Asking the right question about “two-tiered” care

October 1, 2012

When we think of two-tiered care in America, we most often think of the “haves” and “have nots”: those who are covered by health insurance and those who are not. But there is a different way to look at this question, and it may take being outside the U.S. to see it that way.

Going back through old issues of The Economist, I noticed a brief article from October 2011 on health coverage for dually eligible Medicaid recipients (that is, eligible for both Medicare and Medicaid). The article described how dual-eligibles in New York, California, Mississippi and other U.S. states were upset at the prospect of being moved out of fee-for-service, open access medical systems, and into managed care.

In most states today, those with dual coverage (along with those covered by the Children With Special Health Services Needs program) are not enrolled in health maintenance organization (HMO) plans. These individuals tend to be the highest users of medical services in Medicaid, because they are the oldest and/or sickest populations in the program. In 2005, dual-eligibles accounted for an estimated $215 billion in federal and state spending—nearly 25 percent of total Medicare spending and 46 percent of total Medicaid spending for that year.

Because they share the cost of this care, both federal and state governments are interested in ways to reduce spending for this population. The Affordable Care Act authorized a new Federal Office of Coordinated Health Care (referred to as the Medicare-Medicaid Coordination Office) within the Centers for Medicare and Medicaid Services (CMS). This office, along with the Center for Medicare & Medicaid Innovation, is designed to encourage demonstration projects to better integrate the care of the dual eligible population; a number of states are pursuing such projects.

But seniors and others covered by the programs are concerned about these new approaches. They worry they may have to change providers, or have limits placed on their care—generally, have less autonomy to pursue the kind of medical care they want. These are the same concerns many Americans expressed when employers moved them into managed care plans in the late 1990s, triggering a “managed care backlash.”

The Economist describes this shift as leading to a “two tier” health system. But advocates of managed care would argue that by coordinating and integrating care, they are providing higher quality care than is possible in the fragmented fee-for-service system.

It is certainly true that Americans in general don’t like to be told what to do, and the desire to choose one’s own health care providers seems to be built into the DNA of many Americans. So to the extent those covered by Medicaid have fewer choices of providers, and must live within a system with more limits on referrals and the like than those covered by private insurance, I suppose it is a legitimate use of the term “two-tier.”

But if we accept the premise that converting the Medicaid program into a predominantly managed care system—while private insurance remains predominantly open access—creates two tiers in American health care, our next question should be: which “tier” has the better quality of care? Assuming these experiments can overcome opposition and move forward as designed, they will be an interesting test of the ability of managed care plans to deliver higher quality care to these complex populations than the open access system is able to do today.

Now wouldn’t that be a twist: the poor receiving higher-quality medical care than their better-off brethren? What would The Economist say about that?