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Pennsylvania Medicaid's Cost "Savings"

While scanning the news this morning, I laughed out loud at Pennsylvania’s newest proposal to cut Medicaid costs.

According to this Kaiser Health News report, Pennsylvania plans to pay Medicaid recipients up to $200 to visit “higher quality and lower cost hospitals and doctors.”

Gary D. Alexander, the Pennsylvania secretary of public welfare, compared the idea to a shared cost savings. “If the state saves $1,000 on a medical procedure we may give the beneficiary $100 or $200 as a reward.”

Does anyone see a problem with this approach?

Let me lay it out for Mr. Alexander, just in case someone who reads my column has his e-mail address.

In some of the inner-city emergency departments where I have worked, there used to be a policy that patients would be given subway tokens … or bus fare … or cab vouchers at the conclusion of their ED visit. The theory was that hospitals didn’t want patients loitering in the emergency department waiting rooms after their visits trying to find a ride home.  The policy was also viewed as creating good public opinion since the hospitals were making sure that patients had a way home if they came by ambulance and had no other means of transport. Ambulance transport to the hospital is provided at no cost to the patients. Ambulance transport home must be paid with credit card.

Once the general public got wind of the cab voucher policy, guess what happened. Patient volumes increased. Ambulance transports increased. Wait times went up. People waited hours for free medical care so that they could then get their free subway token … or bus fare … or cab vouchers at the end of their visit. The policies were quickly discontinued.

If Pennsylvania begins paying people to go to “better” hospitals, the cab voucher fiasco will occur in Pennsylvania, only on a much grander scale. Once Pennsylvania Medicaid recipients learn that they will be paid to go to a certain hospital for medical care, those hospitals will be deluged with patients. To those receiving public medical assistance, the medical care is free, the medical testing is free, and the medical procedures are free. Now, with a monetary incentive to have a procedure done at a given facility, what do you expect will happen? Patients get $200 if they get a cardiac catheterization at one hospital versus another? Twelve year olds will go to those emergency departments complaining of crushing chest pain. Patients get $50 if they go to one emergency department that provides “higher quality”? There will be lines out the door.

Medicaid will end up footing the bill for an increase in medical care because it has incentivized the patient population to seek out that care.

Brilliant. Just brilliant.

Mr. Alexander even went to a meeting of “300 health insurance executives” in Washington and pitched his plan. I’m sure he got a little round of golf claps for his innovative approach to reducing health care costs.

This is what happens when people who make policies have no practical experience in the industry in which they are making the policies. Mr. Alexander was a political science major in college and has a law degree.

You want to decrease utilization? Pay Medicaid patients that same $200 at the end of a year only if their medical resource utilization (ED visits/prescriptions/whatever other variable you want to control) is below the average utilization for other Medicaid recipients for that year. Kids get $50 per year. Send out letters to those who didn’t get the money telling them why they didn’t get their “incentive payment”.

That policy will pay for itself within the first two years.

But what do I know? I’m just a dumb ER doc without a political science degree.


  1. Your idea makes more sense than anything coming from government sources.

  2. What’s the difference between this and a kickback? If you as a provider did this you would be jailed.

  3. Public policy people seem to expect the most honest behavior from the public and the least honest behavior from their employees.

  4. You’re just being sensitive about the PoliSci degree. The real killer is your lack of a law degree. You have no cred with this administration, or any other for that matter.

  5. This is the funniest crap I’ve ever heard of.

    May as well start doing some Tuskegee Syphilis stuff while we’re at it since we’re paying welfare patients to get unnecessary procedures now. If we’re gonna do procedures-for-money, let’s try to cure cancer or Alzheimer’s or something while we’re at it.

  6. Did he not take a basic Micro Economics course in College? Or did he never think that it applies in the real world.

    Any time people think something is free or low-cost, they will use more of it.

    Now this guy plans on not only to give poor people free health care, but to pay them to get it?

    In general, that is part of the problem with health care in general. Because Insurance hid the costs from us for so long, we began to demand more and more of it. The costs were hidden, so we didn’t care what the costs were.

    So far all the solutions I have seen from Washington are methods to further hide the true cost of health care from us. No wonder I believe they are all doomed to fail.

  7. It sounds like this was an inefficient application of the incentive. It’s highest potential is in the area of controllable conditions, and it must be applied with a systems view to decrease overall consumption of services.

  8. Maybe I should go read the finer print in the proposal, but would this not just invite the abuse of various medicaid recipients to, say,go the the ER with some simple, time-curable virus, or random made up health condition…just to make a buck or 200??

  9. Here’s an easier way to save MONEY. “Lose” the paperwork and send the client a letter that says they did not comply in a designated time and their medicaid benefits will be taken from them. Happened to me and I called my caseworker this morning and guess what? No call back. So, if my self or my husband get sick or hurt, we are going to the ER and get treated w/o any sort of coverage, that we are legally entitled to receive. This will cost more in the long run for PA.

  10. A follow up to my comment: we are both receiving social security and our amount combined is about $1100 a month. We had medicaid for 1 year and didn’t use it at all. We aren’t the type to lounge in an ER. We’ve never asked for it, but, it came to us when my husband turned 65 and got on medicare. I never wanted it.

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