LITTLE ROCK — Arkansas’ effort to overhaul the way it pays Medicaid providers received a boost Thursday as the federal government rewarded the state’s first-in-the-nation efforts with a $42 million grant.
And the grant has the potential to include another federal health program: Medicare.
The state’s surgeon general said the grant signals an interest among federal officials in allowing Medicare, the nation’s health-insurance program for senior citizens, to participate more fully in the state’s plan to lower overall health-care costs.
“It’s a clear indication of their interest,” said Dr. Joe Thompson.
State officials hope to broaden Medicare’s participation in the payment improvement initiative to most of the state’s 1,782 primary care physicians over the next year or so, he said.
Currently, Medicare penalizes hospitals for high readmission rates for certain procedures. Arkansas would like Medicare providers to be eligible for financial rewards for lowering costs and eliminating waste, a key component of the state’s payment changes, Thompson said.
Arkansas is one of six states to receive the competitive State Innovation model grant.
The money has immediate and long-term benefits apart from a greater role for Medicare, said officials from the Arkansas Department of Human Services.
The money will spur progress on the department’s medical-home initiative, which seeks to lower Medicaid costs through primary-care doctors by having them take on a greater role in reducing waste.
Much of the increased focus on coordinated primary care, or “patient-centered medical homes,” as part of the payment overhaul will gain speed later this year to complement the initiative’s other cost-saving measure, which calls for holding doctors financially accountable for treating defined illnesses or conditions called “episodes of care,” instead of paying the providers for each test and procedure.
“[The funds] will really allow us to help support providers in our patient-centered medical homes ... to get them to coordinate care and focus on preventive care and managing chronic conditions,” said Amy Webb, the Department of Human Services spokesman.
The state’s $5 billion Medicaid program serves about 780,000 low-income Arkansans, including the elderly, the disabled, pregnant women and children.
The federal grant will address a more pressing problem, providing money for a consulting and technical-assistance contract with McKinsey and Co. Inc., a global consulting firm that has helped the Department of Human Services’ work on payment restructuring.
Department officials decided to ask for more assistance from McKinsey, raising the cost of the $15.5 million contract by $12.4 million.
Earlier this month, several Republican lawmakers questioned the need for paying the consultant more, and the contract briefly stalled in the Joint Budget Committee.
Webb said the federal cash can be used for the extended contract: “Yes, absolutely.”
Sen. Cecile Bledsoe, R-Rogers, said her colleagues’ concerns about the McKinsey contract had been answered by Department of Human Services officials. The chairmanof the Senate Public Health, Welfare and Labor Committee, said communication between lawmakers and Department of Human Services officials had improved significantly in recent weeks.
And Bledsoe, who has been a critic of the state’s payment plan, said she was cheered by the grant, especially the “medical homes” component.
“It sounds like a really good idea,” Bledsoe said. “I’m anxious to see them get started.”
Thompson agreed that state officials had improved communication with legislators.
The new GOP leadership in the House and Senate had voiced “some anxiety” about the broad-based changes under way, he said.
In addition, to the payment overhaul, lawmakers are considering the expansion of the Medicaid program by up to 250,000 participants, as allowed by the federal Patient Protection and Affordable Care Act. They also are trying to find money to plug an estimated $61 million Medicaid deficit.
But legislators’ unease isn’t just partisan conflict, Thompson said.
“I don’t think it’s just an ‘R’ and ‘D’ issue,” he said.
The payment overhaul includes Medicaid and two of the state’s largest private insurers, Arkansas Blue Cross and Blue Shield, and QualChoice of Arkansas.
Bledsoe said she still has some hesitation about the pace of the “episodes of care” changes. She would prefer to wait and see the results of the first five episodes already begun by the Department of Human Services, she said.
“I would like to be more cautious than maybe some,” she said.
In September, as part of the grant application, Gov. Mike Beebe urged federal officials to fund the state’s $60 million request in part to lure Medicare, which provides federally reimbursed medical coverage for people 65 and older, into the payment overhaul.
In a letter to U.S. Secretary of Health and Human Services Kathleen Sebelius, Beebe said Arkansas needed Medicare’s participation to optimize the initiative’s success.
On Thursday, during a conference call with reporters, federal officials praised Arkansas’ model for the “collegial” way it has worked with “multiple payers.” Medicare already is participating in a federal pilot project in 69 primary-care medical homes around the state, they noted.
They said they would continue to work with Department of Human Services officials on the payment improvement initiative.
“They are actively engaging other players, Medicare among them,” said Cindy Mann, deputy administrator for the Center for Medicare and Medicaid Services and director of the Center for Medicaid and Children Health Insurance Programs Services.
Medicare serves about 500,000 people, or roughly one in six Arkansans, according to the Department of Human Services.
About $4.7 billion Medicare dollars are spent in the state each year, according to the Henry J. Kaiser Family Foundation, a Washington, D.C.-based health-policy think tank.
Webb said her agency is waiting for clarification from Sebelius’ agency on Medicare’s participation.
Sebelius praised Arkansas and the five other states that received the grant - Maine, Massachusetts, Minnesota, Oregon and Vermont - as national trendsetters in public private collaboration to rein in health-care costs while improving patient care.
“Our hope is that these best ideas will spread throughout the country,” Sebelius said.
Although the state didn’t get all the money it asked for, Webb said, the Department of Human Services is “very pleased” with the $42 million headed to Arkansas.
“It’s a validation of the approach we’re on,” Thompson said.
Front Section, Pages 1 on 02/22/2013