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THE PERFECT STORM

March 28, 2007

Oscar F. Lovelace, Jr., MD

by Oscar F. Lovelace, Jr., MD

Medical care in our nation is being hit by a “perfect storm”, and it is shaking at its foundation. The increasing number of uninsured patients, the aging of our society, and increasing costs of providing medical care, especially sky-rocketing malpractice insurance costs, cause many to believe that our health care delivery system is at the brink of collapse. Legislation to limit non-economic damage awards has yet to translate into any relief from soaring malpractice insurance costs for physicians providing essential medical services to communities all across our state. The depth and magnitude of the problem is most easily seen in graduate medical education training programs in both primary and specialty care. Approximately half of the first year residents in our nation’s family medicine residencies have graduated from foreign medical schools. Thoracic and cardiovascular surgery residency training programs were no more successful – filling less than half of the available positions in the initial 2005 match and only partially filling the remaining positions in the scramble after the official match.

Our government has played an expanding role in providing health care through Medicare and Medicaid, approaching 50% of every health care dollar spent in America – especially in SC, one of the poorest and most senior-populated states in the nation. In fact the Governor of SC is the single most influential person affecting health care in our state. The Governor appoints the director of Health and Human Services (DHHS) who administers the Medicaid program and the board and chairman of the Department of Health and Environmental Control (DHEC). The DHEC Board basically sets public health policy in our state.

In order to withstand the challenges of this storm, we must focus on strengthening key aspects of prevention and primary care in our state. We now have the dubious honor of having the lowest cigarette tax in the nation at 7 cents/pack, compared to the national average of 92 cents/pack. We must confront cigarette smoking, America’s number one preventable cause of death. In 2004 South Carolina brought in 74 million dollars of Tobacco Settlement revenue and 31 million dollars in tobacco tax revenue but spent no state revenue on youth tobacco-use prevention. This has held back more progressive public health policy and led to a hidden annual tax on every SC household of $578 to pay for government funded tobacco-related health care costs. If we matched the national average on the cigarette tax and then used the increased revenue as a renewable source of funding for Medicaid, we would simultaneously increase government revenue from cigarette taxes, lower health care costs, prevent teen smoking, and, most importantly, save lives. We must also pass legislation that provides clean indoor air in public places – or at least gives communities the option of passing clean air laws that are more stringent than current state law.

South Carolina’s Medicaid program is the health insurance safety net for nearly a million poor citizens who would otherwise have no health care coverage. The 2004 Medicaid budget represented 19% of the state’s annual budget. Governor Sanford’s Medicaid Waiver proposal represents the most sweeping change in Medicaid since the program’s inception in the 1960’s. A key component of the governor’s waiver proposal seeks to outsource the Medicaid program to private Medicaid managed care contractors, most of which are out of state. Currently DHHS runs Medicaid on a 3% administrative overhead. The waiver proposal assumes that a system of competing private insurance plans and medical home networks will emerge to provide Medicaid recipients with access to more cost-effective, and at least equal quality, health care services. Because of aggressive marketing techniques used by large Medicaid managed care contractors, it is likely that locally developed Primary Care Case Management (PCCM) models will not be able to effectively compete when the flood gates are open to the Medicaid managed care contractors.

From 1994 to 1996, I met with physicians who were assembled at the request of SC DHHS to develop PEP, Physicians Enhanced Plan, a better Medicaid delivery system – one that empowered patients to use primary care physicians for cost-effective medical care. We were asked by Governor Campbell’s administration to develop “South Carolina’s answer to Medicaid Managed Care.” I understood this to mean that the governor wanted to develop a Medicaid delivery system that would empower the primary care delivery system in the state, thereby keeping our federal and state tax dollars in SC and allow the state to be the beneficiary of any cost savings. When my group practice in Newberry County was asked to pilot the PEP program in 1996, SC DHHS reported that the program had saved the state a million dollars in one year on the 1,100 patients enrolled at our site.

The Medicaid PEP program reimburses a primary care physician a flat monthly payment for medical care provided in a physician’s office and requires that the primary care physician be available 24 hours a day, 7 days a week, to authorize services provided by specialists, hospitals, and other health care providers. A major emphasis of the program is to divert non-emergency care away from the hospital emergency room to the primary care physician’s office. Understandably, this also means that emergency rooms are able to be more available to treat true emergencies instead of continually being bogged-down addressing routine medical problems.

