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Pay Us, Mendo, And Together We’ll Rip Off Everyone

Partnership Director Jack Horn

I defy you to read this all the way through and tell me we don't need Single Payer in this country.

Every time the subject of healthcare comes up at the County level we get another glimpse at how byzantine the healthcare system has become. The many unnecessary layers of administrative processing make the system not only beyond anyone’s ability to understand, but unaccountable to anyone.

The latest example came last Monday morning when Jack Horn, Executive Director of the “non-profit” Partnership Health Plan, appeared before the Board of Supervisors in Ukiah.

Partnership Health is a regional "non-profit" insurance company initially formed in the early 90s to “link each member with a primary care provider and has been successful in reducing inappropriate emergency room usage, providing an appropriate level of inpatient care, developing innovative case management programs and providing more services locally.”

Translation: Jack Horn's non-profit denies “inappropriate” care at about the same level as for-profit insurance companies, defining inappropriate care so broadly the indigent and the working poor are excluded from basic health care.

Partnership Health’s “members” are Medi-Cal patients. They become members by being poor and sick.

The Partnership HealthPlan of California or “The HealthPlan,” as they call themselves, began operations in May 1994 as “a public/private organization designed to provide a cost-effective health care delivery system to Medi-Cal recipients in California's Solano, Napa, Yolo, and Sonoma Counties.”

Before Horn and Company glommed onto the Medi-Cal system it operated pretty much like the relatively efficient Medicare system.

“The HealthPlan is an outgrowth of a local coalition of representatives from the Solano County Medical Society, Kaiser Permanente, NorthBay Healthcare Systems, Sutter Solano Medical Center, Solano County Department of Health & Social Services, the Agricultural Workers' Health Center of Dixon, Vacaville Community Clinic, Planned Parenthood, the Council of Cities, and the Solano County Office of Education. These representatives became The Solano Coalition for Better Health. The Coalition was formed in 1988 to address the problem of healthcare to access for the country's growing number of medically uninsured and underserved.”

“The HealthPlan is organized as a ‘health insuring organization,’ and is legally a subdivision of the State of California, but is not part of any city, county or state government system.”

A “health insuring organization” is a health insurance company by another name.

“After its founding in 1993 in Solano County, the HealthPlan has expanded into neighboring Napa County in March of 1998, Yolo County in March of 2001, Sonoma County in October of 2009, and Marin and Mendocino Counties in July of 2011. The HealthPlan's Commission, or Board of Directors, includes representatives from Solano, Napa, Yolo, and Sonoma Counties. The County Boards of Supervisors appoint the HealthPlan's Commission, including: consumer, community, business, nurse, physician, hospital, health maintenance organization, community clinic, local government and County Health Department representatives.”

Remember that Medi-Cal is only one segment of the already fragmented commercial health insurance system. Other segments include Medicare, County employee healthcare, “commercial” health insurance, plus other segments that depend on a given person’s income level, such as CMSP which applies to families that make a bit more than Medi-Cal-eligible families.

Horn and County Health & Human Services Director Stacy Cryer are very happy with The HealthPlan, as they both made clear time and again during their presentation. As one might expect, Horn is conversant with health insurance jargon and the mind-boggling array of terms that have converted the medical world into a veritable mine field of obfuscatory fine print.

Horn told the Board that the way things are going The HealthPlan is in for some “pretty significant growth if all of this comes to pass.”

"All this" was a casual reference to the fate of Obamacare now under Supreme Court review (or a comparable California version if Obamacare is ruled unconstitutional). “It’s hard to plan because of all the uncertainty involved in the next few years,” added Horn.

After Horn’s opening remarks, Supervisor Dan Hamburg asked, “How many members in Mendocino County?”

Horn: “There's about 19,000 members.”

Hamburg: “19,000 members. Wow! That's a lot. Almost one out of four in our county.”

Horn: “Yes.”

Hamburg: “You mentioned an anticipated 5% cut in Medi-Cal? It will come down —”

Horn: “If you look at the January [state] budget and you look at the May Revise in an aggregate number, that's the number — $800 million or about 5%. I think some of it will come through these ‘budget adjustments factors’ like you are paying too much for pharmacy or you had unnecessary hospital admissions.”

