Jennifer Colamonico
Welcome to Vital Viewpoints on Healthcare, where we explore the biggest challenges and innovations shaping the future of health and human services. Today, we're honored to be joined by Jay Rosen, founder, president and chairman of Health Management Associates. Jay launched in 1985, and over the past four decades, he has remained at the helm, guiding the firm's strategic vision, leading its growth, serving clients, and fostering innovation in publicly funded health care.
A nationally recognized expert in health policy, health economics, and health finance, Jay brings deep expertise and insight to some of the most complex challenges facing our health care system. Prior to founding HMA, Jay led planning and policy development for the Michigan Office of Health and Medical Affairs, where he oversaw wide ranging health policy research and analysis with degrees in philosophy from Michigan State University, where he also taught ethics, logic, and the history of philosophy.
Jay combines sharp analytical thinking with a deep commitment to public service. He continues to shape the field through his leadership and by serving on the boards of several health care organizations. So let's dive in. Jay, thank you for making time to interview with us today.
Jay Rosen
Thank you for that nice introduction. Happy to talk about all of this.
Jennifer Colamonico
Excellent. Let's kind of go back to the beginning. I just love to hear a little bit more about the early days. What originally drew you to work in Medicaid policy, I guess. How did you leap from philosophy to Medicaid policy consulting?
Jay Rosen
Oh, well, that's a long story. But the short version is I had actually intended to become a college instructor of philosophy, and was on track to finish a PhD and do all of the relevant things. My timing was not good when the time came for me to find a job doing that. You know, there just wasn't really much going on anywhere in the country.
So I thought, would I then I would take what would be a temporary detour into the public service, might work in the office of the governor of the state of Michigan, which is where the agency you made a reference to was actually located. And then I came across this kind of new thing that had been cooked up called Medicaid in the mid 1970s, and the rest is history.
Jennifer Colamonico
So I'll sort of maybe then fast forward a little bit to when you stepped away from public service. And I, you know, take me back to that day at the, at the Big Boy Diner in East Lansing, where the legend is that that's where HMI started. One of those back of the envelope, kind of conversation.
So what happened there? What was kind of the core idea and. And why was it such a pivotal moment in how HMA may evolve?
Jay Rosen
Well, it's a great and at least mildly interesting question. So just, set the stage. When I first began working with this set of issues and questions, Medicaid was a new thing to important to remember that Medicaid and Medicare, both were traumatic, events from a social policymaking point of view in the country. I think many that many people know as an example of what life was like if you were elderly.
Prior to 1965, how you got to health services you might need or how they would be paid for different world entirely. Medicare, probably the single most important piece of anti-poverty legislation the country has ever had, lifted millions and millions and millions of seniors out of economic hardship because it introduced a source of financing for health services. And similarly, on the Medicaid side, the system of care for low income people before 1965 was dramatically different from what we're accustomed to today.
So it's important to kind of remember, if we can, what world was like before these programs came into existence. And I, just as an observer of current events, came to the conclusion that these were monumental accomplishments from a social policy point of view. They rank, you know, up there next to creation of Social Security and unemployment insurance and other pieces of what we now think of as being the basic safety net for the country.
These were new things when they came into existence in the mid 1960s. They did not just flip over into full operational mode in 1966. In fact, the last state did that come into the Medicaid program until 1983 when Arizona came in. So it's a very long, slow process for the country to adapt to the the creation of, Medicaid in particular in 1965, and its potential was to further strengthen the way the country would respond to the needs of low income people, in particular, seemed like an extraordinary thing, and something that I decided I wanted to become involved with.
So I spent ten years, between 1975 and 1985, being part of the initial, wave of public officials who had responsibility for bringing up the Medicaid program and at least one state. And just as a quick comment and illustration around this idea, generally the early stages of Medicaid, many of the things that we take for granted now, we're nowhere to be seen.
There was no managed care. There was no cash. There were no provider tax. There was no behavioral health. In fact, there was only one thing. And that thing was get the money out the door and get it more or less to the right people in more or less the right amount, in more or less a reasonable period of time.
