Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Joining me now is a guy who I gotta tell you.
I'm sure that when Nicholas Kleinworth was a small wee child,
he said, Mom, Dad, my dream is to work on
healthcare policy for the Paragon Institute. And yet here he
is doing just that. And now, welcome to the show, Nicholas.
I hope you understand I'm having some fun with you.
Speaker 2 (00:21):
Yes, thank you Mandy for having me. It's great to
be on.
Speaker 1 (00:24):
Well, Nicholas just helped write a paper for the Paragon
Health Institute. They work on government health policy and things
of that nature. I just hit that by accent, sorry, Shannah.
And they've got a new paper out called addressing Medicaid
money Laundering, the lack of integrity with Medicaid financing, and
the need for ref Those are pretty strong words, Nicholas,
(00:45):
to call Medicaid money money laundering, Why did you choose
to use that?
Speaker 3 (00:52):
Well, actually, money laundering wasn't a term that was coined
by US. It is actually first used by the Wall
Street Journal some years back to describe this same process
of how hospitals and providers alike are paying into the
system only to get that money back and take money
from the federal Coffers.
Speaker 1 (01:13):
So explain to my listeners how Medicaid dollars flow to
the state and dumb it down because this is super complex,
which is part of the problem. And let's talk about
how that money flow works.
Speaker 3 (01:25):
First of all, right, well, it's complex by design. It
makes it really hard for people to figure out what
is exactly going on. Basically, all you need to know
about medicaid is it is a federal state partnership, So
the federal government helps the state administer this program. The
federal government will provide say, sixty percent of the cost,
(01:48):
and then the state's supposed to provide that other forty percent.
But states are cheating the federal government in this way.
So they're taxing healthcare providers. They put a tax on
your doctor or your hospital, and they promise them that
they'll get their money back. So they take that money
and then they raise payments to those providers so they
(02:09):
get all that money back. And because those payments are
additional spending in Medicaid, the federal government then matches sixty
percent of that higher spending. Now, so now the state
was able to create billions of dollars out of thin air,
keep the providers happy and expand the Medicaid program.
Speaker 1 (02:30):
So what's the problem with that, Nicholas.
Speaker 2 (02:33):
So there are a few problems with it.
Speaker 3 (02:36):
The first thing is that the states are getting rid
of their incentive to control costs within the program. So
if you're getting money out of thin air, why would
you want to be frugal with the dollars make sure
they're actually going to improving people's health.
Speaker 2 (02:51):
And so we see that on the Medicaid program. How
it's actually a very low value.
Speaker 3 (02:55):
Program and people aren't getting out of what the government's
putting into it. Secondly, unlike Colorado, Colorado is one of
the exceptions, but in other states, some of these payments
go all the way up to average commercial rates for
these services. And what that does is if you, as
a doctor, knew you were going to get a guaranteed
(03:16):
payment from the government and it's up to your average
commercial rate, you're incentivized to raise that rate. So it
actually raises the cost of health care for all Americans,
not just the Medicaid people.
Speaker 1 (03:29):
No, it is my understanding, and I've had this experience
in Florida many years ago. I was trying to help
someone on Medicaid find a specialist, a very specific kind
of specialist and they were unable to get this specialist.
And these are people living in poverty and they needed
a specialist for their child. And I was told by
someone at the Medicaid office that because reimbursements are so low,
(03:50):
that none of the specialists for that particular specialty would
take Medicaid on a regular basis. So we did jump
through all these soups to get somebody to take her,
you know, as a specific case. So what you're telling
me is that that is not accurate in all the
other states, that many of them are approaching average market rates.
Speaker 2 (04:09):
That's correct, and in a lot of states.
Speaker 3 (04:11):
So it's true that the Medicaid airyimbursement rate standard the
base rate is below what you would consider as like
a normal market rate or the average commercial rate for
that Well, what states do to raise the spending and
give extra money to these providers. They provide what's called
supplemental payments to these providers, and that gets them to
(04:34):
that threshold.
Speaker 1 (04:35):
What is the solution for this? Because what's happening now,
and let me see if I can break this down correctly.
States are incentivized to increase payments to doctors at the
same time doctors are paying a provider fee or tax
back to the state with the understanding they're going to
get it back, and then Medicaid builds the government at
a much higher level, relieving the state of much of
(04:57):
their responsibility when it comes to medicate. So that's the game,
right right, right, Okay, so how do we fix it?
Speaker 3 (05:05):
So all we're proposing at Paragon, and it actually really
should be a pretty low bar mandy, because all we're proposing,
even Barack Obama believed or not proposed, that we lower
what's called the safe harbor threshold, which is how much
the states are.
Speaker 2 (05:23):
Allowed to.
Speaker 3 (05:25):
Give back to providers in a hold harmless type of agreement.
So what I just described where they pay the tax
and then they get that money right back. Right now,
they can charge up to six percent of the of
the profits made by the hospital or that provider. So
we're proposing that you lower that to at least three
point five percent.