Hamburg: “I was just wondering, Are there plans now that are being made in terms of how that cut would be absorbed in this county?”

Horn: “Yes. We are looking at our 12-13 budget [for July 2012 to June 2013] and if you just take the 10% cuts, we are not planning to implement those cuts. We are building that into our current budget.”

Hamburg: “When you don't implement those cuts, that means that Partnership is absorbing those cuts? I mean, you are not going to change your reimbursement rates to providers for example?”

Horn: “Right. That's correct. We would not do the 10% cut to providers. The only way we can fund that is out of our current reserves.”

Horn didn't say anything about whether Medi-Cal or HealthPlan members would continue to get the same level of care, just that provider reimbursement rates per visit won’t be cut.

Hamburg: “You said that you pay three times the Medi-Cal rate to your primary providers?”

Horn: “Yes.”

Hamburg: “That's very interesting in terms of how managed care differs from non-managed care. Primary care providers are really what it all comes from. It all starts with the primary care doctor.”

Horn: “Yes/ I think that Mendocino certainly has the highest percentage of the primary care provided through health clinics and rural health centers of anybody we deal with. They are a little bit different. Take a medical group or a community physician — if you look at the cost — and we've been doing this for 19 years so were pretty good at figuring this out — so the fee for service Medi-Cal rate would be about $5 per member per month. That would be the budget. We pay $10 roughly in a prepayment for each primary care visit. In addition we pay $5 in a quality bonus. So if the primary care physicians have good outcomes on their testing, or their members, for diabetes and asthma and the associated rates, if they have really good scores, they can get more. If their member satisfaction is good they can get more.…"

Brown: “So both health centers that receive federal funding and also the ones that don’t? They’re the same?”

Horn: “Correct.”

Brown: “I sat on the board of the Potter Valley Health Center for a number of years, but not at the time that it closed with the adult services being taken away.”

Supervisor Brown didn’t question the twisted logic of giving federally subsidized clinics the same money as non-federally subsidized clinics.

Hamburg: “A local doctor at a meeting I was at recently said that regardless of what the Supreme Court does [on Obamacare] it will barely affect California because California is moving toward managed care whether the Supreme Court strikes down the mandate or not. Is that your assessment?”

Horn: “I don't think it's quite that simple. Because the Medi-Cal fees— There are two, 16 million people in Medi-Cal and 16 million that would go through the purchasing cooperative and the exchange that they are putting together —”

Hamburg: “We are looking at California only?”

Horn: “Yes. So the Medi-Cal piece I don't think would be affected by the Supreme Court decision at all. The other half, the other 16 million people, people from 133% of poverty to 400% of poverty, would go in a purchasing cooperative in an exchange. The actuarial assumption is that they will have all the members in the risk pool and not be insuring the burning barn — to use an analogy. So if you don't have the whole insurance base, I'm not sure the exchanges are viable.”

McCowen: “Because without the mandate for them to enroll then you are not going to get full 16 million included in the pool.”

Horn: “Right. And a lot of those pools haven't worked very well. People just enroll when they are sick. And they add more rate and then they lose some other wealthy people.”

Obama’s solution is to force people into the “pool,” then pay commercial insurance companies (or “non-profit insuring organizations” like Horn's) to fish them out of the pool before they drown. Theoretically, anyway.

Hamburg: “How will that affect the 20,000 members in Mendocino County?”

Horn: “That would be eligible for the exchange? Is that what you're talking about?”

Hamburg: “No. I'm talking about the ones who are now under Partnership.”

Horn: “I think it would not affect it. In terms of Medi-Cal, the court, the people who are in now are the people, the other 30%, that will come on. I think there's a lot of uninsured people that could have gotten coverage through the premium subsidy. So if you are over 133% of poverty you can't afford the premium but you would get maybe 60% or 70% of your premium paid by the government. That's the people that would be affected — thosejust over Medi-Cal can't afford healthcare.”

McCowen: “But that would only work if they were mandated to enroll. Or am I missing something?”

