Monthly Review & Commentary On Health Issues From A Rural Perspective - February 1st, 1998


WI Coalition For Health Insurance Reform
A core of major Wisconsin organizations has come together to pursue basic state health insurance reform. This perennial issue may benefit from good timing and a growing public distaste for how the insurance market-place currently operates. Anyone who saw the recent hit films Rainmaker and As Good As It Gets couldn't help but notice the visceral audience responses to the dark portrayal of certain health insurers.
The group, now named The Coalition For Health Insurance Reform, was incubated by the Wisconsin Rural Partners, Inc., self-described as "federal, state, tribal, local, profit, non-profit partners collaborating for rural Wisconsin." The Coalition is seeking access to affordable health insurance for individual and small group markets. Recently, the federal government passed a number of health insurance reforms, but these measures are still of very limited benefit to individuals and do not provide for any greater stability in insurance premiums for either individuals or small businesses.
Coalition members are hoping through a facilitated problem solving process to find common ground with insurers in Wisconsin in order to:
· provide a means for small businesses and individuals to access health insurance where costs, quality and stability are not significantly different from larger businesses.
· create incentives within the insurance industry that will promote the pursuit of greater efficiency in the delivery of care rather than the avoidance of risks.
· create an insurance market whereby all insurers operate by the same rules, and where the rules do not adversely affect insurers and purchasers that want to be more inclusive of the whole community.
· foster economic development by creating improved access to health insurance for farmers, entrepreneurs and small businesses.
Initial members in the Coalition include the:
Catholic Health Association of Wisconsin
Marshfield Clinic
Rural Wisconsin Health Cooperative
State Medical Society of Wisconsin
Wisconsin Farmers Union
Wisconsin Health and Hospital Association
Wisconsin Office of Rural Health
Wisconsin Primary Health Care Association
The first meeting of the Coalition is scheduled for March 19th from 1:00 to 5:00 pm at the State Medical Society. Call Kelly Haverkamf, Executive Director of Wisconsin Rural Partners, Inc. at 608-265-4525 for additional information.
WI's Medicare Losses
As some of you know, Wisconsin's Green Bay Packers are now #1 in the National Football Conference and again in the 1998 Super Bowl. What you may not have noticed, is that Wisconsin continues to lose big in the Congressional competition for equitable Medicare payments.
The Health Care Financing Administration recently released their Medicare and Medicaid Statistical Supplement for 1997. It reports that nationally, services to all rural beneficiaries in Calendar Year 1995 were paid for at a rate equal to only 85% of the national average. Rural communities across the country continue to be substantially disadvantaged by artificially low Medicare reimbursement rates for hospital wages, correspondingly low payment rates for Medicare HMOs and ongoing physician shortages.
As shown below, the variation among states is also much greater than most people expect, with Wisconsin, a notable example, ranking 4th from the bottom. The average total of payments per Medicare beneficiary served in rural Wisconsin was $3,483, 66% of the national average of $5,249. Wisconsin's average urban rate was $4,191, still only 80% of the national average. Wisconsin's urban rate was in fact three hundred dollars a year below the national average for rural areas.
Clearly some regional variation is understandable, if not always welcome, but this level of inequity clearly points to an issue continuing to evade resolution, not surprising given the dollar value of the vested interests. We know that many in Congress worked long and hard last year to create a floor in payment rates for Medicare+Choice Plans. But much still remains to be accomplished in both the traditional program and with the newer options.
For people back home, the processes of Washington remain obscure on a good day and depressing on most others. But it just seems reasonable that all Members representing those districts and states clearly disadvantaged, can put aside partisan differences and work together to assure reasonably equitable Medicare payment formulas.

Clinton's Preempts Medicare Commission
From "Clinton's Senseless Medicare Plan" by David S. Broder in The Washington Post, 1/11/98:
"Last year Clinton and the GOP Congress agreed on a plan to postpone the threatened bankruptcy of the Medicare system for 10 years and set up a bipartisan commission to deal with its longer-term problems. With the commission not scheduled to report until March of next year, it appeared the issue was off the table for the 1998 election."
"Clinton has put it back into play by proposing to let millions of people between 62 and 65 without health insurance, as well as displaced workers as young as 55, buy into Medicare. Key congressional Republicans reflexively denounced the idea, perhaps diminishing its chances of becoming law but setting up a clear political issue for this fall. The target population for the Clinton program clearly can use help. They are of an age where health problems are more frequent and private insurance is harder to get."