Speaker 2 (05:45):
That's what Obama wanted to do, and I would.
Speaker 3 (05:48):
Hope that Republicans would at least be as conservative as
Barack Obama on this issue.
Speaker 1 (05:53):
What about block grants?
Speaker 3 (05:56):
Block grants are actually are number one recommendation or this
It's hard to see that we would actually get to
block grants and medicaid this year with all the with
what we're seeing in Congress right now, But that would
be ideal because what's happening in medicaid is that open
ended reimbursement. If the states spend more the government, the
(06:16):
federal government ends up reimbursing more, and so that incentivizes
the program to have a round away costs. So a
block reant would actually incentivize states to be a lot
more efficient with the program and would address a lot
of these issues.
Speaker 1 (06:29):
Is that feasible to do? I mean, could you look
at what a five year look back and figure out
what each state's block would be? Would they all be
the same because states with higher poverty, of course, would
need a bigger Have you guys worked out the details
on that.
Speaker 3 (06:43):
Every state would be a little bit different. There are
different dynamics at play in the states, and when when
you're trying to decide something like that, I would say
that the main thing that we need to do is
that the current f map situation, or the federal matching situation,
is that the state it's supposed to be correlated with
(07:07):
the wealth of the state inversely correlated. So the less
wealthy of the state is the more the federal government
with kit can. But right now we're actually seeing just
the opposite. More wealthy states are getting more federal money
per person per enroll Lee.
Speaker 2 (07:25):
I should I should make sure to specify that.
Speaker 3 (07:27):
So what we would want to do with the block
grant system is actually kind of make medicaid the way
it was always supposed to be, which is the poorer
states they are actually getting more help.
Speaker 1 (07:38):
Nicholas Kleinworth, It's a fascinating, fascinating article. I hope everybody
goes to read it because we're now having a quote
medicaid crisis here in Colorado because our legislature is overspent
over the last few years and now they're having to
try and.
Speaker 2 (07:52):
Figure it out.
Speaker 1 (07:53):
So I'd love to be offered. I'd love to be
able to offer solutions that don't just involve more money
from the government, because that money from the government, that's
my money, and I'm quite cheap. Nicholas, I appreciate your
time today very much.
Speaker 2 (08:05):
Yes, thank you for having me. It's a great conversation.
Speaker 1 (08:07):
All right, thank you. That's Nicholas Kleinworth from the Paragon
Institute
Joining me now is a guy who I gotta tell you.
I'm sure that when Nicholas Kleinworth was a small wee child,
he said, Mom, Dad, my dream is to work on
healthcare policy for the Paragon Institute. And yet here he
is doing just that. And now, welcome to the show, Nicholas.
I hope you understand I'm having some fun with you.
Speaker 2 (00:21):
Yes, thank you Mandy for having me. It's great to
be on.
Speaker 1 (00:24):
Well, Nicholas just helped write a paper for the Paragon
Health Institute. They work on government health policy and things
of that nature. I just hit that by accent, sorry, Shannah.
And they've got a new paper out called addressing Medicaid
money Laundering, the lack of integrity with Medicaid financing, and
the need for ref Those are pretty strong words, Nicholas,
(00:45):
to call Medicaid money money laundering, Why did you choose
to use that?
Speaker 3 (00:52):
Well, actually, money laundering wasn't a term that was coined
by US. It is actually first used by the Wall
Street Journal some years back to describe this same process
of how hospitals and providers alike are paying into the
system only to get that money back and take money
from the federal Coffers.
Speaker 1 (01:13):
So explain to my listeners how Medicaid dollars flow to
the state and dumb it down because this is super complex,
which is part of the problem. And let's talk about
how that money flow works.
Speaker 3 (01:25):
First of all, right, well, it's complex by design. It
makes it really hard for people to figure out what
is exactly going on. Basically, all you need to know
about medicaid is it is a federal state partnership, So
the federal government helps the state administer this program. The
federal government will provide say, sixty percent of the cost,
(01:48):
and then the state's supposed to provide that other forty percent.
But states are cheating the federal government in this way.
So they're taxing healthcare providers. They put a tax on
your doctor or your hospital, and they promise them that
they'll get their money back. So they take that money
and then they raise payments to those providers so they
(02:09):
get all that money back. And because those payments are
additional spending in Medicaid, the federal government then matches sixty
percent of that higher spending. Now, so now the state
was able to create billions of dollars out of thin air,
keep the providers happy and expand the Medicaid program.
Speaker 1 (02:30):
So what's the problem with that, Nicholas.
Speaker 2 (02:33):
So there are a few problems with it.
Speaker 3 (02:36):
The first thing is that the states are getting rid
of their incentive to control costs within the program. So
if you're getting money out of thin air, why would
you want to be frugal with the dollars make sure
they're actually going to improving people's health.