Horn: “If it [the Obamacare mandate] stays in place, they would be mandated to enroll.”

McCowen: “Right. But if that part is knocked out —?”

Horn: “If California says, We are California and we have an exchange and we are going to move forward, I don't think that would work financially. Because you need that whole pool risk, not just the sick people.”

McCowen: “So the people that are currently left out in the cold would still tend to be left out in the cold.”

Horn: “Could be. Could be.”

Cryer: “I was at the meeting Supervisor Hamburg was at on Friday and where that's coming from is Diana Dooley, the secretary over at Healthcare. She made the statement that regardless of what kind of healthcare reform moves forward, California will move forward in some way or another. So we just don't know how that will look. The California Benefit Exchange has regular board meetings. Unfortunately, they conflict with this board meeting, so I haven't been able to attend. But they are developing — they needed to move out in front of the rest of the country because we are so large and the federal government really needed California to get in front and they did. They did that by developing the California Health Benefit Exchange.”

Ms. Cryer added, “We will do another presentation on this subject in August.”

Supervisor Carre Brown: “Back to financial risk. I don't do well with acronyms. What is Pharmacy MAC?”

Horn: “That's the Maximum Allowable Cost. The state is actually telling us that we pay too much on certain drugs. They have a fee schedule. It's not how you're doing on aggregate. It's how you're doing on specific drugs. Even if you are doing okay on average in your pharmacy costs, they have a fee schedule for every individual drug. So if you are over on that drug they calculate how much you are over and take that money back from you. It's kind of a long story. The way our rates — I don't want to get too technical —”

McCowen: “I think you answered the question.”

Brown: “I do want to get technical.”

Horn: “OK. We don't get cost reimbursement. But they look at two years, a base year one, and a base year two. And then they look at what your trend is. So for the next year your rates are based on your historical cost and they are required to do that by federal law. So when they do that and they don't have enough money to pay that, they come back and say, oh — you should not have paid that much on pharmacy. You had some preventable hospital admissions. So that's some of the things, some of the ways that the state does a budget adjustment factor on us.”

Brown: “Basically, tell me how well is managed care with pharmacies and meeting the needs of patients in this county?”

Horn: “We contract with every pharmacy in this county. “

Brown: “Actually there was a group here earlier that evidently left that wanted to hear the presentation. So you contract with most pharmacies here in the county?”

Horn: “The way it works is, and this is the way most all managed care works, is, there is a pharmacy benefit management company, a PBM, another acronym, and we contract with them to go out and contact all the pharmacies and to negotiate the rate with those pharmacies on our behalf. The other thing they do is they pay pharmacy claims because pharmacy claims — you can have eight to 20 prescriptions a month, so we outsource that to this other company and so they go to each pharmacy and they have a contract with the pharmacy as to what they will pay so that — then the pharmacy agrees and they are doing this on our behalf.”

Brown: “I want to be very honest, I am very concerned with the medical pills, medicine, that many of these patients need. But I'm also concerned about the fact that I'm hearing locally that you have paid —whomever you contract out with is really paying way below a normal dispensing fee. And while many pharmacies want to help people the $1.40 dispensing fee is well below what the overhead is in order to dispense those pills.”

Horn: “In terms of pharmacy, pharmacy is an anomaly in the Medi-Cal world. First, let me mention what Medi-Cal pays physicians. They typically pay something like 60% of what Medicare pays. And the commercial market pays maybe 110% of Medicare. In the pharmacy world Medi-Cal pays higher than commercial, state Medi-Cal pays more than the going rate in the community for the other 80% of the business. So what Partnership does, and what all the health plans do pretty much, is use the pharmacy benefit management company to contract at a competitive rate in the community, whatever the community rate is and the rate for the commercial business. So I think it would be fair to say that we are paying the same as commercial health plans for most, 80%, of the business. But I will be the first to admit the state pays more than commercial insurance companies.”

Brown: “That is not information that I was receiving. I just wish that the people were here to address that issue because I think it's very important because how long can a small pharmacy stay in business if they are not meeting their overhead costs? I asked Ms. Cryer about this previously. I am glad you are here today. It's just that I am sad that people who were here for this item had to go.”

