LITTLE ROCK — Medicaid enrollment and spending are starting to level off, prompting speculation among lawmakers and state officials Wednesday that an improving Arkansas economy and nascent payment reform has slowed growth in the $5 billion program.
From July to October, Medicaid rolls climbed less than 1 percent, and the program’s growth rate in spending fell from 5.6 percent during the same period in 2011 to 2.5 percent in 2012, according to the Department of Human Services.
The programs are stabilizing because the economy is growing, and changes in the Medicaid payment system may also be a factor, Department of Human Services officials said.
The state has begun a fundamental shift in how Medicaid pays its bills, moving from a “fee for service” model to one that holds providers financially liable if they don’t keep costs down, said Thomas Carlisle, chief fiscal officer for the department.
“It’s the lowest growth in a quarter that we can remember,” Carlisle said.
Republican John Burris, a state representative from Harrison, said the low growth - if due to an improved economy - vindicates his position on the Medicaid fiscal crisis. The program faces an estimated $138 million deficit beginning in July 2013.
“I suggested in the past that one way to actually curb our growth in Medicaid expenditures is economic development and growth in opportunity in our state’s economy. And I’ve been the subject of a few mocking press releases saying that I don’t understand Medicaid,” said Burris at a joint meeting of the Public Health, Welfare and Labor committees.
It’s too early to tell what is driving the slowdown in Medicaid growth, said John Selig, the department’s director. But the program’s growth from Oct. 1 through Wednesday is similar to growth in the previous quarter. If the pattern holds true until July, the state would finish the fiscal year at roughly half of the program’s 6 percent yearly growth rate over the past decade.
Medicaid covers about 780,000 people each year. But the totals vary month to month as recipients come on and off the rolls because of fluctuations in income and other factors. In the first quarter of the 2013 fiscal year, Medicaid covered an average of 674,737 Arkansans. That’s an increase of only 6,189 people compared with the same period a year ago.
The $1.1 billion spent in the first quarter was about $27 million more than was spent in the year-ago quarter, Carlisle said.
That more generic drugs are coming onto the marketis one reason for lower prescription-drug costs, said Sen. Percy Malone, D-Arkadelphia. Medicaid’s drug costs dipped by 1.1 percent compared with the year-ago quarter.
The ARKids First program, which covers about 335,000 children from low-income families, also saw its costs fall by 2.4 percent in that period.
Although he said only “anecdotal” evidence exists to support the claim, Carlisle said two years of publicity about the state’s payment overhaul has focused providers’ attention on lowering costs.
Burris pointed out that the payment improvement initiative began Oct. 1, after the quarter ended. Carlisle said the state’s health-care providers are much more aware of the new payment system. It seeks to reward doctors and other providers whose costs fall below an acceptable range and punish those who exceed it.
The payment overhaul will gain speed next year, Selig told lawmakers. DHS The Human Services Department will approve companies that specialize in helping doctors adjust to the new model. DHS The department also plans to hire a vendor to help plan the next round of episodes of care - illnesses or conditions that will be coordinated by a single provider who will bear financial responsibility for the costs.
Doctors with small practices who need help in managing difficult patients - such as those who don’t follow instructions or use the emergency room inappropriately - will receive extra state money to potentially spend on these services.
Under the medical home model being developed, doctors will receive state money for each of their patients - an average of $7 per adult per month and $3 per month for children. That money could be used to purchase outside help, Selig said. Or doctors could pocket the cash, he said. The money is meant, in part, to help compensate doctors for the cost of creating medical homes.
Sen. Stephanie Flowers, D-Pine Bluff, questioned why doctors should receive help keeping abreast of changes in their practices. Selig said DHS the department believes that the companies will help persuade doctors to keep costs down for their most difficult patients, who might need more supervision than a small practice could provide.
Despite Medicaid’s slower growth, the department still expects to exhaust its $273 million trust fund by July, Carlisle said. The “fund of last resort” typically is used in the second half of the fiscal year, but if growth remains sluggish, some trust fund money might available in July, Selig said.
Arkansas, Pages 9 on 12/20/2012