Speaker 2 (02:51):
And so we see that on the Medicaid program. How
it's actually a very low value.
Speaker 3 (02:55):
Program and people aren't getting out of what the government's
putting into it. Secondly, unlike Colorado, Colorado is one of
the exceptions, but in other states, some of these payments
go all the way up to average commercial rates for
these services. And what that does is if you, as
a doctor, knew you were going to get a guaranteed
(03:16):
payment from the government and it's up to your average
commercial rate, you're incentivized to raise that rate. So it
actually raises the cost of health care for all Americans,
not just the Medicaid people.
Speaker 1 (03:29):
No, it is my understanding, and I've had this experience
in Florida many years ago. I was trying to help
someone on Medicaid find a specialist, a very specific kind
of specialist and they were unable to get this specialist.
And these are people living in poverty and they needed
a specialist for their child. And I was told by
someone at the Medicaid office that because reimbursements are so low,
(03:50):
that none of the specialists for that particular specialty would
take Medicaid on a regular basis. So we did jump
through all these soups to get somebody to take her,
you know, as a specific case. So what you're telling
me is that that is not accurate in all the
other states, that many of them are approaching average market rates.
Speaker 2 (04:09):
That's correct, and in a lot of states.
Speaker 3 (04:11):
So it's true that the Medicaid airyimbursement rate standard the
base rate is below what you would consider as like
a normal market rate or the average commercial rate for
that Well, what states do to raise the spending and
give extra money to these providers. They provide what's called
supplemental payments to these providers, and that gets them to
(04:34):
that threshold.
Speaker 1 (04:35):
What is the solution for this? Because what's happening now,
and let me see if I can break this down correctly.
States are incentivized to increase payments to doctors at the
same time doctors are paying a provider fee or tax
back to the state with the understanding they're going to
get it back, and then Medicaid builds the government at
a much higher level, relieving the state of much of
(04:57):
their responsibility when it comes to medicate. So that's the game,
right right, right, Okay, so how do we fix it?
Speaker 3 (05:05):
So all we're proposing at Paragon, and it actually really
should be a pretty low bar mandy, because all we're proposing,
even Barack Obama believed or not proposed, that we lower
what's called the safe harbor threshold, which is how much
the states are.
Speaker 2 (05:23):
Allowed to.
Speaker 3 (05:25):
Give back to providers in a hold harmless type of agreement.
So what I just described where they pay the tax
and then they get that money right back. Right now,
they can charge up to six percent of the of
the profits made by the hospital or that provider. So
we're proposing that you lower that to at least three
point five percent.
Speaker 2 (05:45):
That's what Obama wanted to do, and I would.
Speaker 3 (05:48):
Hope that Republicans would at least be as conservative as
Barack Obama on this issue.
Speaker 1 (05:53):
What about block grants?
Speaker 3 (05:56):
Block grants are actually are number one recommendation or this
It's hard to see that we would actually get to
block grants and medicaid this year with all the with
what we're seeing in Congress right now, But that would
be ideal because what's happening in medicaid is that open
ended reimbursement. If the states spend more the government, the
(06:16):
federal government ends up reimbursing more, and so that incentivizes
the program to have a round away costs. So a
block reant would actually incentivize states to be a lot
more efficient with the program and would address a lot
of these issues.
Speaker 1 (06:29):
Is that feasible to do? I mean, could you look
at what a five year look back and figure out
what each state's block would be? Would they all be
the same because states with higher poverty, of course, would
need a bigger Have you guys worked out the details
on that.
Speaker 3 (06:43):
Every state would be a little bit different. There are
different dynamics at play in the states, and when when
you're trying to decide something like that, I would say
that the main thing that we need to do is
that the current f map situation, or the federal matching situation,
is that the state it's supposed to be correlated with
(07:07):
the wealth of the state inversely correlated. So the less
wealthy of the state is the more the federal government
with kit can. But right now we're actually seeing just
the opposite. More wealthy states are getting more federal money
per person per enroll Lee.
Speaker 2 (07:25):
I should I should make sure to specify that.
Speaker 3 (07:27):
So what we would want to do with the block
grant system is actually kind of make medicaid the way
it was always supposed to be, which is the poorer
states they are actually getting more help.
Speaker 1 (07:38):
Nicholas Kleinworth, It's a fascinating, fascinating article. I hope everybody
goes to read it because we're now having a quote
medicaid crisis here in Colorado because our legislature is overspent
over the last few years and now they're having to
try and.
Speaker 2 (07:52):
Figure it out.
Speaker 1 (07:53):
So I'd love to be offered. I'd love to be
able to offer solutions that don't just involve more money
from the government, because that money from the government, that's
my money, and I'm quite cheap. Nicholas, I appreciate your
time today very much.
Speaker 2 (08:05):
Yes, thank you for having me. It's a great conversation.
Speaker 1 (08:07):
All right, thank you. That's Nicholas Kleinworth from the Paragon
Institute
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