And it's important to remember that before Medicaid was created, the states had no responsibilities in the health care domain. There was anything like what they were being asked to do. Now, states experience with health related responsibilities were swimming, pool inspections and restaurant inspections and vaccine campaigns and things like that. Now, all of a sudden, states were expected to take on the responsibilities of essentially the infrastructure responsibilities of an insurance company completely alien to anything any state had ever done before.
So the, taking on of this responsibility to organize and operate a medicaid program, a big shock to the system from just the the structure and the scale and the capabilities of organizations like state governments, really anything and, of course, external parties. Most famously, Ross Perot came to the states and said, you'll never figure out how to do this.
Just let me here. That's EDS, web Traffic Data systems. Just let me just, let's just have a contract. You know, I'll do this for you. And there were other similarly situated people. And by the way, it's not irrelevant that Ross Perot came out of the military because Medicaid in its early years was seen as a data processing problem, not as a health care problem.
That had to do with get the money out the door. And much of the country's data processing expertise was in the military because in the late 1960s and so on and so forth, the principal issue for the U.S. government was to prevail in the Cold War with the Soviet Union, and the military was where the government's the best and brightest, who had these systems related and data processing skills, the entire Medicaid program.
When I first became involved with it was the national enrollment was something in the range of 15 million people, maybe 20 million. Some number like that. And now, of course, it's 90 year, whatever it happens to be at the moment. So it's much smaller, very arcane, very unfamiliar to the States themselves from a provider point of view. Most providers didn't, really have a lot of interest in getting involved with Medicaid because it was it pertained to a small slice of their patient population.
When they did get involved with it, it was complicated. It was new and brought them into a relationship with the state that they weren't all that interested in having, which was very, very new for everybody. And I had done, you know, this work in the governor's office for however many years and in the early 1983 and 1984 or something like that, I and three other individuals, one of whom was at the time the Medicaid director in the state of Michigan, a gentleman named Paul Allen.
Another colleague of mine, Elliot Wicks, and another individual who worked with me in the governor's office, a gentleman named Jay Endsley, decided that, well, what the country really needed now that we had this Medicaid thing out there was, for a group of folks like us to come to them and help them grapple with the challenges that bringing up, the Medicaid program was going to create.
One other piece of this pertains to the advent of the Reagan administration in 1980, Reagan administration. Some of us might remember it was a while ago had an ideological point of view, which, among other things, suggested that the federal government should not be involved in the operation of the American health care system and that that administration was aggressive and active in trying to limit the federal participation.
And it pulled back wherever it could. In some ways, not that differently than some of what we're seeing today, but that didn't make the problems go away. People were still going to get sick. Huge numbers of uninsured people. And again, for those who remember this far back that early 1980s was a period of extreme economic distress in the United States.
Healthcare costs were going up at 1,520% a year. Interest rates were 18% a year at their peak. Very high unemployment, lots of distress, particularly in the center of the country. In Michigan, Ohio, Indiana. States like that. So it was a time of great economic turmoil as well in the United States. So our conclusion was rather than, be involved in the efforts of the federal government to reduce the role of public sector in the way the health care system operated.
We concluded there was no place for these problems to land other than in the laps of the governors, that the federal government was not prepared to apply its resources to the solution of these problems. The only the only folks left to deal with them would be leadership at the state level, which we knew intimately because we had been in those roles in the state of Michigan.
So we organized health management in 1984. 84, early 85. And our idea was that we would come to the States and we would tell them that we were there to help them figure out. But the answers to these hard problems would be and that was the idea the Big Boy restaurant figures into this because all of the plotting, we were all still active state employees at the time.
All of the plotting and the planning occurred in the back booth of the Big Boy restaurant with the lights turned down low so nobody would see us to see what we might be conspiring about. And, the building still stands. There's no historical marker there, but this building is still intact. So. And at the time, there was nothing like us.
There was no industry of advisors focused on the public system, and especially with respect to the challenges that were facing the states around the country. So the very novel idea. But we had confidence that it was a solution to what would be a real challenge for the states. And so we thought we should proceed into this. My colleagues in this early phase were actually quite a bit older than I was.