Cryer: “We know that since the beginning of the implementation of managed care into this community there has been some questions and issues with the pharmacy reimbursement. It has come up from several businesses and from several supervisors. … There are a couple of different issues. One is about the formulary process and what drugs are approved, especially around the mental health pharmacies. The medical director and representatives from the Partnership Health Plan have spoken to the mental health board at least once because I was present at that and they presented to the mental health board and the community about some of the concerns that were brought up there. The other issue is about the reimbursement rate that small pharmacies receive. I think Jack [Horn] did a good job of explaining that it's really kind of odd, it's the one place where Medi-Cal is a better reimburser and because we are in the Medi-Cal managed care environment, the pharmacy reimbursements, because of the way it's reimbursed, is lower than what they are used to getting under Medi-Cal. And it's the only area of Medi-Cal that this exists as far as I can tell. I have actually spoken to the small pharmacies over time. I want to let the board know that there is a lawsuit that's been filed by some pharmacies against the Partnership Health Plan. So there is pending litigation, they have gone through some rounds, but it's a continuing process as far as litigation about the reimbursement rates. So some of this will be settled within the court process. I'm well aware of the issue. One of the things that happened early on is that Partnership Health Plan did what they could under guidelines from the federal government and through the state about what they can reimburse them what they can't and how those formularies work. And they did seem to acknowledge the fact that we are rural and small. So there are some different levels of reimbursement that they were able to give and they did that when they could. What the small pharmacies are saying of course is that it's not enough. Again, we have spoken with them and we are well aware of the issue and there is a lot of rules around this and again it’s in court. We will reach out again certainly.”

Brown: “Large chains can survive. It’s the small pharmacies.”

Cryer: “Some of the small pharmacies as we well know serve our most remote and rural areas. We have a small pharmacy that delivers pharmaceuticals to Covelo and without that the residents of Covelo would be in trouble. We are well aware of the issues. I feel very fortunate that we are engaged with Partnership Health Plan because it is a county-operated health system and I get to sit on the board and have a voice on the board. I have brought this up to the Partnership Health Plan board over and over and we talked about it at committee level and at the Partnership governing board. If we were part of another managed-care system that's going to be implemented whether they like it or not in the other 28 counties we would not be in this fortunate of a situation. Because we are part of the system we do have some benefit. It doesn't make it easier on those pharmacies, especially those small ones. All I can say is we will continue to work on the issue and continue to meet with them and I think that the Partnership Health Plan is willing to do whatever they can under the guidelines that they have to follow.”

Supervisor Kendall Smith: “Is there not the ability to take some steps to address this further? I know you talked to the pharmacies. I was aware of that. The reason the federally qualified health centers can stay in business because of the rate structure that they are able to get for reimbursement and we know that's what’s saving rural health care. Why can't Mendocino sort of advocate for that same realm? We knew when we moved down this pathway to a managed care system that there would be winners and losers and pharmacies would be in the losing in category. One of the few. But what really can we do about this? I share Supervisor Brown's concerns with the pharmacies that need to survive locally and that our rural population really relies on.”

Cryer: “There was an upfront recognition of winners and losers and an upfront concern about local pharmacies and there was an outreach to them at the time. We went into this knowing there would be some concern and we did what we could to try to mitigate that. I think in a lot of ways our hands are tied to some extent.”

Horn: “In terms of what we can do, this is a little premature to talk about because we do have a lawsuit going on this issue of what our requirements are. So it's never a good idea to talk about lawsuits, including this one that was filed by some of the pharmacies against Partnership over reimbursement rates. That's currently going on. We did offer higher rates to the small outlying pharmacies. Some of the bigger ones where there is a competitor right down the street, we didn't do anything different there for the chains versus the privately owned. But if we get the lawsuit behind us then we can address the fee schedule issue greater. When you're in the middle of a lawsuit you can’t go back out to somebody and say, Well, okay we can reconsider. You just don't do that.”

McCowen: “On the other hand if you win the lawsuit, what incentive do you have to address the concern?”