"The problem is that Clinton has no new money to put behind his plan, so it must be self-financed. Administration actuaries say the monthly premium for those between 62 and 65 will be $300 a month, plus a surcharge on their monthly doctors' insurance once they pass 65 and start receiving Medicare. For displaced workers 55 to 61 it would be about $400 a month."
"Because of that cost, officials estimate only 300,000 in the targeted population -- one out of 10, presumably the most affluent -- would actually be able to take advantage of the program. Clinton is proposing no government subsidies for the rest."
"Clinton's proposal raises much more than a question of consistency. Until now, Medicare has been for everyone over 65. Once you change the description so it becomes a program also for some people up to a decade younger, the illogic of the program is nakedly exposed."
"Why should the millionaire of 65 receive heavily subsidized Medicare benefits while the ailing former waitress of 62 gets no help in obtaining health insurance? It makes no sense at all. But the same president who now wants to open Medicare to affluent early retirees objected last year when the Senate voted to charge well-off Medicare recipients over 65 higher premiums for their Part B doctors' insurance. He said that change should be considered, along with alternatives, by the Medicare commission. Now he has jumped the gun on the commission with his own headline-grabbing proposal -- one that will help the well-off much more than their less affluent peers."
Rural Wages May See Long Sought Review
Several months ago we reported that the Health Care Financing Authority (HCFA) was convening a work group to look at long-standing technical problems with the Medicare Wage Index. Problems with the wage index have long constituted a major reason why states like Wisconsin and rural areas within most states are paid by Medicare at a lower rate than the national average. Glen Grady, CEO for Neillsville (WI) Memorial Hospital and Home (appointed by the National Rural Health Association) has been an unfettered, persistent rural voice at these sessions; this is his update:
At the Medicare Wage Index group meeting in Baltimore on 1/14/98, HCFA representatives agreed for the first time to explore the possibility of collecting the data necessary to describe differences in the mix of occupations employed by hospitals. This data would allow Medicare to adjust for area wages as Medicare was originally supposed to do­to adjust only for regional differences in labor rates.
If a hospital normally does more 'sophisticated' procedures it will typically employ a higher percentage of professionals who are able to command higher wage rates in most areas. The increased cost due to this phenomena is already accounted for by the government when it assigns each hospital discharge to a Diagnosis-Related Group (the 'DRG'), resulting in a higher payment for the higher costs incurred by the hospital.
Under current rules, such a hospital may also benefit by being in an area with an artificially higher wage index, one not corrected for differences in occupational mix. On the flip side, many hospitals (frequently rural) with lower DRG rates are penalized by being in an area with an artificially lower wage index, one not corrected for differences in occupational mix.
The data necessary to make the needed occupational mix adjustment is available by surveying a statistically sound sample of providers. HCFA representatives have agreed to discuss such an approach with the Bureau of Labor Statistics to determine cost and feasibility. Hopefully, HCFA representatives will be able to report back in April with a plan to proceed with this long awaited correction.
Health Expenditure Growth at 37 Year Low
The following is from "National Health Spending Trends in 1996" by Katherine Levit and others in Health Affairs, 1/98:
"The National Health Accounts produced annually by the federal Health Care Financing Administration's Office of the Actuary, present estimates for 1960-96 of nationwide spending for health care and the sources funding that care. This year's estimates set two records: Spending topped $1 trillion for the first time, and expenditure growth slowed to the lowest rate seen in thirty-seven years of measuring health care spending--4.4 percent. The combination of decelerating health spending and a growing economy has kept national health spending as a share of the nation's gross domestic product unchanged for the fourth consecutive year." (See the graph on the right.)
"Of the trillion dollars spent on health care in 1996, 46.7% came from public sources. This extended the trend in rising public financing shares, which had remained stable from 1975 to 1989 at 40-42 percent, to seven consecutive years. The rising public funding share reflects the divergence in health expenditure growth between public and private funding sources since 1989. Public sector spending growth continued to rise at an average annual rate from 1989 to 1996 (9.7%) roughly similar to that seen between 1975 and 1989 (11.5%). However, average annual growth in private-sector spending decelerated markedly between 1989 and 1996 to 5.8 percent, from the 12 percent average annual growth seen during 1975-1989."