In the Carolina Medical Review’s Spring 2002 newsletter (written by Mary Barnett, Chief of Staff at SC DHHS), the results of a comparison study were reported. The study performed by SC DHHS from January 1999 through June 2000, comparing traditional Fee-for-Service Medicaid and PEP, revealed that PEP members received more primary and preventive care services and prescription drugs than patients under the traditional fee-for-service program. In addition, the PEP model – through reduced utilization of lab and x-ray services, as well as reduced hospital inpatient, outpatient, and emergency room services – achieved significantly better overall cost savings.

Unfortunately, the PEP program model has never been fully implemented. After ten years of half-hearted statewide implementation, only about 5000 of the one million Medicaid patients are enrolled in the PEP program’s much broader and successful primary care “medical home” model of care. Instead, an increasingly larger portion of the state’s Medicaid budget is being spent on hospital charges (24.4%), and progressively less on physician services (9%). In fact, in 2004 there was an overall decline in the number of Medicaid recipients receiving physician services.

In early 2003, the Governor’s Healthcare Task Force (which I chaired) recommended the further implementation of other medical home programs like the Medically Fragile Children’s Program. The Medically Fragile Children’s Program, also implemented in 1996, has saved South Carolina Medicaid an additional one million dollars each year by providing a similar medical home for 56 medically ill foster children. Tri-County Project Care developed in Charleston, Berkeley, and Dorchester counties also created a successful medical home model for the working poor and uninsured citizens of our state and needs careful consideration for state-wide implementation.

MUSC health care economists have shown that private Medicaid managed care in South Carolina has proven to be more expensive than PEP and FFS Medicaid, because managed care plans tend to enroll healthier patients and avoid the chronically ill. If there is statewide implementation of the Governor’s Medicaid waiver there will likely be a further decline in primary care physician services for the chronically ill resulting in more patients receiving medical care in local emergency rooms. Over time this will lead to higher Medicaid costs from unnecessary hospitalization resulting from delayed treatment of preventable medical problems.

As a young person, who grew up knowing and eventually caring for an aunt with cerebral palsy as her family physician, I appreciate the important role our state’s Medicaid Program plays in the lives of the most vulnerable South Carolinians.

As citizens we cannot sit back and watch South Carolina’s future go up in smoke from regressive public health policy, soaring medical liability insurance costs, and a flawed Medicaid waiver. “While I breathe, I hope” for clean fresh air in public places and for common sense healthcare policy that is in the best interest of all South Carolinians. Our cigarette tax should at least meet the nations average and where it could be used to provide real medical homes for our Medicaid patients – a relationship with a primary care physician – not a relationship with an out of state Managed Care Corporation Working together, we can make a difference for a brighter future in South Carolina.

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2 Comments leave one →
  1. Lou Neiger permalink
    March 28, 2007 9:31 PM

    Dr. Lovelace,
    Thanks for your great work you do for our citizens. Your article is well written
    I am going to keep a copy of this.
    BUT as we discussed at a gas station after the election. Let us 1st look at the abuses by folks that receive mediciad and remove the ones that should No longer be on it.
    2. Penalize all doctors and hospitals if found over charges to Medicaid. Than have a real review of the cost and savings to the tax payers who pay the bill.
    The folks paying today will not pay tomorrow as we will be retired.
    We must look to save money 1st.
    Sincerely
    Lou Neiger,CLU
    Newberry

  2. Louis w. Neiger permalink
    April 6, 2007 1:35 AM

    Dr. Lovelace,
    Thanks for your great work you do for our citizens. Your article is well written
    I am going to keep a copy of this.
    BUT as we discussed at a gas station after the election. Let us 1st look at the abuses by folks that receive mediciad and remove the ones that should No longer be on it.
    2. Penalize all doctors and hospitals if found over charges to Medicaid. Than have a real review of the cost and savings to the tax payers who pay the bill.
    The folks paying today will not pay tomorrow as we will be retired.
    We must look to save money 1st.
    Sincerely
    Lou Neiger,CLU
    Newberry

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