They were actually closer to the end of their working lives, whereas I was maybe more toward the beginning, which accounts for my being the sole survivor at this point. But still, it was a fun and exciting decision to leave the public sector and see if we could figure out how to do this.
Jennifer Colamonico
So how many states had Medicaid at that point?
Jay Rosen
Probably by 1985, all of them did that.
But just barely. So many others had come in really just in the late 70s, early 80s. And, but it was still new and it still was it was still a different kind of program than what we have today. A lot of these things I mentioned before existed anywhere. The things that we are familiar with every day and that we work with every day, none of that existed.
It was still a fee for service, environment.
Jennifer Colamonico
So what was the core I'm trying to think about? Like what was the core value of moving outside the government to then support governors in that way? What were some of the early accomplishments that where you kind of felt like, okay, you know, we got we got a good business model here. What were the kinds of things you were doing to help governors at that point?
Jay Rosen
The hallmark of what you might see, if you look back in the history of the program to the mid or later 1980s, was the very first emergence of what we now see everywhere we look and call managed care. The idea of using intermediaries, risk bearing insurance like intermediaries between the state as a payer and providers and consumers at the other end was a very, very novel idea, very novel.
And just coincidentally, Michigan was one of the early sites for the experimentation with the idea of managed care and so, you know, now it's ubiquitous, we've got, you know, two thirds of the Medicaid population has served through managed care arrangements and half in Medicare, but none of that existed at the time. So this was the period in the early evolution of health plans, serving Medicaid clients.
There were many interesting things about how this happened. There were federal rules, for example, that basically said that if you could not have more than three quarters of your membership in Medicaid beneficiaries, at least one quarter had to be commercial. If you wanted to be in the health plan business, you had to observe Medicaid. You couldn't be in Medicaid only, but you had to have commercial membership as well.
There were many, many, many little themes and threads that found its way into this early discussion. It was almost all voluntary enrollment. There was no mandatory managed care on it. The enrollment process in those days involved the health plans. The early first wave of health plans had big groups of salespeople, and they would go from house to house in certain zip codes and try and persuade people to sign up for Medicaid.
That's how people that's how it was done. First, many abuses occurred, and we ended up with elaborate marketing rules. And, you know, now all that stuff is generally prohibited and it's mandatory anyways. But anyways, completely different environment and all of those things of which I could enumerate 100, which were elements in the evolution of the program and the emergence of managed care as a significant theme in Medicaid.
All of that was taking place, and we were involved in all of that all over the country over the next 15 years between really, when we started the firm in 2000 and 2005, which was really the period where managed care to call the Medicaid, we had a chance to be involved in many, many places and in every case, it was a matter of figuring out the answer to these kinds of things.
How could you get involved? What's an appropriate way to market this? What should you be saying and what should you not be saying? To lure people to step out of a fee for service environment and stay up with some organization I've never heard of before? Really? Lots and lots and lots of interesting problems.
Jennifer Colamonico
So what you're describing is really from the get go, a lot of innovation, because from the get go, you were figuring out really how to make this work. And I think that's interesting some throughout, I've always felt like Medicaid is more of a source of innovation than a lot of people give it credit for. But as we, as we kind of, you know, look back and reflect as Medicaid has evolved, what do you think which innovations have kind of worked?
What particular changes do you think have had the most positive impact on the program?
Jay Rosen
Again, it's useful to contrast pre Medicaid with post-acute pre Medicaid. And of course, you know, the original target beneficiaries. So I can use that phrase in Medicaid where mothers and children and nursing home residents that I mean in those days there was no home energy base or there was just people in nursing homes and nursing home services.
So Medicaid was seen as a adjunct to what we used to refer to as the welfare system, the cash welfare system. So if you became eligible for AFDC, became eligible for Medicaid, you could that become eligible for Medicaid independently? It was seen as an extension of your, quote unquote, welfare benefits in the late 1970s. Anyways, just to illustrate this, one of the early health plans evaporated in Detroit, which at the time was called Comprehensive Health Services Detroit (CHSD), when they started, their first great undertaking was to convert a burned out, abandoned motel into a clinic for expectant mothers and their newborns, plus a hotel, motel, two floors. All the doors are on the outside. Kind of a classic, I don't know, motel. They converted the office into the reception, and then they would hand it to you to go upstairs to run to oh one and see doctor X.
