State Health Care

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How state budget cuts are impacting services provided by AHCCCS, Arizona’s Medicaid program, and how health providers can adapt to the changes. Guests include Banner Health CEO Peter Fine and Dr. Leonard Kirschner, President of AARP Arizona and a former director of AHCCCS.

Ted Simons: The state's budget crisis is hitting health care especially hard. 47,000 kids of working poor parents lost their health insurance when the state cut kids care. Medicaid patients waiting for life-saving organ transplants were taken off the list and hospitals are hemorrhaging from cuts to AHCCCS. With more cuts ahead the search is on for new ways to meet Arizona's health care needs in this difficult economic climate. Here to talk about this is Peter Fine, president and CEO of banner health Arizona's largest hospital system, and Dr. Leonard Kirschner, the president of AARP Arizona and a former director of AHCCCS. Good to have you both here. Thanks for joining us. The impact of the budget crunch on health care providers, what are you seeing out there?

Peter Fine: What we're doing right now, obviously, is preparing for the worst. And hopefully that won't happen, but logically we know there has to be some changes in the process and in the system that exists today. It's unaffordable, and the growth of AHCCCS has become so great, that it's becoming just a substantial program to support in today's framework. Right now certainly at banner we're gearing up for substantial changes in reimbursement coming from AHCCCS, and that's a program that's paying us maybe 70 cents on a dollar of cost right now. And to have significantly greater budget cuts to come from that is quite distressing, but we're going to respond and react to that as best we can.

Ted Simons: I want to talk about how that response might be, but again, overall, the impact, what are you seeing out there?

Leonard Kirschner: There's no question that health care is so critical to our economy, and our people. There's been a growth area, and AHCCCS has been an incredible success. We were the last Medicaid program. We were last. We started in 1982. And we have provided health care system that is unique, that other states have emulated, we did think out of the box. And Peter, we were talking that that's the way we have to start looking as we go forward. As we're now in the third and fourth decade of this AHCCCS program, it is successful, it has grown dramatically, but understand it is just critical to the future of Arizona for our economy, to the folks that live here.

Ted Simons: For something this critical, how do hospitals, let's start hospitals, how do you adapt? What do you do?

Peter Fine: Well, Obviously you have to get a handle on what the effect of the changes are going to be on you from a reimbursement perspective. You have to factor that into your -- the Services you provide, and decide how you are going to make that up. Clearly there shouldn't be a hidden tax. If AHCCCS dollars are cut, we're going to have to try to find those revenue streams we can't cut from a cost perspective, and then look at insurance companies for premium increases that are going to absolutely have to occur. That's unfortunate, but what bothers me most is people don't recognize that significant cuts in a very, very successful program and one that has significant funding that comes from the federal government for every dollar that we put in really is not the place to look for reductions in service or reductions in what needs to be provided.

Ted Simons: Reductions -- go ahead.

Leonard Kirschner: Peter, I'm looking for somebody that will give me a 200% return on my money. I can't find it, but the reality is, just basically for AHCCCS, for every dollar we put into the system, we get $2 from the federal government. Turning your back on that, and this money doesn't go in a hole, this money pays for people, for salaries, for buildings, and it is the robust -- these are the good jobs we want. So it is fool hardy to turn our back on that.

Ted Simons: And yet we will have lawmakers on this program at this desk in those chairs telling me it's great, to spend one dollar to make two, we don't have the $1 to spend.

Leonard Kirschner: I would argue there are ways of looking at that. We have had that discussion before, as we've gone through other budget issues, when I was AHCCCS director for those seven years, we had a similar problem. But we didn't turn our back in that, perhaps because Bob Usdane was there, and he was one of the great believers in the AHCCS program. And it's so sad to see that he has passed away.

Peter Fine: This is actually one of the more successful AHCCCS programs that you'll find in the country. It has been well run, it has been well designed, it has been well organized, the problem isn't that the AHCCCS program is bad, the problem is that we have had growth in members in AHCCCS, as a result of the economic environment. If you look at the charts in the growth of AHCCCS since 2007, that's really been the driver. And to make short-term decisions that really don't really make sense from a long-term perspective, can be quite destructive. I've heard discussions from members of the legislature that have even thought about doing away with the AHCCCS program. That's -- an $11 billion with $7 billion dollars of it coming from the federal government.

Ted Simons: But I do want to get back now to some new ideas and out of the box ideas, but back -- the same question to you again, short-term ideas that just don't seem to make sense, folks are saying, those short-term ideas are necessary because there is no money. The state just can't do it.

Leonard Kirschner: I'll throw out, you had the town hall for the last town hall, in November here yesterday, but we met in Prescott a couple of years ago, and talked about health care. We must do better delivering accessible, affordable county health care to all Arizonans. Put out 10 proposals that we suggest the legislature look at. We met with some of them just recently, and talked about, this document is on their website, it's available -- I would be happy to sit down with anyone, and it lays out the bigger picture. Not just the budget for this fiscal year, next fiscal year, but a way to look at making our system far more productive, efficient, and equitable.

