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You are here: Home / Anderson On Health Insurance / McAllen Texas Update

McAllen Texas Update

by David Anderson|  May 7, 20155:44 pm| 25 Comments

This post is in: Anderson On Health Insurance

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I wish I could write as well as Atul Gawande as he looks at how cost curves are bending in a tour de force article in the New Yorker.  He revisits McAllen, Texas after he highlighted how this city was the most expensive city in America for Medicare and he reports on the change.  There is a little bit of everything going on that has resulted in a bent cost curve.  Below is McAllen baseline situation:

McAllen’s doctors were ordering more of almost everything—diagnostic testing, hospital admissions, procedures. Medicare patients in McAllen received forty per cent more surgery, almost twice as many bladder scopes and heart studies, and two to three times as many pacemakers, cardiac bypass operations, carotid endarterectomies, and coronary stents. Per-capita spending on home-health services was five times higher

In 2009/2010, if you sneezed in McAllen, you were admitted to the hospital for a full work-up. If you sneezed in El Paso, someone handed you a tissue.  That has changed. This is now:

the cost of a Medicare patient has flattened across the country, El Paso included. U.S. health-care inflation is the lowest it has been in more than fifty years. Most startling of all, McAllen has been changing its ways. Between 2009 and 2012, its costs dropped almost three thousand dollars per Medicare recipient. Skinner projects the total savings to taxpayers to have reached almost half a billion dollars by the end of 2014.

Half a billion dollars in reduced costs from McAllen is more than the total reduction in costs from the Pioneer ACO pilot projects that are beginning to be brought to national scale.  It is a big Biden Deal.  How did this happen?

  • “Several federal prosecutions cracked down on outright fraud….”
  • Costs were never a consideration — “We didn’t know that home health was a thousand dollars a month” for each patient, Peña said. People in the medical community had never paid attention to how much of it they were ordering or how little of it was really needed”
  • Preventative care became profitable:  “WellMed had contracted with Medicare H.M.O. plans to control their costs. Its pitch to clinicians was that, if a doctor improved the quality of care, this would save on costs, and WellMed would share those savings with the doctor in the form of bonuses.
  • Accountable Care Organizations were formed and successful: ” two McAllen accountable-care organizations together managed to save Medicare a total of twenty-six million dollars.”

McAllen is an outlier as it was the most expensive market in the country for medical care.  It should be the easiest case to see change because its baseline was so out of whack with typical baselines.  It is a massive success story as each little bit of the healthcare reform puzzle took a whack at a segment of misutilization and inefficient utilization of services.  Outcomes are improving despite the government spending $3,000 per Medicare beneficiary less per year.  That is an amazing win.  It is a win that won’t be replicated on a national scale as the typical county in the US has far less low hanging fruit, but we don’t need everyone to move to best in practice status, we need to move the worst performers to thoroughly mediocre performers or better for us to seriously bend the cost curve.  McAllen is moving significantly out of the horrendous and past mediocre.

I have a few other questions on the economics of medical care in McAllen.  The most important one is Dr. Gawande is only talking about the quantity of services being ordered and used.  Those have gone down massively.  Total cost is the number of units used times the average price.  Has the average price of services in McAllen decreased?  The article indicated that some of the home health care service companies had closed, so a typical market response would be for these companies to start cutting their prices.  If we are seeing that as well as a reduction in total services, then the medical market is actually acting like a market. And that would be shocking.

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Reader Interactions

25Comments

  1. 1.

    Craigie

    May 7, 2015 at 5:54 pm

    Thanks Obama!

  2. 2.

    Baud

    May 7, 2015 at 6:08 pm

    I wish I could write as well as Atul Gawande

    I think you write good, Richard.

  3. 3.

    D58826

    May 7, 2015 at 6:11 pm

    If this kind of good news keeps happening the GOOPPERS will be ignored when they claim the Obamacare sky is still going to fall in. Fortunately for the GOOPPERS they have a fall back plan.. SCOTUS will find for the plaintiffs this summer and when costs sky rocket then the GOP will have all of its talking points fulfilled. We are rapidly approaching the point that a third rate banana republic would not want to be seen in public with the US. But we are EXCEPTIONAL:-)

  4. 4.

    JPL

    May 7, 2015 at 6:31 pm

    @D58826: Goopers will complain about free enterprise.

    I read the article earlier and good for those wanting to provide health care. The system before was providing income to a few but not quality care.

  5. 5.

    Litlebritdifrnt

    May 7, 2015 at 6:34 pm

    According to some pundits on the BBC the exit poll is a bunch of shit.

