100 state ‘episodes of care’ seen ahead

Posted: May 16, 2013 at 12:54 a.m.

Arkansas plans to expand its “episodes of care” approach for health-care-cost containment to as many as 100 medical conditions in the next few years, according to Rhonda Hill, director of health-care finance for Arkansas Center for Health Improvement.

Hill’s comments come after a federal report released last week on more than 3,000 hospitals showed a wide range of charges for about 100 treatments, the charges for the most part far exceeding what is paid through the federal Medicare program, the insurance program for those 65 and older.

The transition to a handful of episodes of care from the traditional fee-for-service model is under way, and a state Department of Human Services’ Medicaid program that is called the payment-improvement initiative expects to have 13 to 16 in place by the end of the year, Hill said Wednesday.

The department; Blue Cross and Blue Shield of Arkansas, the state’s largest private insurer; and QualChoice are participating.

By examining records of charges under the existing model, cost benchmarks are established. Depending on where a provider stands on treatment of those conditions, he will either be rewarded with more payment for the service by the insurer or will have to repay whatever exceeds the benchmark.

The “data transparency”of the federal report helps to “paint the picture, especially from the consumer perspective, of what actually happens within the health-care system,” Hill said.

Arkansas’ payment-improvement initiative is “helping drive” the effort for transparency, Hill said.

While the program focuses primarily on physicians, hospitals are the focus in cases such as congestive heart failure, she said.

Another effort, the insurance exchange that the state of Arkansas will inaugurate Jan. 1, is designed to offer coverage for those without it. The creation of the exchange is driven by the federal Patient Protection and Affordable Care Act.

A related effort is the “private option,” whereby those who qualify for Medicaid can use that money to purchase private coverage in the insurance exchange. Participation in the exchange is designed to provide enough customers and promote competition and lower costs.

The state will present its application for the private option to Kathleen Sebelius, secretary of the the U.S. Health and Human Services Department. It would allow as many as 250,000 Arkansans who make up to 138 percent of the federal poverty level to buy private coverage by using Medicaid funds.

Also, more than 200,000 Arkansans without insurance and who make between 138 percent and 400 percent of the federal poverty level will be able to buy insurance on the exchange and qualify for a federal subsidy.

The fact that so many more Arkansans will have insurance will reduce pressures on hospitals that are having to make up for uncompensated costs, resulting in “deflationary pressure on the cost of care,” said Amy Webb, spokesman for the Department of Human Services.

Webb said that the agency is still working on the application to be submitted to Sebelius. The so-called waiver that the state is seeking would be unprecedented in the country.

The Department of Human Services commissioned a study that shows that the state would save $670 million over a decade by the reduction of traditional Medicaid rolls. The state currently pays 30 percent of Medicaid coverage and the federal government pays 70 percent.

The inauguration of the state exchange and the private option will coincide with the roll out of the federal Patient Protection and Affordable Care Act on Jan. 1. The act requires employers with 50 or more employees to provide insurance. Fewer employers will face penalties under the federal act because of the expanded coverage.

State Surgeon General Joe Thompson, who is director of Arkansas Center for Health Improvement, said in an interview last week that extending health insurance to more Arkansans could lower the prices that hospitals, doctors and other providers charge insurers.

The center is a nonpartisan, independent health policy center dedicated to improving the health of Arkansans. It is supported by the University of Arkansas for Medical Sciences, the Arkansas Department of Health, Arkansas Blue Cross and Blue Shield, Arkansas Children’s Hospital, and Delta Dental of Arkansas.

“Twenty-five percent of Arkansans don’t have health insurance today, but they’re still going to the doctor or the emergency room or the hospital,” Thompson said. “Those providers are essentially not able to get payment for those individuals, so they shift the cost over to those people who do have insurance and are paying higher rates.”

At the same time, the federal law will place additional requirements on insurance plans, creating “upward pressure” on premiums, he said.For instance, beginning in 2014, insurance plans will not be able to impose annual limits on coverage or exclude people from coverage because of pre-existing conditions.

“I don’t think we’re going to know until this fall what the net effect [on premiums] is,” he said.

The federal health-care law limits the amount by which insurance companies can charge higher premiums on the basis of age and prohibits them from charging higher rates to those with pre-existing conditions.

Cindy Crone, who is heading up the creation of the exchange for the state Insurance Department, said that the the prospects of having upward of 500,000 potential customers is proving attractive for insurers.

Not everyone who applies for the private option will qualify, Crone said. Those with complex and expensive conditions can be eliminated through a screening process that might mean they would be better off staying with

Medicaid rather than taking the private option, she said.

The federal law that takes effect on Jan. 1 does away with lifetime and annual benefit levels. But certain provisions in a private policy, such as limits on the number of office visits per year, might not be for the best, she said.

Information for this article was contributed by Andy Davis of the Arkansas Democrat-Gazette.

Business, Pages 27 on 05/16/2013