Peter Fine: When people are stressed because of short-term budgetary issues, they make in many cases irrational decisions for long-term benefit. And I think that's what we're being faced with. The pressures - and this is not something we can sit here and blame legislators for. This -- that would be ludicrous to even think like that. What we have though is people that are reacting to short-term problems, very intensive problems, and many times will make decisions that aren't in the best long-term interests of the state.

Ted Simons: Let's talk about some decisions that might be a little bit out of a box, maybe a little bit innovative and long-term as well. An idea that you seem to be promoting or seem to have talked about is a collaborative effort as far as sharing reimbursements and these sorts of things. What's that all about?

Peter Fine: Well we've talked about accountable care organizations being developed in which certain degree of risk is passed on to people to provide Services. And all of the providers come together to provide a level of Service and take accountability for that Service. And it's something that is flowing from the legislation in health care reform in the federal level, and banner has been gearing up very, very aggressively to be able to participate in those programs as they develop.

Ted Simons: Incentivize the idea of sharing, collaborating with this reimbursement?

Leonard Kirschner: Absolutely. But there are lots of issues we can deal with. For example, I'll give you one. Nibbling at the side, not just a billion dollar fix but millions of dollars fix. One of the cost drivers in AHCCCS are head injuries and motorcycle accidents. Now, I've been advocating a helmet law. There's a study that just came out on just that issue. If the legislature would go in and mandate helmets for motorcycle drivers, that would save money. That's a small bite, but there are literally hundreds of small bites we could do-- think through them. And we could actually deal with the system in a much more efficient way.

Ted Simons: Small bites in a sense of cutting admissions by way of better preventive care, cutting readmissions by way of better maintenance, these sorts of things. Is that -- are those small steps, are they bigger steps than we think?

Peter Fine: What you have is a problem that there's no magic bullet. There's no one big step so you have to take little bites at the apple. And you have to do many, many little things that accumulate to significant benefit. What we have is a problem of usage. We don't really have a problem with the cost of health care; we have a problem of usage of health care. The greater the usage the more money is spent and that's what's driving these numbers right now, is the increased usage of Service. So therefore, it behooves to us look at ways to reduce usage of Service. Do things in a smart way, and accountable care organizations tend to have control of a whole process and therefore can look from beginning to end for opportunities to reduce issues.

Leonard Kirschner: Accountable care organizations are clearly coming on the scene across America. But there are different varieties in almost every location. There is no single one accountable care. But it is -- it's a model, but it's a long-term model. It's not going to solve the budget crisis for 2011 or 2012. But we need to look at this really from what do we want as our society? Let me just read quickly, Hubert Humphrey in his last speech before he died. "The moral test of government is how it treats those who are in the dawn of life, the children. Those who are in the twilight of life, the aging, and those in the shadows of light the sick, the needy and handicapped." Let me tell you, that's where AHCCCS works. You cut that, it's not just reimbursement to Peter's group, it is cutting those people. It's cutting the young, the old, the disabled, and that's just not acceptable.

Ted Simons: That is a wonderful speech, and that in its current climate in Arizona is not going to get you too far, because most folks would agree with the sentiment but they would disagree with the way getting there, they want to see more free market, they want to see less big government solutions, can they find it?

Leonard Kirschner: I'm willing to have that argument. Because I do think you look at what they did. They passed the sales tax for education. They passed first things first. I think the people are better than we think they are.

Ted Simons: Are there ways to attack this, to go about this without a big government tag over the process?

Peter Fine: Well, I clearly think there are, but you have to come to recognition. And you have to come to the recognition that you're not going to cost cut your way to solving this problem. There's no way to do that logically, and there's no way to do that in a way that the public at large will accept it. There's a reason the public overwhelmingly approved the sales tax. They have Services that they demanded, that they want and that they don't want cut. We have to recognize and I think the legislature has to recognize, and the executive branch has to recognize and come to a conclusion that you can't cost cut your way to solving this problem. It has to be a balanced approach. You have to look at the revenue side. And there are many ways to go after the revenue side, you just have to be willing to do it and accept it. And there are ways that won't have significant impact on any individual when you can spread it across a big base.

Leonard Kirschner: When I was the director I fought for my budget because I knew that a quality program meant that I to pay the hospitals, the doctors, the pharmacies, the nurses, the nursing homes, properly. That's a cost effective quality program. That's what I think the state of Arizona wants and deserves.

Ted Simons: Gentlemen, thank you very much, great discussion. We appreciate it.

Peter Fine:CEO, Banner Health;Dr. Leonard Kirschner:President, AARP Arizona;

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