The Health Reform Legislative Task Force met yesterday, and as I reported, the question of whether to involve managed care companies in efforts to reform the traditional Medicaid program continues to divide the task force. The state’s consultant, the Stephen Group, will now be focusing on an alternative that achieves the governor’s target of $835 million in savings over five years but does not use full-risk managed care. That gives some momentum to opponents of managed care, as the Stephen Group will present its analysis, including budget scoring, on the alternative approach next month. However, task force members who support managed care for Medicaid’s high-cost populations say that option is still on the table, with the task force set to take final action in March.
Some other highlights from yesterday’s meeting:
The task force has three meetings scheduled in the coming months.
* February 17: Gov. Asa Hutchinson will report back from his early-February meeting with the feds. Hutchinson has to negotiate the details of “Arkansas Works,” his proposal to add GOP-friendly tweaks to the private option — it will be up to federal officials just how much they allow the state to do in revising the PO. By February 17, we should have a pretty clear picture of what “Arkansas Works” looks like. Also at this meeting, the Stephen Group will present its findings on a Medicaid reform plan (as explained here, the plan they present will not use full-risk managed care companies but will employ a company to manage care — more care coordination, more focus on primary care docs, incentives to encourage providers to offer high-quality and cost-effective care, and shifting from overreliance on nursing homes to more home- and community-based care). This meeting will be purely informational — the task force will take no action.
* March 7: The task force will take action, making its final recommendations. This will presumably be two big votes: 1) An up or down vote on whether to continue the private option via “Arkansas Works.” Of course, this would still need approval from a supermajority in the full General Assembly. 2) A vote for full-risk managed care for Medicaid’s high-cost populations or the alternative that the Stephen Group presented at the previous meeting. The executive branch would then proceed with the reform plan the task force votes for — including running contracts through the relevant committees.
* March 29: The task force will meet to convert its recommendations into legislation. The legislature will meet in full at a special session in April to vote on this legislation. This would include enabling legislation for “Arkansas Works” and, possibly, any legislation necessary to make it easier for the executive branch to enact the reform plan for traditional Medicaid.
Medicaid growth baseline
The Stephen Group yesterday explained the methodology it will use to score the traditional Medicaid reform plan and anticipated exceeding the governor’s $835 million target. The target will not be a cut against current spending levels; instead, the savings will be projected against a baseline of 5-percent annual growth in the Medicaid program. In other words, the Stephen Group is assuming that if the task force simply did nothing in terms of traditional Medicaid reform, spending would grow around 5 percent per year.
Worth noting: That’s actually faster growth than the Medicaid program in Arkansas has seen in recent years; in fiscal year 2013, it only grew 1.47 percent, in fiscal year 2014 it grew 2.16 percent, and 2.07 percent in fiscal year 2015. So is the 5-percent baseline too conservative in terms of an effort to contain costs? Not necessarily — in previous years the growth rate fluctuated between 6 to 10 percent. Back in 2010, say, a 5 percent growth rate would have been considered an extremely aggressive goal.
DHS Director John Selig said that 5 percent was a reasonable baseline going forward. He said that the slowed economy and factors in the health sector such as fluctuations in drug prices may have led to slowed growth in recent years that is not sustainable going forward. According to Selig and the Stephen Group, national trends suggest that growth in the Arkansas Medicaid program is likely to pick up to around 5 percent annually in the coming years without further reforms.
But Selig also said that one factor that may have contributed to the slowed growth in recent years was the implementation of programs to incentivize providers toward more cost-effective care (programs that would be expanded significantly under the Medicaid reform package proposed by the Stephen Group). DHS’s initial efforts on this front may have had a “sentinel effect” — that’s health-wonk speak for the tendency of people to perform better on their own when they know they’re being watched. In other words, there may have been a fair amount of slack and waste among Medicaid providers, and once DHS began implementing reforms, providers tightened the ship on their own. These effects could be permanent, so it’s at least possible that 5-percent baseline is too high. It’s impossible to know for certain.
Five percent is probably a reasonable baseline and ultimately, if the Stephen Group’s recommendations save money and lead to higher-quality care, it’s worth doing regardless. But slight variations in the growth rate make a massive difference in terms of spending. Imagine that the task force does nothing and the growth rate is 3 percent instead of 5 percent (again, even that’s higher than the growth rate has been for the last three years). That would amount to more than a billion dollars less in spending as compared to a 5 percent growth rate. In other words, it would exceed the governor’s target without enacting any new reforms at all.
Obviously, predicting the future is hard, and budget forecasters have to come up with the best growth baseline they can. In the grand scheme of things, the point of these reforms is precisely to slow the growth rate, and the Stephen Group report argues that without them, spending for Medicaid’s high-cost populations will grow at an unsustainable rate. But I mention all of this because Hutchinson has focused on the target number, $835 million, that he claims is necessary to “pay for” the private option. For the record, if the Medicaid program simply sustains the growth rate of recent years, the governor will have his “pay for” and then some.