Three Managed Care Mega-Trends
The following is from Valuation Insights, Healthcare Industry published by Deloitte Touche Tohmatsu International, Fall, 1997:
"In our work with managed care clients; whether they are evaluating an acquisition candidate or analyzing strategic alternatives, the question of value is increasingly shifting from, 'What are we worth today?' to 'How do we sustain and create value tomorrow?' Several important trends are shaping the managed care industry. Three are particularly noteworthy:"
"Less Restrictive Product Types--The industry is increasingly responding to the unpopularity of the more restrictive aspects of managed care plans by offering enrollees more options and more open networks. Growth in traditional HMOs has ground to a halt and point-of-service products have become the state of art. A growing number of plans are offering 'open access' products which allows enrollees to see specialists without permission from a primary care 'gatekeeper.'"
"Diminished Growth Prospects--The overall level of managed care penetration in many large markets is reaching relatively high levels in the core large and medium-sized employee group market. The most substantial prospects for growth are currently in niche markets serving the Medicare, Medicaid and small group populations."
"Increasing Provider Sophistication and Influence--One longer-term trend that may have a profound impact on managed care plans is the increasing sophistication and influence of providers, particularly in terms of their role in contracting in a managed care environment. The continuing consolidation of hospitals and physicians, as well as physician-hospital organizations, practice associations and other contracting vehicles is solidifying their bargaining power and enhancing their negotiating leverage. In addition, by assuming greater degrees of risk and accepting capitation, they are in effect competing with and sharing an increasing portion of the 'underwriting profit' with managed care companies."
Becoming Indispensable
The following is from "Critical Elements in Managed Care Market Strategies for Hospitals and Health Systems" written by Ed Dirkswager, Jr. and Dan Zismer in the Integration Advisor distributed by Towers Perrin, 10/97. While not written in the context of rural markets, much of this article seems to be applicable to those many rural communities where the outmigration of patients is or could become an issue:
"It's safe to assume that all health care is now or soon will be managed as payers strive to reduce costs or enhance the cost/benefit ratio of health services. A recent estimate based on a survey of 3,300 employers with over 10 employees indicates that in 1996, 77% of their active employees were in managed care plans."
"When health care providers contemplate managed care strategies, their thoughts are often focused only on gaining access to covered lives and 'adequate' reimbursement. But effective managed care strategies go far beyond payer contracting. A full managed care strategy touches all aspects of a provider's activity, including access to patients, reimbursement, operational efficiency, referral relationships, integration with other providers and the management of care, data and quality."
"The principal goal in emerging markets is access to patients/enrollees through 'tolerable' contracts. Although contracts at any price are not the goal, providers must remember that reimbursement methods and rates are meaningless if a competitor has the contracts/patients. That said, the overarching strategic goal is 'market indispensability' (i.e. remaining essential to the payers, patients and markets at large)."
"To achieve market indispensability, provider organizations must implement tactics to distinguish themselves from competitors and add value along the four dimensions of access, price, quality and service. These four dimensions are weighed differently by each purchaser but are typically the four criteria used in making a purchasing decision. Creation of a competitive advantage requires attention to each."
Strategic regional alliances (hospital and physician) with a competitive advantage have developed with a variety of structures; key characteristics include:
· "They align third-party contracting incentives."
· "They encourage distribution of clinical and management 'best practices.'"
· "They focus collective efforts on initiatives that matter to key payers and purchasers."
· "They fund and direct resources to markets and market opportunities (i.e. someone is directly responsible for opportunity development and management, including progress monitoring and evaluation)."
· "They develop the ability to provide providers with acuity-adjusted practice profiles so that physicians can compare their own practice styles with local and regional peers."
· "They align financial incentives among providers with agreed-upon performance targets."
International Medical Graduates
The following is from a Findings Brief published by the North Carolina Health Research and Policy Analysis Program, 11/97:
The Problem: "As the number of International Medical Graduates (IMGs) in residency programs and the US physician workforce has increased, many policymakers have become concerned that there are too many international medical graduates competing for residency positions, employment opportunities and public funds with US medical graduates. Yet any reduction in the number of IMGs may affect access to health care in rural areas."
Key Findings: "IMGs do constitute a greater percentage of the US physician workforce in rural, underserved areas than in rural areas that do not have a physician shortage. Variation in geographical distribution vis-à-vis under-service is often much more apparent at the state scale of analysis than at the regional or national scales of analysis."
Policy Implications: "Given the complex interweaving of federal, state and local policies, there is a strong need for greater collaboration, coordination and consistency in policies towards IMGs... Among the many possible reasons why IMGs help alleviate rural under-service more so in some states than in others include: state policies, state-federal interaction, social and cultural networks, public perceptions of the status of IMGs, hospital recruitment efforts and the location and activity of physician recruiters and lawyers seeking immigration pathways for clients."
