Colorado’s Medicaid Cost Drivers

Health policy discussions often focus on controlling the cost of the sophisticated medical care that is provided to relatively few people. Outside of this blog, relatively few people pay attention to the impact of routine costs like the cost of an extra physician visit for each of 150 million people. This is one reason why so many people are surprised by the fact that consumer directed health plans with proper incentive structures can lower health care expenditures by as much as 20 percent without compromising health or externally rationing care. It also explains why so many Medicare commentators have difficulty understanding how the Ryan Medicare reform plan might work.

Below is a list of what officials at Colorado Medicaid consider the top 10 “cost drivers” for the state Medicaid program as shown in one of the Colorado’s budget documents. Six of the ten cost drivers revolve around labor and delivery and routine physician visits by children. Colorado Medicaid covers slightly more than 36 percent of Colorado births, almost 25 percent of its children, 20 percent of its disabled, and 60 percent of its nursing home residents.

How the bureaucracy chose these items as cost drivers is not made clear in the budget document. In the past, officials have focused on areas showing the largest year over year percentage increase. Only two items qualify as part of care for the aged and disabled even though the state’s Medicaid program still does spend more in total on the elderly and disabled than it does on healthy children. And if the cost driver listed as per capita cost for kids using Federally Qualified Health Centers is any guide, Federally Qualified Health Centers are really, really, expensive places to get care when compared to visits to regular physicians.

The number of cases and the total cost for FY2010-11 follow in parentheses:

Uncomplicated vaginal delivery (14,177, $38.7 million)

Health supervision of infant or child (105,734, $17.7 million)

Uncomplicated cesarean section (3,116, $16.4 million)

Cesarean with complicating diagnoses (2,175, $15.3 million)

Health supervision of infant or child at Federally Qualified Health Centers (58,789, $15 million)

Outpatient hospital visits involving abdomen and pelvis (18,331, $12.8 million)

Tracheostomy with mechanical ventilator with major operating room procedure (130, $12.3 million)

Oxygen concentrator (12,454, $12.2 million)

Special investigations and examinations at Federally Qualified Health Centers (39,480, $12.2 million)

Vaginal delivery with complicating diagnoses (3,061, $11.0 million)

The performance goals given by the state Medicaid bureaucracy grandly propose containing these costs. In response, state budget staff have asked, quite sensibly, whether the Department plans to “reduce vaginal deliveries without complicating diagnoses” by reducing the number of births?

Comments (9)

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  1. Mike Ainslie says:

    The last sentence lays it all out- If we could only stop all pregnancies and children we’d save money

  2. Harry P. Otter says:

    If Colorado Medicaid program can reduce vaginal deliveries without complicating diagnoses that would be impressive, but isn’t tha a little far fetched for the unborn? Can they really plan the births without complications?

  3. Studebaker says:

    In response, state budget staff have asked, quite sensibly, whether the Department plans to “reduce vaginal deliveries without complicating diagnoses” by reducing the number of births?

    State Medicaid official may not have it within their ability to convince fewer indigent women to conceive babies they cannot afford. But what if the state declined to cover childbirth (the question is rhetorical: that’s not an option)? The babies would still be born. But more may be delivered by midwives as private expense.

  4. Roget says:

    +1 Studebaker

  5. Alex says:

    Excellent post Linda.

    The last part in particular shows what happens when legislators and bureaucrats get involved in health care.

  6. linda gorman says:

    The point of the last sentence is that the bureaucracy seems to be grasping at straws when it comes to controlling Medicaid costs, something that is clear to the legislative budget analyst.

    Having decent care for labor and delivery reduces infant and maternal death and complications. If one wants to reduce those costs one has to make it less expensive for hospitals to provide necessary care. One does that by making sure that the government does everything in the power to reduce the costs of doing business.

    At present, there isn’t any alternative care model as safe for mother and child. The Dutch data on births make clear that midwife attended at home births are more dangerous simply because we don’t have good predictors for when things will go wrong.

  7. Alice says:

    To be fair the budget offers some recommendations like
    “Implement the federal integrated care for dual eligibles contract” and “Develop a value-based reimbursement methodology for primary care providers/replace current ‘pay for volume’ system”

  8. Linda Gorman says:

    Please describe how a “pay for volume” system would differ from a value-based methodology for uncomplicated vaginal births.

    Seems to me that there’s one mother and one baby no matter what.

  9. Alice says:

    Linda: Value-based payment may not change anything for births, but any area where there is substantial differentiation in service should see an impact from a switch.