Horn: “Because you don't know us well enough, and this may sound self-serving, but we really do try to find solutions that work for everybody so we—”

Smith: “Maybe this issue can be addressed with respect to mediation on the lawsuit. Maybe there could be an outcome in terms of the lawsuit that hopefully resolves this.”

Horn: “We have discussed that at our board level also. Our attorneys advised us that that's a bad idea.”

Smith: “That doesn't address our concern.”

Horn: “As soon as the lawsuit is over within 60 days, I will give a full report to you on what — I'll give you an action plan within 60 days after the end of the lawsuit. I'd be happy to do that. Does that sound fair? As soon as there is some resolution I will report back. And if you want me to come personally I will do that or in writing or through Stacy [Cryer].”

Smith: “Sounds fair, but not to the local pharmacies. We need to find out how that gets resolved.”

Horn: “I'll tell you what our resolution would be.”

McCowen: “So that report back would be how you intend to address the concerns of the small pharmacies?”

Horn: “Yes. That's correct.”

All these costly layers of confusion would disappear under a Single-Payer plan similar to Medicare. In fact, most reformers say Medicare should simply be expanded to include everyone — how's that for a big pool? — then hospitals and doctors would decide who gets what services and medications, and hospitals and doctors and pharmacies would get paid at prearranged negotiated rates. No fuss, no muss, big savings.

Meanwhile the various predatory “insuring organizations” have the whip-hand.

9 Comments

  1. John Sakowicz June 25, 2012

    On Friday, June 29, at 9 AM, “All About the Money”, on KZYX, will have a special edition show on Medi-Cal in Mendocino County. One in four county residents are covered by Medi-Cal. For much of California, including Mendico County, Medi-Cal is now a operated as a managed care plan by Partnership Health Plan (PHP).

    Our guests are Jack Horn, CEO of Partnership Health Plan, and Stacey Cryer, Director of Health and Human Services in Mendocino County. Ms. Cryer also serves on the PHP Board of Directors.

    Remember, that’s right here, on KZYX, your community radio, on Friday morning at 9 AM. We’ll take listener calls, at 895-2448, during the second half of our show.

  2. Caryn Goddard June 21, 2012

    Mr. Marks, I have spent time in Canada and I have several friends there who have verified the length of time that it takes to get routine appointments and the much longer length of time it takes to get surgery.
    A hip replacement is non-life threatening ? Give me a break !
    It is precisely this kind of bureaucratic attitude that imperils peoples’ lives.
    What you are really saying is that it’s ok for others to pay for your medical care but then they have to get government permission to pay for their own ?
    Where the hell do you get off ?

  3. Christopher Marks June 21, 2012

    Dear Ms. Goddard–

    It seems that you have some funny ideas about how things work “on the ground” with Canadian health care. In fact, I am an American who lives in Canada for the last two years, and I have first-hand experience participating in the health care system. It is in no way true that “routine appointments” take an inordinate amount of time, relative to the United States system. This is a frequent comment I hear from Americans and there is simply no evidence to support this assertion. What IS true (and is a legitimate criticism) is that NON-LIFE THREATENING procedures seem to take a long time to be scheduled, e.g. a hip replacement is something that you might be forced to live with for a while, unless as you say you want to travel to the States and pay tremendous amounts of cash to have the procedure done there.

    But ask yourself: what happens if you come down with a life-threatening ailment (say cancer) in the States versus Canada? Where do you stand a better chance at obtaining the treatment you need and not going bankrupt in the process? Even people who “have coverage” in the States will still drown financially from such a process, due to the co-pays, death by a thousand cuts as it were. The system stinks for the vast majority of people, that’s the point. Spewing propaganda will not change that fact.

    Chris Marks

    P.S. Last November while visiting my hometown in California, I ended up in the hospital with appendicitis and had to get the beast cut out of me the old-fashioned way. The total bill for this routine procedure was $52,000. Think about that, okay? My Canadian travel insurance paid for it, but it would have cost less than a fifth of that north of the border.

