State doctors to get same Medicaid pay

Agency: Spending drop averts 3% cut

With Medicaid spending growing at its slowest pace in 25 years, Arkansas Department of Human Services officials have scrapped plans to cut reimbursement rates to doctors and hospitals, and they no longer expect the program’s trust fund to be exhausted when the state’s fiscal year ends June 30.

Instead, Thomas Carlisle, chief fiscal officer for the department, said he expects the trust fund to end the fiscal year with a balance of $40million to $60 million - money that will be available to cover expenses if costs rise sharply in the future.

To help shore up finances, the Human Services Department had planned to cut its reimbursement rates by 3 percent starting July 1, a move that would have reduced federal and state payments by about $100 million for the year, Carlisle said.

“This is somewhat unexpected but happy news for the Medicaid program, to see the growth rate at historically low levels,” Human Services Department spokesman Amy Webb said.

Medicaid covers about 680,000 low-income Arkansans, including children and the disabled. The Legislature last month approved expansion of the program using Medicaid-funded private insurance plans to include about 250,000 people with incomes up to 138 percent of the federal poverty level -$15,860 for an individual or $32,500 for a family of four.

Arkansas pays about 30 percent of Medicaid’s costs, with the federal government picking up the rest.

The federal government will pay the full cost of expanding the program to those with incomes up to 138 percent of the poverty level until 2017, when the state will begin paying 5 percent of the cost.

After that, the state’s share for the newer recipients will rise each year until it reaches 10 percent in 2020.

During this year’s session, legislators also increased the state’s funding for Medicaid for next fiscal year by $154 million, including $84 million in general revenue and $70 million in one-time funding from surplus revenue.

The state’s total Medicaid spending is expected to be $957 million, Webb said.

Money in the trust fund comes from a tax on soft drinks, which generates about $50 million a year, and judgments in Medicaid fraud cases, Carlisle said.

The state may need to use some of the trust-fund money next year if the growth in spending increases, Webb said.

“Basically, this gives ussome cushion,” she said.

The turnaround comes as the growth of health-care spending nationally has slowed.

In March, for instance, the U.S. Department of Health and Human Services released a report that showed that Medicaid spending per recipient dropped 1.9 percent nationally from 2011 to 2012, only the second year-to-year drop in 47 years.

In Arkansas, state and federal Medicaid spending totalled $3.44 billion in the first three quarters of this fiscal year, from July 1, 2012, through the end of March.

That was an increase of 2.1 percent compared to the $3.37 billion in Medicaid spending during the same nine months last fiscal year.

From fiscal 2011 to 2012, spending during the first three quarters of the year increased 6.2 percent, Carlisle said.

“That is a very profound change,” Carlisle said. “We’re running at about a third of the growth rate at this time last year.”

The growth rate is the lowest the program has had since 1988, he said.

Webb attributed Arkansas’ spending slowdown in part to the state’s Health Care Payment Improvement Initiative, in which doctors, hospitals and other providers are encouraged to spend less to treat certain ailments.

Under the initiative, providers are financially rewarded for keeping the cost of providing an “episode of care” below a range considered acceptable or penalized for exceeding it.

The initiative began in October with three episodes of care: upper respiratory infection, perinatal care and attention deficit hyperactivity disorder. Congestive heart failure and total joint replacement were added in February.

The direct savings from the initiative have been small, Carlisle said, but it has prompted providers to pay closer attention to their spending on a wide range of services.

“I think it’s a paradigm shift,” he said.

An improving economy has also played a role, he said. He noted that spending on ARKids First, which covers children in low-income households, dropped 3.9 percent during the first three quarters of the fiscal year compared to a year earlier.

“We’re spending less money there because I think there are less people that need services,” Carlisle said.

News that the Medicaid reimbursement rates won’t be cut was welcomed by hospitals, said Bo Ryall, chief executive of the Arkansas Hospital Association.

Hospitals already are facing cuts in Medicare, the federal health insurance program for the elderly, of $2.5 billion over 10 years due to the 2010 Patient Protection and Affordable Care Act and automatic federal spending cutsthat began this year, he said.

“Hospitals really can’t stand any more cuts,” he said.

The Medicaid expansion approved by the Legislature is expected to help improve the program’s finances, in part by shifting some people who now receive limited services from traditional Medicaid to full coverage under the expanded program, with the federal government picking up the full cost for the first three years.

In 2014, that change will affect about 116,000 people, including about 89,000 women who receive family planning services through Medicaid and 23,000 employees of small businesses participating in the ARHealthNetworks program, which will be discontinued.

In the meantime, the Department of Human Services plans to expand the payment improvement initiative in October to include four additional episodes: tonsillectomies, gall bladder removal, colonoscopies and oppositional defiant disorder.

At a joint meeting of the House and Senate’s public health committees Friday, lawmakers said they wanted more information before they approve the additions.

Rep. John Burris, R-Harrison, the chairman of the House committee, said he expects the committees to meet again within a few weeks to take up the issue.

He said legislators were busy with other issues during the session, and the initiative “hasn’t been a topic of active conversation” for several months.

“I think there was just a little bit of hesitancy to move forward until we’ve had a little bit more time to review the next wave of episodes,” Burris said.

Front Section, Pages 1 on 05/29/2013

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