So the conversion of a motel in which all of the exam rooms opened into the outside. Now you're in Detroit in the winter, so you go upstairs, you know, and say a motel room which had been converted into a exam room that was seen as an extraordinary advance in the development of infrastructure to serve this population of low income mothers and their children.
That's where we were in those days. And pre Medicaid, who knows? Honestly, who knows what the power, the delivery system really functioned for those folks, if at all.
Jennifer Colamonico
You'd talked a bit about, you know, the evolution of managed care and obviously where the 80s were an interesting time in the development of managed care, and then the backlash that came in the 90s. But I think in Medicaid managed care remains to be a little bit sometimes controversial today. And I just wonder, in your view, you know, what do you think the biggest contribution is that managed care has made for the Medicaid program and its beneficiaries?
Jay Rosen
The this is a view I guess I've had for a long time, maybe widely shared, maybe not. To me, the truly, the deep significance of the emergence of managed care is to create a chain of accountability in Medicaid. So in the old days where you're where the states are running their own fee for service, okay, you have this objective anyways.
You want your newborns to be getting their well child services in their first year or two of life. So you know, you have to create an in, you know, fee for service environment. You kind of have to hope that will happen. And you have to I guess, you know, you can think about creating incentives or nagging the mothers to get their children in and so on and so on and so forth.
And if you do it okay, and if you don't do it okay, I mean, if you're the agency who's watching you, who's measuring your performance, who's holding you to account for the things that you're supposed to do as the responsible piece of the government to do this. It's kind of a murky thing, but I just described now the contrast is I have a contract with you, your health, me, I got a very, very specific set of things I'm expecting you to do.
And I'm going to watch you carefully. And if you don't do them, I have a contractual solution to fall back on you. And if you really, really want to do the things you've agreed to do, I'll kick you out of the program and get somebody else to do so. The, the, the real, the the really deep, valuable contribution of managed care in Medicaid is to be accountable to the administering agency, which is the Medicaid agency, to do a certain specific set of things.
So if to serve your population, you need a number, a certain number of participating providers, primary care people, obese, whatever we happen to be talking about, if you're the state, you have state employees driving around in cars, going to medical practice, asking them if they be interested in signing up with there's no program in the States, right?
Or you have a contract with a health plan and you say it's your obligation to create a network, a contracted network of this size, to serve this population. And if you can't or won't do that, we'll get somebody else in here who will. So it completely transforms. First of all, it transforms the role of the government. It's no longer the operator of the machinery of the organization of the system for these beneficiaries.
You're now really a contract administrator, and you are your job is to hold your contractors feet to the fire. And that honestly, you know, that's really the story of managed care, is that that's an industry that has been built on the idea that it's there to carry out the policy determinations of the government, to run the kind of program the state has determined that it wants to run and to do it in an environment of substantial accountability.
So now you have very substantial reporting requirements. You have heaters, you have star ratings, you have, quality performance measurement systems. All kinds of things have been developed to watch over the performance of the health plans. So we've given you the money. We've given you the people, and we've given you a very specific set of requirements. These are the things you must do to be in compliance with your contract.
And we're going to hold your feet to the fire. So the construct is completely different. Many people have said, and I'm not saying this is entirely untrue, you know, that managed care is all about saving money. It's not all about saving money. I mean, I used to work in the budget office, and if the state had to save money, we had a million ways to save money.
That isn't really the issue. But now I've got somebody at the other end of the contract I can tell them exactly what it is I expect them to do. I can see if they're going into an activity, and if they're not doing it, I'll kick them out and I'll get somebody else in here to do it. And that's exactly what's been happening now for 35 years.
