LITTLE ROCK — Arkansas’ Medicaid director said Thursday that joint replacements and congestive heart failure — the two newest “episodes of care” to be included in the state’s payment overhaul — would be “enticing” conditions for Medicare.
“This would be a terrific opportunity for Medicare to join in Arkansas’ reforms. We’ve done the work for them and created a terrific opportunity” to improve efficiency, Andy Allison said after a public hearing.
Washington-based Medicare officials, who run the federal insurance program for senior citizens, could decide by early December to join the nation’s first attempt at restructuring health-care payments for public and private insurers by eliminating waste in medical services.
Allison said in a Little Rock public hearing Thursday that joint replacements and congestive heart failure are “relatively modest” and “low volume” treatments for the state’s $5 billion Medicaid program, expected to serve 792,000 people this year.
But Allison said after the hearing that Medicare is a “heavy user” of such episodes and the chance to participate in the costsaving measures could be “enticing” for the federal program’s administrators.
Earlier this month, the Department of Human Services announced that it had applied for a $60 million federal grant to help accelerate the state’s payment improvement initiative —an effort by Medicaid and two of the state’s largest private insurers to rein in costs by rewarding or punishing providers for their costs in treating defined conditions or procedures or “episodes of care.”
The payment changes are designed to curb rising Medicaid costs and help address the state’s looming Medicaid deficit — estimated at between $250 million to $400 million by next year. The effort won’t solve the immediate fiscal gap on its own, but the department has estimated that it will achieve $3.6 billion in Medicaid savings by 2020.
Although the federal grant isn’t contingent on Medicare’s participation, Gov. Mike Beebe, in a September letter of support to U.S. Department of Health and Human Services Secretary Kathleen Sebelius, wrote that Arkansas needed Medicare’s “full participation over time to maximize our impact” as the state attempts to retool how public and private insurers reimburse doctors, hospitals and other providers for medical services.
If Medicare decides to join the cost-containment effort, the “episodes of care” model would control more than 90 percent of the state’s healthcare spending by mid-2016, according to state estimates. Already on board are Arkansas Blue Cross and Blue Shield and QualChoice of Arkansas, which together control about 85 percent of the private market.
Allison and other state health officials have said for months that they wanted to include hip and knee replacements and congestive heart failure early on to encourage Medicare to join in the effort.
On Thursday, Allison said the two episodes weren’t rolled out now as bait for Medicare.
“I don’t think that was the core intent, but it is certainly the case that Medicare would be the heavy if not dominant payer for these two episodes,” Allison said. “We’re not engaging in payment improvement in this state with some core goal of enticing Medicare. It is true that it should be enticing for them.”
In Arkansas, about 492,000 people receive Medicare. About $4.7 billion Medicare dollars are spent in the state.
At the public hearing, attended by about 20 people, concerns about how the new episodes would affect hospitals, orthopedic surgeons and other providers surfaced.
Paul Cunningham, senior vice president of the Arkansas Hospital Association, urged state officials to consider including the “cost factor” of medical devices used in joint replacements. He said the devices are a “significant part of the supply cost” for hospitals.
Bill Greene, administrator for OrthoArkansas, a central Arkansas orthopedic practice, said orthopedic surgeons are unhappy with being the principal accountable providers — or quarterbacks — for the episodes.
Under the new system, such quarterbacks are held financially responsible for containing costs. If a quarterback’s year-long cost average falls below the acceptable range of costs, they share in half the savings. If it exceeds the average cost, they’re liable for half the cost overrun. Those whose care falls within acceptable parameters break even.
Surgeons are only reimbursed a small portion of the total episode cost, but are responsible for other costs beyond their control, Greene said. They also have a “small number” of Medicaid joint replacements and worry that a particularly expensive patient would skew their averages, leaving them with a financial penalty.
Orthopedic surgeons would likely avoid taking on Medicaid patients if the structure isn’t tweaked, Greene said.
“They’re not going to assume risk for Medicaid joint replacements,” Greene said.
Allison said the state is still working on the final draft for the two episodes and would take orthopedic surgeons’ concerns into consideration. He said that providers had a “stop-loss” provision that would limit their financial penalties by a formula pegged to annual Medicaid reimbursements.
Lawmakers will review the state’s plan in early November. The public comment period ends Oct. 21.
Front Section, Pages 1 on 10/12/2012