Using Phones for Self-Care
The following is from "Putting Demand Management in Context, Issue #2 of the Future Facts series published by The Hospital Research and Educational Trust, American Hospital Association, 1997:
"The Friendly Hills Healthcare Network based in La Habra, California, has become nationally recognized for the delivery system innovations and progressive structure it has created. It's comprehensive continuum of care is supported by the extensive use of critical pathways, practice guidelines and other evidence-based clinical practice innovations."
"One interesting aspect of Friendly Hill's approach to primary prevention is its Telephone Advice System (TAS), designed to promote and involve patients in quality self-care. Harriet Brown, a Friendly Hills executive says, 'The philosophy behind TAS was that a patient management system integrated into the Friendly Hills Healthcare Network's continuum of care would result in a cost savings as reflected in the appropriate use of services and an increase in patients' self-care. Both of which are key demand management goals.'"
"Friendly Hills' key objectives for TAS at the outset were: reduce phone calls and visits handled by non-dedicated staff, reduce the time demand on clinical care nurses, develop a system wide standards and protocols for telephone advice using a multidisciplinary task force, provide patients with consistent and accurate information, satisfy patient needs for self-care education and instructions and increase patient satisfaction with the overall care system, while improving the pattern of health services utilization."
"TAS currently logs between 900 and 1,200 calls per month from the immediate service area. One of the most successful interventions has to do with the use of the service by potential emergency room (ER) visitors who, in most cases, are able to be helped without resorting to an ER visit. Brown estimates that there has been a 30% decrease in unnecessary ER and office visits during the program's implementation. Brown points out, 'Patients don't want to lose a half day of work for an unnecessary office visit; at the same time, patients are hungry for information--they naturally gravitate to strategies that encourage self-care.'''
The U-Special Kids Model of Integrated Care
The following is from Health Issues for Children & Youth and Their Families, December 1997. Health Issues is published two to three times a year; you can be placed on their mailing list by writing the IHD, University of Minnesota, Box 721, Minneapolis, MN 55455-0392.
"Even today, children with complex medical conditions find themselves organized like a medical school curriculum. The University of Minnesota has specialty clinics in neonatology, renal transplant, bone marrow transplant and brain tumor. They offer pediatric immuniology... For some, these condition-specific clinics work just fine. However, many of the children seen in these clinics have very complicated conditions that require multiple services."
In response, the Institute for Health and Disability at the University of Minnesota has initiated the U-Special Kids as a model demonstration project. "This non-categorical approach assumes that the impact of a chronic illness on the psychological and social functioning of children and their families is more alike across conditions than different, and the protective factors contributing to the success of a child are more alike regardless of whether the child has diabetes, spina bifida, cerebral palsy or cystic fibrosis."
Five principles guide U-Special Kids:
· "The developmental needs of children with chronic illness and disabilities are fundamentally the same as those of all other children."
· "Family is the central influence in the lives of all children."
· "Full community participation by children with disabilities and their families benefits the child, the family and the community."
· "Beliefs and attitudes about children with disabilities shape outcomes; positive beliefs contribute to competence."
· "Normalizing life experiences foster the development of psychological and social competence."
Critical Access Hospitals: A WI Update
Last year with the Balanced Budget Act, Congress authorized the Critical Access Hospital program. This program builds on the Rural Primary Care Hospital demonstration project that had been piloted for a number of years in six states. The principle benefit of this approach is that it will allow rural communities to maintain an emergency room capacity without necessarily having inpatients in the hospital and to receive Medicare reimbursement on a reasonable cost basis. The primary requirement is that the state must designate such facilities based upon a plan that has been adopted by the Health Care Financing Administration. How much discretion will be allowed the states is not yet clear.
A key issue is that the federal law requires that a Critical Access Hospital be located at least 35 miles away from another hospital or alternatively, that the State certifies the rural facility as a "necessary provider." The current State working proposal is that in Wisconsin a Critical Access Hospital would be considered a necessary provider if it was 20 miles from another facility and met at least two of the following criteria:
a. high percentage of elderly population
b. population center is skewed away from the next closest hospital
c. high percentage of population below poverty
d. hospital located in a medically underserved area or health professional shortage area
e. seasonal weather impact on travel conditions
f. substantial negative impact on health of community if facility closes
g. substantial negative impact on other health care services if hospital closes
The state would retain the option of lowering the mileage threshold in particular special circumstances. The Wisconsin Health & Hospital Association estimates reports that of 73 hospitals potentially meeting the Critical Access Hospital criteria, only four are over 35 miles from their closest neighbor; an additional twenty-four are between 20 and 35 miles.