And the so that the contracting process that the Medicaid agencies have adapted, which is to do these competitive procurements every 4 or 5 years is really part of what I have just described. It's a way of stopping saying, let's look at who's doing what we told them to do or contracted with them to do and who's not, and who is able to give me confidence that prospectively, they're going to be even better at doing the things that we have determined should be done.
And these contracts were awarded, and they're worth billions and billions and billions of dollars. And so the competition is intense. It's a competition to be an agent of the Medicaid agency to do, to carry out the policy determinations that the Medicaid agency has made as to how it wants the program to function. And a number of plans have gotten themselves into trouble in a business sense, and maybe even more by forgetting that.
And so the report to me, that's really that the revolutionary aspect of the emergence of managed care and its adoption by Medicaid is really about creating accountability in the program, knowing what you want to accomplish for the people you're responsible for as a medicaid administrator, getting competent folks at the other end of the contract to carry out the policy that you have determined should be followed, and then doing the rest and that of the process to make sure that it gets done.
So that's really the essence of it.
Jennifer Colamonico
Yeah. You talked about the growth obviously. And you know, we've grown beyond just those two populations that you talked about. And you know, thinking about even this week as we're recording, right? We're seeing blueprints emerge for proposed changes to eligibility. You know, but the program has grown considerably. And so, I guess, how do you sort of square that with its original objectives?
What maybe what makes you most concerned about the program today, whether that's where it is today or the proposed changes? But, what makes you most concerned about its kind of sustainability moving forward?
Jay Rosen
You know, Medicaid is a proxy for the economic profile of the country at a very high level. That's at least as it exists today. It rests on a pure income based eligibility determination process. And the eligibility standards are not very high. I mean, 138% of priority is not a very big number. And for most people it nevertheless, we have 99 people.
So indirectly, that's a way of saying, you know, you've got a really, really big swath of the country, 30%, and it's a really big number that are, you know, operating more broadly in an economic environment that's pretty you know, it's pretty difficult. So I and I, and I think the country's recognition that as a society, it has an obligation to step in and provide this kind of support for that population, whether it's 138% or 160 or whatever number you pick is a pretty profound, positive step forward.
We're not going back to having 20 million people. We might go back to having, you know, 85 million people instead of with it for a while anyways. But the core concept of the program isn't going to change you. You've still got this really, really big subset of folks who live in the United States whose economics are really, really difficult, and enhancing their own health care is completely out of reach for them.
You can't, it can't be done without this kind of support. They're not going away. Whether the number of people in those circumstance starts to shrink or not. It's a great question. If it starts to shrink, that would be fantastic for the country. That is, if the if the subset of lower income folks were to become smaller, that would be great success on another score.
Jennifer Colamonico
It's an important distinction because I think you raise the point that the core mission of Medicaid is not in dispute, but because we use Medicaid as a vehicle to correct for that affordability of insurance. In the, you know, private sector, if you will, or in the commercial sector, now we're having a medicaid debate. It's not really about the core of Medicaid.
It's really about the mechanism by which we are going to help other people who don't, you know, aren't categorically poor or disabled or elderly, but who are not able to get insurance and need it. And so, which is a different conversation, perhaps a different solution. So we've kind of, I guess, backed ourselves into this moment where it seems like we're having a medicaid discussion.
That's not necessarily about Medicaid, which is interesting, but both directions, frankly.
Let me ask you, if you had a magic wand, and you could wield that in a way that would help kind of stabilize and sustain the Medicaid program. What's the one thing that you would change with that? Or how would you wield that magic wand?
Jay Rosen
Well, it's, you know, the Medicaid program is, despite all of the things that it accomplishes, it is very expensive and it's very expensive, honestly, not because the way it supports the needs of any individual is, you know, in describing it from a classical view, it's because we're talking about 90 million people. It is. Right. And so, I mean, everybody knows, I think that Medicaid runs it, you know, half or two thirds the cost of the Medicaid program in the commercial system.
I mean, from a cost point of view, it's an extraordinary success, actually, if you look at it kind of kind of take a risk adjusted point of view and look at Medicaid economics. It's pretty amazing. But the gross cost is very, very it is high because it supports such a huge proportion of the country's population and because it has responsibility in many cases, for the most expensive payment, the most expensive are older, frail, disabled people that are explicitly part of the burden of Medicaid support those folks that their acute care needs.