  6. 6.

    fleeting expletive

    May 7, 2015 at 6:36 pm

    I’m so glad to catch a Richard Mayhew thread. I’m now getting the bills for my eye injury and surgery.The bill from the eye surgery center is particularly confusing to me. It runs on for two pages. The first item is a procedure that bills out at $5500, then there is an “adjustment that reduces that amount by $4,295.80.

    There are several more entries that do that, the large asking price and then a substantial adjustment. What is the deal there? Whose game is this and what is the point. Looks like after all this, for this provider, my liability will be in the lower hundreds, which I can live with. After all, where would I be without all these trained people?

  7. 7.

    RSA

    May 7, 2015 at 7:16 pm

    “We didn’t know that home health was a thousand dollars a month”

    I’m wondering what home health is, exactly? I’ve had some experience with physical therapists, nurses, and caregivers visiting our house. If they hadn’t visited, the same things would have happened, but it would have cost me an hour or two in the middle of my day. That is, I wonder if it’s possible to tell if any of the savings are cost shifting.

  8. 8.

    sm*t cl*de

    May 7, 2015 at 7:20 pm

    Gawande is giving a public talk here next week (albeit on the subject of end-of-life rather than checklists or cost management). Why yes, we have tickets.

  9. 9.

    Craig Pennington

    May 7, 2015 at 7:20 pm

    @D58826: Opponents will claim death panels are euthanizing people to save money if history is any guide.

  10. 10.

    David Koch

    May 7, 2015 at 7:22 pm

    Insurance companies win. Time to kill this monstrosity coming out of the Senate. ~ Markos Moulitsas

    FDL: Top 10 Reasons to Kill Senate Health Care Bill

    1. Forces you to pay up to 8% of your income to private insurance corporations — whether you want to or not.

    2. If you refuse to buy the insurance, you’ll have to pay penalties of up to 2% of your annual income to the IRS.

    3. Many will be forced to buy poor-quality insurance they can’t afford to use, with $11,900 in annual out-of-pocket expenses over and above their annual premiums.

    4. Massive restriction on a woman’s right to choose, designed to trigger a challenge to Roe v. Wade in the Supreme Court.

    5. Paid for by taxes on the middle class insurance plan you have right now through your employer, causing them to cut back benefits and increase co-pays.

    6. Many of the taxes to pay for the bill start now, but most Americans won’t see any benefits — like an end to discrimination against those with preexisting conditions — until 2014 when the program begins.

    7. Allows insurance companies to charge people who are older 300% more than others.

    8. Grants monopolies to drug companies that will keep generic versions of expensive biotech drugs from ever coming to market.

    9. No re-importation of prescription drugs, which would save consumers $100 billion over 10 years.

    10. The cost of medical care will continue to rise, and insurance premiums for a family of four will rise an average of $1,000 a year — meaning in 10 years, your family’s insurance premium will be $10,000 more annually than it is right now.

  11. 11.

    jacel

    May 7, 2015 at 7:24 pm

    @fleeting expletive: A few years ago I had extensive eye surgery for multiple tears in my retina. I received an itemized bill from the hospital that came to a scary five-figure price. Subsequent lines for various mysterious factors reduced this amount by percentages until the bottom line that I was to send them payment for was a perfectly round one hundred dollars. That bit of billing magic baffled me as well.

  12. 12.

    beth

    May 7, 2015 at 7:26 pm

    I’m a bit skeptical of these cost savings claims. I know someone in a wheelchair who recently had his three times a week ambulance transport to dialysis cancelled in Medicare reform. There’s no way he can afford to take cabs there and his health will surely suffer until he can get this straightened out (he has notes from doctors attesting to his need for transport). Are states blindly cutting too wide a swath in the name of cost savings? I’m hearing quite a few stories like this.

  13. 13.

    Baud

    May 7, 2015 at 7:28 pm

    @David Koch:

    4. Massive restriction on a woman’s right to choose, designed to trigger a challenge to Roe v. Wade in the Supreme Court.

    Whaaa?

    (The rest of it I at least understand.)

  14. 14.

    Elie

    May 7, 2015 at 8:00 pm

    For Pete’s sake, we have livelihoods and an economy to run!

    Seriously. This is not about covering our population with the ability to get healthcare. It is about the transfer of resources we think we can make for incomes of caregivers. Mostly, this is the a) physicians and b) institutional providers. Everyone else like nurses and physical therapists and pharmacists are in another tier. The top two want to make sure that they hit the appropriate income/revenue targets and it is hard as hell to keep them from achieving that. First, the data just sucks. Although there has been some progress in finding the blood suckers, there are so many you can’t really go after them full bore. The other thing is that a lot of these folks employ other people. Squeezing them too tight gets them some, but a lot of other people too.
    The ACA will seek strategic balance between getting everybody some sort of care to allowing some people/providers to make good livings. The boundaries of this are always going to be tough and there will be those who get away with screwing folks.

