LITTLE ROCK — State Medicaid officials and two of the state’s largest private insurers said Thursday that revamping how payments are made to providers will lower costs, improve health-care quality and possibly attract business to the state.
On Sunday, the state and private insurers will begin a Medicaid fix that has been discussed and tweaked for more than a year and will affect about two-thirds of the state’s 2.9 million residents.
The changes are necessary to address an estimated $400 million deficit in 2014 and slow the increasing costs of health care, Department of Human Service Director John Selig said.
Although Human Service Department officials don’t expect to close the gap with the proposal alone, they hope to contain cost increases.
Arkansas is the first state to try this public-private partnership and is receiving “positive feedback” from the federal government, which will approve or deny the overhaul within the next year or so, said Andy Allison, the state’s Medicaid director.
“Fundamentally, we have been paying for volume. That’s how health insurance, that’s how Medicaid has been structured since the program began 45 years ago. We’re setting about to change that and to pay for exactly what we want out of the system,” Allison said at a gathering of reporters in Little Rock.
Over the next three to five years, the way that Medicaid and private insurers, Arkansas Blue Cross and Blue Shield and QualChoice of Arkansas will structure payments to doctors and other providers will change from a traditional fee-for-service model, where individual payments are made for each test or procedure, to an “episodic care” model where one provider takes charge of coordinating care for a particular health episode - such as a upper respiratory infection or hip replacement. If providers, over a set period of time, beat the state average cost for the episode, they would receive half of the savings. If they exceed costs, they would be responsible for half of the cost overrun.
Doctors will receive quarterly reports showing how their costs stack up against the average.
The first phase will track costs and performance for hip/ knee replacements, prenatal, birth and postnatal care, upper respiratory infections, congestive heart failure and attention deficit hyperactivity disorder.
Allison said the state should save about $3 million a year in 2014 from the new system. Right now, the state is wasting money on duplicate procedures and other waste, Selig said.
Overall, Medicaid cost an estimated $4.7 billion in the fiscal year ending Saturday. Currently, the federal government pays 71 percent of the cost.
Gov. Mike Beebe has said the state might need to cut services or increase taxes to deal with the shortfall. The Legislature will review the proposal in July.
Dr. William Golden said the state has enough doctors to serve as “quarterbacks,” who would direct the coordinated care, although forecasted physician shortages and an influx of 250,000 new Medicaid enrollees under the Affordable Care Act could create problems in the future.
He said that the financial incentives for serving as a “principal accountable provider”- or quarterback - could attract more doctors and other providers to parts of the state that currently don’t have enough.
The plan has been structured to protect providers against increased malpractice claims and losing money because of unusually high-cost cases, Allison said.
Payments to providers won’t be reduced, state and insurance officials said.
A linchpin of the plan is to get doctors, hospitals and other providers to work together more efficiently, Golden said.
Michael Stock, president and chief executive officer of QualChoice of Arkansas, compared the proposed system to home building, which normally is coordinated by a general contractor that prevents unnecessary or duplicate costs.
A more efficient healthcare system in the state could attract businesses to Arkansas, said Steve Spaulding, vice president of enterprise networks for Arkansas Blue Cross and Blue Shield.
“That’s a major cost for business. When a business looks for a place to locate, they’re looking for all the advantages they can get,” Spaulding said.
Aligning costs and performance is what the plan is designed to do, Allison said.
“[Currently] costs are disengaged from ... financial consequence. So we’re re-engaging them ... as they are in other businesses and other parts of the economy,” he said.
Arkansas, Pages 13 on 06/29/2012