That's on the Medicare side. On the Medicaid side. So long term care, chronically mentally ill people, developmentally disabled people, very, very vulnerable, very, expensive populations. So all of this gets rolled up into medicaid's cost. The states have very powerful incentives to maximize the federal participation. From our granting point of view, it's led to a very convoluted equation in terms of how the financing works.
It's much more complex than you would expect it to be if we all could agree on who belongs in the program and who doesn't, and what its real costs are, and what is accessible in the aging equation as between the states and the federal government. We waste a tremendous amount of time. When I say we, I mean all of us involved.
The way the program operates, whether you're within, you know, in the public service or you're in the kind of position that we occupy, a tremendous amount of effort goes into pushing responsibility back and forth between the states and the federal government. Who's going to pay? I think that rationalization of the financing system would be an extraordinary improvement in Medicaid, which stability in the financing structure for Medicaid, a lot more effort could be devoted to making the program run well, and a lot less effort would need to be developed or devoted to trying to get somebody else to pay, which is what we spent a huge amount of time on.
But, you know, it's important to remember it's just a really, really big program. It comes in 50 different flavors because that's just what it is. And so the complexity of the thing is, is extraordinary. And, you know, from my point of view, it operates very, very well, given the, the nature of the problems that it is charged with addressing.
But getting to a more rational and stable financing equation would be a great step forward for the country. And really, that in turn rests on getting to the kind of consensus we were talking about a few minutes ago about what the role of Medicaid is and it's not, and embracing that and building the program on that solid political foundation.
Jennifer Colamonico
Are you optimistic right now that there could be a rationalization in this current environment?
Jay Rosen
I don't think in 2025 we're going to see much rationalization. I actually think this debate, which is going on now, is having the effect of bringing into clear focus the degree of support in the country that the Medicaid program has for the Medicare program. Nobody's talking about anything, right. So, you know, Medicare is settled in Medicare. What are we talking about?
Dental benefits. Maybe are an inexpensive continued expansion and growth of the Medicare benefit in Medicaid. I mean, everything we see every time anybody goes out and asks folks, you know, where they stand on Medicaid, there's just extraordinary support for the program. And now they're asking about it right now because it's threatened. Normally, pollsters and other public opinion people don't go around asking folks about that, but they're asking now.
And what they're finding out is the support is very broad and very deep that particularly Partizan, I mean, you get virtually the same results in red states that you get in blue. So I think that the, you know, the actual kind of unexpected benefit of this debate we're going through is that it's bringing more clarity to where the people of the country stand on something like Medicaid, and where they stand is they want it and they want it to be there, and they want to be available for the folks who need to have it.
Yeah. So I don't think anything is going to get resolved in 2025 because there's too many other, you know, dynamics operating here. But I do think in the long run, it's a way of communicating to the political decision making process that this is just something that's got to be part of the it's got to be part of the deal for Americans.
And the government is expected to maintain it in reasonably good shape. No, I don't I don't have any opinion about how this is all going to express itself, but I actually think that the main result that this thing we're going through now is going to be to strike and support for the program in the long run.
Jennifer Colamonico
It's fantastic. It's probably a good note to end on a core truth. Yeah. Well, thank you so much. I certainly learned a lot about the firm and about the Medicaid journey. And, I really appreciate your time and sharing those insights with us today and look forward to, another 40 years. Right.
Jay Rosen
Very good.
Jennifer Colamonico
This episode of Vital Viewpoints on Healthcare is sponsored by HMA Information Services. HMAIS is a subscription based service that provides state level data on publicly sponsored programs like Medicaid from the latest managed care enrollment, market share, and financial performance data to up to date of calendars and state by state overviews. HMAIS has all the information you'll need to power your initiatives to success.
This podcast was produced by myself, Jennifer Colamonico along with Tiffany McKenzie in collaboration with our guests. The content is the property of Health Management Associates.
