Kobach Claims He Can Save $2 Billion For Medicaid, But Experts Say The Math Doesn't Add Up

Oct 26, 2018
Originally published on November 19, 2018 3:44 pm

Kris Kobach says his proposal to reform Kansas Medicaid could save the state $2 billion.

At campaign events, the Republican nominee for governor touts the benefits of combining Medicaid with direct primary care, an unconventional payment system that avoids the bureaucracy of health insurance.

But the people who gave Kobach the idea say they haven’t calculated that direct primary care would save $2 billion for Kansas Medicaid.  And Kobach’s campaign hasn’t provided an alternative source for that number.

On top of that, health experts say the idea oversimplifies one of the state’s largest and most complex expenditures. While direct primary care is a familiar idea in Kansas in private practice, no one knows whether it could work with Medicaid’s complex structure and recipients’ specialized needs.

Direct primary care, sometimes called “concierge medicine,” allows patients to pay doctors a monthly or yearly fee for unlimited primary care. That often includes office visits, phone calls and texts.

Direct primary care clinics offer patients discounts on procedures, medications and lab tests. They typically don’t take insurance, which saves doctors the hassle and overhead costs of dealing with insurance companies. The Kansas Department of Health and Environment says about 30 doctors use the system in Kansas.

For years, lawmakers have considered bringing direct primary care to KanCare, the Medicaid program that serves 425,000 of the state’s most vulnerable residents. Now, Kobach and his independent opponent, Greg Orman, have included the proposal in their campaign platforms.

“If we had successful direct primary care for our KanCare system, the $3.2 billion that we're spending for 400,000 people would go down to $1.3 billion for the same 400,000 people,” Kobach said at a July candidate forum in Garden City. “There is an opportunity to realize  great savings in our KanCare system.”

Kobach’s other statements on the subject are frequent, but lack detail. His campaign website doesn’t include a section on his proposals for health policy. At an October press conference, Kobach told the Kansas News Service he would introduce a direct primary care pilot program to one county or region before expanding it to Medicaid across the state and, he promised, reaping $1.9 billion dollars in savings.

“If it works well in that setting, then we would hopefully expand it, “ Kobach said. “You'd have to go statewide with it to save that kind of money.”

Despite repeated requests from the Kansas News Service, the Kobach campaign hasn’t provided a source for that number. A spokeswoman said Kobach based the idea off of work by Steve Anderson, a former state budget director under former Gov. Sam Brownback, and Josh Umbehr, a direct primary care physician. But neither Anderson nor Umbehr say they calculated anywhere near $2 billion in potential savings.

The back of an envelope

Umbehr has long been an advocate for direct primary care, speaking about the subject across the country and making appearances on local and national media.

He’s run a direct primary care clinic in Wichita since 2010 and says the payment system saves his business time and money.

“We cut out a lot of middlemen,” Umbehr said. “We can lower that price and offer that directly to our patients.”

When his father, lawyer Keen Umbehr, ran for Kansas governor as a Libertarian in 2014, Josh Umbehr was his running mate. Their platform promised to save the state $1 billion by combining direct primary care with Medicaid.

In 2015, Josh Umbehr testified about the idea in front of a Kansas House of Representatives committee, attracting interest from lawmakers. A month later, the committee introduced a bill creating a direct primary care pilot program as part of broader Medicaid reforms. But that legislation stalled.

Now, Umbehr is advising the Kobach campaign on the issue. He also practices medicine in the Hartman Oil Building — the same place where Wink Hartman, Kobach’s running mate, headquarters his oil company.

Umbehr and Anderson remember calculating the potential Medicaid savings of direct primary care over a meal at a Wichita restaurant in 2013 or 2014.

Anderson said they took the discounted prices that Umbehr charged at his clinic and applied those discounts to KanCare procedures and expenses  — minus the cost of nursing home care.

“Three hundred knee replacements, for example,” Anderson said. “And then there would be a calculation, what that costs us, and then what it would have cost under Josh’s system.”

He remembers getting the data from a state spreadsheet and doing the math on the back of an envelope.

“It’s a really big, nine-by-nine envelope,” Anderson said.

