The Health Reform Legislative Task Force met today, with the clock ticking on coming up with a consensus on reforms in the traditional Medicaid program (that is, everything other than the private option). The governor has requested $835 million in savings over five years; the state’s consultant, the Stephen Group, found that via a commitment to more care management, the state could achieve those savings — or perhaps even more — and improve the efficiency and quality of care in the program. Just how to implement reforms — and whether to use managed care companies for high-cost populations — continues to sharply divide the task force. The Stephen Group will analyze possible approaches, focusing on alternatives to full-risk managed care, and report back to the task force next month with a score of the budget impact.  

There is broad agreement across the task force that the traditional Medicaid program needs some form of care management, particularly for the high-cost populations (long-term care for the elderly and the severely disabled, developmental disability, and behavioral health). The Stephen Group report makes a compelling case that the state could save money and improve quality of care by moving away from the unmanaged fee-for-service model and towards more care coordination, more focus on primary care doctors, incentives for providers to provide cost-effective and high-quality care, and a “re-balancing” that would give more options for beneficiaries currently served by nursing home and other institutional settings to move into home or community-based care if those were more appropriate for their care.  

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The billion-dollar question is how to implement these reforms. The governor, DHS Director John Selig, and the Republican leadership on the task force favors fully capitated managed care for Medicaid’s high-cost populations. That’s a fancy way of saying that the managed care company takes on all the risk. The state would negotiate a per-person cost with the managed care company; if the managed care company beat that number they would profit, but if costs went high the managed care company would be stuck with those cost overruns.

Provider groups and their allies in the legislature are opposed to managed care. The alternative still involves using an outside management entity to oversee and implement reforms, but not a full-risk managed care company. The Stephen Group was adamant that this care management alternative would still involve risk for the management entity — John Stephen, the Stephen Group’s managing partner, said that such risk was a prerequisite to actually achieving the projected savings. The difference: this entity would only take on partial risk. If the state failed to achieve savings targets, the management entity would be on the hook for some portion of the cost overruns, but the state would eat the rest of the costs. It remains unclear what form this risk would take (perhaps the contract would establish financial penalties if targets weren’t met). Another open question: would providers take on any risk under this alternative? Stephen said that providers would be paid fee for service but would likely have incentives toward cost-effective care, potentially including some risk. 

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The Stephen Group will analyze and score this alternative approach, including implementing any ideas from provider groups, and present their findings at the next task force meeting on February 17. The analysis will project savings as compared to a baseline of five-percent annual growth in the Medicaid program. Because of a motion passed by the task force last month, the Stephen Group’s focus will be on this care-management alternative as opposed to full-risk managed care. Does that mean that the idea of full-risk managed care for Medicaid’s high-cost populations is dead? Not necessarily. It’s possible that after hearing the details on the alternative approach next month, the task force will conclude that managed care is the better approach. A final vote will take place at task force meeting on March 7. 

What does all of this mean for long-term costs in the Medicaid program? The Stephen Group already found that using managed care companies would produce dramatically larger savings than the alternative approach — more than a billion dollars more over the course of five years. That said, it’s possible that the alternative, once fleshed out over the next month by the Stephen Group, could hit the governor’s target. 

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