    We are not a country with much of a safety net. What exists is there because it tips its hat to those who would use these programs and services to build wealth. Some of us may not like it, but alas, that is who we are until enough people want it different to make it so.

  15. 15.

    Shakezula

    May 7, 2015 at 8:39 pm

    What I don’t understand is how the Medicare carrier allowed one city in its jurisdiction to get so out of whack.

    It seems that a lot of that utilization could have been controlled with tighter coverage policies and pre- and post pay audits. But then, I’ve been wondering why that carrier lost its Medicare contract. Mystery solved, perhaps.

  16. 16.

    MobiusKlein

    May 7, 2015 at 10:11 pm

    @Shakezula: because Texas. Really, years of W as Gov, Then 8 more as Pres, and there was bound to be some “heckaofajob” situations there.

  17. 17.

    PhilbertDesanex

    May 7, 2015 at 10:33 pm

    The price cuts from retail are ‘discounts’ your insurer works out with the provider. In other words, if you are not insured, you pay full fare, or are charged it anyway. I have a partial hunch they figure that at if you are not insured you’re unlikely to pay anyway, so in the end they can write off more or seek more from govt. It is all accounting funny money from the provider to the insurance company to the employer. Just shop around when you have some horrible thing, free market dontyaknow.

  18. 18.

    Wag

    May 7, 2015 at 11:11 pm

    The comments are incomplete without a link to http://www.choosingwisely.org. The Choosing Wisely campaign seeks to decrease or eliminate care that is common but has been shown to be wasteful is harmful. These are big ticket items that’ll add up if implemented in full.

  19. 19.

    PhoenixRising

    May 7, 2015 at 11:22 pm

    “We didn’t know that home health was a thousand dollars a month” for each patient…

    Yeah, about that.

    I read this segment as “McAllen, TX used to be a pretty okay place to be old, sick and poor, because it was possible to bill Medicare for some of your actual care needs. Now, it’s as shitty a place to be old, sick and poor as El Paso.”

    Um…yay? The fact that home health agencies employ a population of Americans who themselves tend to be poor, brown, low-education-level women…I’m not so sure that overall human happiness or health has improved in McAllen from this metric.

    I’m happy that fewer old folks are getting operations they didn’t need, which is the main cost curve effect described in the article. That’s good. Destroying a poorly functioning market in home health care, in which federal dollars were being transferred to some poor folks to make other poor folks less miserable, isn’t the same thing.

    Obviously socialism (cash transfers to both sides of that paid care relationship so a person can afford to take care of her own elders) would be better, because it leaves out the home health agency owners where they are not adding value. But we can’t have socialism because commie pinkos, and some services funded by Medicare have been the next best thing for longer than you & I have been alive.

  20. 20.

    Wag

    May 7, 2015 at 11:22 pm

    @WagMake that wasteful or harmful.

  21. 21.

    dww44

    May 8, 2015 at 12:51 am

    Richard, I can’t thank you enough for linking me to this article. As one on Medicare and who must soon decide whether to have some recommended spine/disk/neck surgery to relieve compression of a nerve this is enormously helpful.

    Plus I get to share with all my conservative relatives who are in those self-same medicare years and hopefuly, just maybe, open their eyes a bit. Even if none of their opinions of the ACA changes , they can still learn lots from that article. Maybe even nod their heads that what we need more of are primary care physicians who are paid for outcomes and not for how many patients they see in a day or an hour.

    You are truly “value added” at BJ.

  22. 22.

    Shakezula

    May 8, 2015 at 7:03 am

    @MobiusKlein: The Medicare program is federal and the carrier (a subsidiary of one of the Blues, I think) oversaw several states. Even if it was just a Texas thing, I’d expect the entire state to be incredibly high.

  23. 23.

    Davebo

    May 8, 2015 at 7:34 am

    @PhoenixRising:

    I read this segment as “McAllen, TX used to be a pretty okay place to be old, sick and poor, because it was possible to bill Medicare for some of your actual care needs. Now, it’s as shitty a place to be old, sick and poor as El Paso.”

    That’s a pretty creative reading you have. It seems much more likely that McAllen had a lousy organization managing Medicare and that the health care community there took advantage of that fact to rape the taxpayers.

    However I’m guessing you didn’t actually read the Gawande piece at all.

Comments are closed.

Trackbacks

  1. Reforms and job changes » Balloon Juice says:
    May 8, 2015 at 7:21 am

    […] PhoenixRising raises a good point that has to be discussed as health care reform continues forward.  There are people who are made worse off as we reform […]

  2. Ask versus get » Balloon Juice says:
    May 8, 2015 at 7:51 am

    […] Fleeting Expletive asked a good question regarding how to read a hospital bill: […]

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