Anderson said he hasn’t spoken to Umbehr in years, and admits his memory of that day, and even which year it happened, is spotty. But Anderson remembers coming to the conclusion that direct primary care could save not $1 billion in Medicaid costs, like Umbehr claims, but more like $450 million to $600 million.

“It’s a rough estimate,” Anderson said.

Umbehr told the Kansas News Service that KanCare could save $1 billion by combining direct primary care with a wraparound insurance program to handle other medical expenses. He said cheaper primary care would also decrease non-primary care expenses, such as hospitalizations and emergency room visits.

“We’re pulling all of those things in-house and decreasing the cost of them by 95 percent.” Umbehr said.

‘It’s just inaccurate’

Former Kansas Medicaid director Robert Day says both Anderson and Umbehr did the math wrong.

“These people are idiots. They know nothing about health care financing or costs,” Day said. “To make the statements they make, it's just blatantly  — it's so untrue and unfactual that it staggers the mind they would even say something publicly like that.”

Day, who worked for Republican and Democratic governors from 1999 to 2008, said the savings from a private direct primary care clinic can’t be applied to Medicaid. It’s a complicated program, he said, that doesn’t work like regular health insurance.

The elderly and disabled comprise only 25 percent of people receiving Medicaid or the related Children’s Health Insurance Program in Kansas. But they account for 70 percent of KanCare’s spending.

Any savings from direct primary care would most likely not apply to the elderly and disabled, Day said, because their needs are so different from those of the general population.

“Most of the costs of that population is in long-term and nursing home care,” he said. “So they're not physician-driven costs.”

In 2016, the state spent $1.1 billion on two categories of service primarily for the elderly and disabled: adult care homes and home and community-based services. In the same year, it spent $315 million on two categories of service that include primary care procedures: physician services and outpatient care.

Day said KanCare couldn’t save anywhere near what Anderson, Umbehr and Kobach are claiming, because it doesn’t spend $450 million, $1 billion or $1.9 billion on primary care in the first place. 

“It’s just inaccurate,” Day said. “It shows a complete lack of understanding of the Medicaid program.”

Uncertain benefits

Other health policy experts were skeptical about whether direct primary care could adequately serve the specialized needs of Medicaid recipients when so many are elderly and disabled.

“There’s been no program to even test or look at, at this point,” said Cindy Samuelson, a vice president of the Kansas Hospital Association. “So it’s really hard to answer those questions of what the true impact might be.”

While direct primary care might save time and money by reducing paperwork, Samuelson said interacting with the bureaucracy of Medicaid, especially KanCare’s three managed care organizations, might negate any of those benefits for doctors.

Given those complications, she says it’s unclear whether there are enough doctors who are willing to try both direct primary care and Medicaid.

“Would the program even be something that providers are interested in?” Samuelson said.

That uncertainty highlights the need to run a pilot program before drawing any conclusions, said Kari Bruffett, vice president for policy at of the Kansas Health Institute.

“A pilot could help assess how direct primary care might work for various populations in KanCare,” Bruffett said in an email. “It could also be used to assess beneficiary interest, provider interest and capacity, and whether direct primary care could work either as an alternative to or an option within a managed care model.”

The Kansas Department of Health and Environment, which manages Medicaid, told the Kansas News Service it hasn't yet done a cost analysis of using direct primary care for Medicaid.  But it’s open to a pilot program if it’s supported by a future governor and legislature.

“Anything innovative like that, we would like to think it warrants exploration,” said Secretary Jeff Andersen.

Andersen agreed that physician availability, negotiations with managed care organizations and other details were uncertain. “Those are things that have to be worked out, but it's all doable.”

So far, the Kobach campaign hasn’t answered questions about those details, nor has it provided another source for Kobach’s claim of $1.9 billion in savings, despite repeated inquiries.  In an email, a spokeswoman forwarded this statement, attributable to Kobach:

“Direct Primary Care would result in significant savings. We will be looking at all kinds of measures to increase the efficiency of our Medicaid delivery and to improve the satisfaction of Medicaid patients. Direct Primary Care accomplishes both. The patients love it, and the doctors love it, too."

Nomin Ujiyediin is a reporter for the Kansas News Service, a collaboration of KCUR, Kansas Public Radio, KMUW and High Plains Public Radio covering health, education and politics. You can reach her on Twitter @NominUJ.

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