The Winds of Healthcare Change..

Recently Texas Governor Rick Perry said "we feel very comfortable that we could come up with a more equitable, a more efficient, and obviously a more cost-effective way to deliver health care" with respect to Medicaid.

So why is our "entitlement health care system" driving states toward bankruptcy?

The answer is both simple and complex. 

One the simple side:

• Medicare and Medicaid each cover at least 50 million people each - that's a total of 100 million people or so.
• Medicare covers people over 65 - typically these people require more services than younger, healthier people.
• Medicaid covers poor people who typically use hospital emergency rooms for primary coverage.

The complex side is that most or all of government run healthcare is full of "mandates".  To understand mandates you first need to understand how the federal and state governments work together under the laws providing funding. 

Medicaid is a program created and funded by the Federal government.  The Federal government gives the states (like Pennsylvania) matching money for every Medicaid dollar spent as long as the dollars spent by the state match the program requirements.  The part in the italics is the catch, as it were.  The Federal government requires the states to do certain things under the "program".

The states only get the money after they have spent it, i.e., the Federal government reimburses the state after the state has spent its money on health care for people enrolled in its programs.

Medicare works differently.  Institutions get payments in block amounts of money for specific things, like a doctors visit or a stay in a nursing home.

In the case of both systems there are many issues related to billing and payments.  Fraud is easy because there is so much billing.  Doctors usher patients through at the maximum rate allowed, i.e., there is no financial incentive to cure someone.  The only financial incentive is to bill for services rendered - so as long as someone keeps coming back for the same problem you, as a doctor, do better, than if you cure them in one visit.

Then there are mandates.  If your hospital or practice wishes to be paid by these programs (directly or indirectly) you must meet certain federal guidelines.  For example, Medicaid is changing the "visitation rights" for hospital patients.  Mandates can be simple things or complex and can cost the states nothing or a lot.

And here in lies the problem.

The federal government is coercing the states to behave in specific ways.  The carrot and stick are reimbursements.  If you want to see patients covered by these program you must follow the guidelines.  If you don't follow the guidelines you cannot see eligible patients.

What's happening in Texas is that the state believes it can do better without the Federal government involved.

Right now this is just talk.

But serious talk. 

My guess is that in a few years these federal systems for health care will start to fail because they are overly complex financially and medically.  Those of use facing retirement in ten years will be left holding the bag as it were.