As Wisconsin prepares its federal application (hopefully to be completed by the end of March) it must, like many states, also amend its basic hospital statute to integrate into Wisconsin law this new federal provider type. It is hoped that this will be done by the legislature as it considers a "late winter omnibus bill" of other similar technical adjustments.
At the same time, Wisconsin has been moving forward with final regulations and statutory tweaking to implement its Rural Medical Center model, authorized by statute on July 1st, 1996. The Rural Medical Center is a regulatory approach that acknowledges the reality in many rural communities--that several separate licensed services are frequently operated by a single corporation, a rural hospital and nursing home is a particularly common combination. Another example would be a rural nursing home that also operates a home health agency or hospice program.
The Rural Medical Center is the perfect umbrella license for a Critical Access Hospital combined with a nursing home, home health agency or other service. Consequently, Wisconsin's Rural Medical Center Advisory Committee and associated State staff have been asked to add to their implementation of the Rural Medical Center statute the responsibility for (1) implementing the Critical Access Hospital program in Wisconsin and (2) assuring its coordination under the Rural Medical Center umbrella.
Gerry Born had done yeoman's duty as the Wisconsin government's 1997 shepherd of these activities, in his role as Administrator of the Division of Supportive Living. With his resignation from State service, a favorite Committee regular is again returning, John Chapin in his new role as Administrator of the Division of Health. While the initiative will continue within the Bureau of Quality Assurance within the Division of Supportive Living, John was chosen for his role due to his ability to be an excellent "executive sponsor" for this long term and complex "reinventing of government."
The recognition and accommodation by the State of the clustering of such services that already occurs, as well the promotion of such clusters, is the aim of Wisconsin's Rural Medical Center initiative. Wedding this approach with the new Medicare provider type, the Critical Access Hospital should be good for Wisconsin. Other states may wish to consider adopting the Rural Medical Center model for multi-licensed entities as they implement the Critical Access Hospital program.
WI Assembly On Line with Live Coverage
The following news release was distributed by the office of Speaker Scott Jensen; for more information call 608/266-2402 or go to the Legislature's web site at <www.legis.state.wi.us>.
"Assembly debate is available live on the Internet as the body reconvenes in January, announced Assembly Speaker Scott Jensen (R-Waukesha). 'This is an exciting step into the world of electronic democracy," said Jensen. 'We should use these inexpensive technologies to bring government closer to the public. Putting our proceedings on line will make it easier for constituents to be informed and involved in our democracy.'"
"Beginning with the January floor period, anyone with a computer connected to the Internet and equipped with sound capabilities would be able to call up the Legislature's existing web site and listen in on Assembly action as it happens. Jensen said he expects the greatest interest in the new service will come from school groups, local government officials and the news media."
"'It is my hope that this will be just a first step in creatively using state of the art information technology to make our government more accessible and more accountable to Wisconsin.' said Jensen."
WI AHEC System Restructuring Update
From The Monthly Update for Wisconsin AHEC System staff and partners, January 1998:
"The statewide AHEC Partnership Council has approved the preliminary plan to restructure the Wisconsin AHEC System as a cooperative effective July 1, 1998. The cooperative will primarily consist of the four regional centers and their academic partners. As a new 501(c)3 cthe cooperative will become the fiscal administrative entity for Wisconsin's AHEC system, currently a role held by the Medical College of Wisconsin. An ad hoc work group of the Partnership Council is finalizing the agreement to establish the cooperative to present at the February Partnership Council meeting for final approval."
Entries for $1,000 Rural Essay Due April 15
This competition is open to all students of the University of Wisconsin-Madison, who are associated with the Center for Health Sciences.
The Essay Prize was established in honor of the memory of Hermes Monato, Jr., a December 1990 graduate and RWHC employee, as well as to highlight the University's growing understanding of the importance of rural health. The writer of the winning essay will receive a check for $1,000 paid from a trust fund established at the University by the Cooperative, family and friends of Hermes.
The deadline for submission of essays for the 1998 Prize is April 15th. Complete information available on the RWHC web site or by calling the RWHC office.
Would You Want to Know?
The following was labeled as Good News in the "Health Report," Time, 1/26/96:
"Using a few drops of spinal fluid, a new test can detect Alzheimer's disease years before full-blown symptoms arise. The test, which is as accurate as a brain autopsy, measures NTP, a protein that's released from damaged brain cells."




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