  4. John Sakowicz June 21, 2012

    Fyi, I’m trying to schedule Jack Horn and Stacey Cryer as guests on my show. Ms. Cryer, of course, is the department head for Mendocino County Health and Human Services, but she also sits on Mr. Horn’s board of directors.

  5. Bruce Anderson June 21, 2012

    A dialogue of the deaf. Goodbye.

  6. Chuck Becker June 21, 2012

    Mark,

    Single payer, in a nation that can manage it, might be the best solution for them. Canada has fewer people than California, they seem to like each other a lot more (social commitment), and they’re certainly more civil. And despite that, they felt a need to legally prohibit private health insurance.

    Despite Leopold Kohr’s work on the size of effective governmental units, we tend to look to the federal government to provide uniformity and ‘the economies of scale’. Having worked for the federal government, I know that those benefits are greatly overestimated.

    Kohr would hold that the United States is too large to administer such a system from a distant and unresponsive central capital. The Founders seem to have held the same opinion, embodied in the Tenth Amendment. The quick, direct, effective way to cut through that knot is California SB 810. The counter-argument that “California can’t afford it” begs the question, then how can the federal government? Healthcare, consumed in the present, should be paid for in the present. So more federal borrowing to finance a system that the states can’t afford is a bad answer.

    Regards,
    Chuck

  7. Mark Scaramella June 21, 2012

    Single Payer is not “fully socialized medicine.” Nor is it “central planning.”
    Most of the other assertions here don’t even pass a routine smell test.
    “60% under government control”? Please.
    Medicare has dramatically raised the cost of medicine? (Right. Big Pharma, prohibitions on cost negotiations, Insurance company monopolies, etc. have had nothing to do with it.)
    People in Canada with serious medical issues come here? (Canada underfunds its Single Payer system intentionally. That doesn’t make Single Payer the problem, it makes funding the problem. Even so it delivers a lot more cost effective healthcare than anything in the United States.)
    Ms. Goddard has no documentation here. (Not that some of these ideas are bad.) My report was mostly a transcription of the Supes Meeting. Draw your own conclusions. I don’t care. But nothing you’ve said here is an argument against Single Payer, nor is it a solution to the convoluted mess described in the Supes meeting.

    • Caryn Goddard June 21, 2012

      I can supply a list of books and papers that document my comments.
      Single payerlike single government anything is fully socialized medicine and indeed it is central planning the same as any other centrally run government program whether on the state or federal level.
      Canada does not deliver a lot more effective health care than the US. Even routine appointments take much more time getting than they should.
      As far as a ‘smell test’ goes may I suggest that that is not the cognitively correct way to document one assertions ?
      By the way, nothing that you have asserted here comes with any documentation.
      Also your the only AVA writer that has a regular fit when his postings in a public newspaper are challenged.
      My solutions are not solutions because you say so ?
      All you can come up with is the same tired old New Deal-Great Society
      failed retreads that brought the country to bankruptcy along with perpetual war for perpetual peace, also started by Roosevelt & Co.
      Please. Take a Logic 101 course.

  8. Caryn Goddard June 21, 2012

    The last thing we need is fully socialized medicine. It is already 60% under government control.
    The HMO concept was pushed by Nixon and Ted Kennedy forty years ago as a halfway measure to socialized medicine.
    We need to end licensing, the prescription racket, government authorization to build hospitals, government-insurance company collusion, the AMA as a medieval guild and eventually down the road, Medicare, which has dramatically raised the cost of medicine across the board.
    Central planning has never worked in any area of any economy, so why should medicine by any different ?
    Nor is it a right. Anything not given in abundance in nature has to be produced by someone’s effort, to say you have a right to another person’s effort is to make that person your slave.
    People in Canada with serious medical issues come here.
    I lived in Israel for years and they are now thinking of abandoning their national health system. They are also thinking of lowering taxes on the wealthy who pay way too much and increasing the taxes on the other classes.
    We need to do the same here as over 50% pay no income tax at all.
    The arrogance of believing that every person must come to the same conclusion as Mendo lefties do is mind boggling.
    It reminds of the late, unlamented David Brinkley’s book titled Everyone Is Entitled To My Opinion. He wasn’t being ironic.

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