rate. The same is true for employers and governments. But, sooner or later, given the underlying structural relationships and dynamics, the vast majority of individuals and the economy overall will arrive at that intersection. Tennessee and other states arrived at it earlier this year with their Medicaid programs. General Motors appears to be at the doorstep right now. In contrast, for the time being, it appears that the Federal government has chosen to spend a higher portion of its economic capacity (tax revenue plus debt) on Medicare. Yet, when we consider projections for the Medicare Trust Fund, clearly the day of reckoning is not that far away.

I’m going to make a brazen assertion here: If you want to understand what is happening in healthcare and if you want to anticipate what will be happening, then the single most important measurements to track are overall healthcare spending, the carrying capacity of the economy that’s paying for it (whether family, regional, employer, governmental, or macro-economic), and their relationships to one another. With healthcare cost growth rates exceeding economic growth rates, the larger the gap between growth rates in healthcare spending and economic capacity, the closer the day of reckoning.

These economic forces were hard at work long before 2005. I strongly suspect (believe) that the inflection point at which time the proportion of people with coverage stopped growing and started declining was 1980, give or take a few years. And the inflection point was the result of pretty simple economics. We we spending an increasing proportion of our economic capacity on health care. And we were individual-by-individual, employer-by-employer reducing our participation in the system because we couldn’t afford it any more.

I’ve modeled this dynamic using a technology that I can now put up on the web. Maybe I’ll take a crack at that after vacation.

What Kenworthy has done is raised a question regarding life expectancy and the increasing distance between the US and other advanced economies. It’s well worth further exploration.

Tagged as: Coverage, Economic Capacity, Life Expectancy

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NewsCorp is a criminal conspiracy … and worse

July 11, 2011

From the Guardian, News International papers targeted Gordon Brown: Journalists from across News International repeatedly targeted the former prime minister Gordon Brown, attempting to access his voicemail and obtaining information from his bank account, his legal file as well as his family’s medical records (Emphasis added). … Brown was targeted during a period of more [...]

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Oh goody, a new acronym

June 17, 2011

About half the states have or are working on databases that encompass the bulk of claims for health services, both for hospital inpatient, ambulatory care, and pharmacy. It’s about time. Why’s that? Because it broadens policymaker’s perspective on what is actually happening in healthcare systems. For decades, most states have had databases that encompass all [...]

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Back online soon

February 2, 2011

We’ve been offline for nearly five years. We’ll be back soon. In the meantime, you might take a look at some of what we used to talk about. Or take a look at our sister site.

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