Draft legislation is now circulating for two alternatives to implement reforms to the traditional Medicaid program.

The Health Reform Legislative Task Force came to broad agreement that better care management for Medicaid’s high cost populations — including developmental disability, behavioral health, and long-term care for the elderly and the severely disabled — could lead to higher quality care and lower long-term costs. However, the task force was sharply divided over the best means to implement those reforms. 


The two alternatives have the same big goals: 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.

One plan, backed by the governor, would employ a managed care company to push these changes. 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 (this is known as “fully capitated risk”). Typically, managed care companies also pay providers with some form of capitated risk. You can see the draft legislation for the governor’s managed care plan here


The other plan, backed by providers’ allies in the legislature and dubbed “DiamondCare,” would aim to implement the same slate of reforms, but would employ an administrative services organization (ASO) and would still pay providers on a fee for service basis. The main difference is that the ASO wouldn’t take on the same level of risk if cost targets were not met (and providers might not face any financial risk at all). The ASO would have to pay a flat fee if benchmarks were not met and could receive a share of the savings if costs were below benchmark; the state’s Department of Human Services would be tasked with monitoring the ASO to ensure that quality of care was maintained and determine whether benchmarks were achieved. You can see the draft legislation for the “DiamondCare” alternative here

In both plans, the nursing homes have been “carved out.” Thanks to their powerful lobbyists, they have made a separate agreement with the state to implement reforms on their own, focused on transitioning beneficiaries who would be better served by home-and-community-based care rather than nursing homes (one area that would clearly both improve quality of care and save substantial amounts of money). They have promised $250 million in savings over five years; the draft legislation states that DHS will hire an independent actuary to confirm the savings. The governor has stated that if the nursing homes fail to meet their targets, they will be subjected to managed care (or some other form of care management from an outside entity). 


The state’s consultant, the Stephen Group, estimates that the governor’s  managed care proposal would save $1.439 billion over the course of five years (the state has to pay for around 30 percent of traditional Medicaid costs, so that would save Arkansas around $430 million). DiamondCare, meanwhile, would save $1.057 billion (or $317 million for the state) over the same period, according to the Stephen Group. 

Opponents of managed care argue that using managed care companies could harm both providers and patients. Hutchinson’s plan attempts to address those concerns by including a “patients bill of rights” and a “provider bill of rights.” 

The legislation’s stated rights for beneficiaries: 

A member shall be entitled to:

A plan of health insurance coverage offered through a managed care organization that: Establishes one (1) or more community advisory committees that includes advocates and members; Does not reduce the types of services and benefits established by the state; Does not place utilization limits on the number of medically necessary visits by a member to a primary care provider; Offers member-centric programs, including without limitation rewarding healthy behaviors; and For a member with multiple chronic conditions or disabilities, provides a whole-health integrated care approach for benefits in which the member has qualified; 

The right to choose a Medicaid primary care provider; and 

The enrollment in a patient-centered medical home to ensure the continuity of care.

And the protections for providers: 


Healthcare provider rights.

A healthcare provider shall be entitled to a plan of health insurance coverage offered through a managed care organization that: 

Pays: The healthcare provider no less than the prevailing Medicaid fee schedule, unless mutually agreed upon by the provider and managed care organization; Ninety-nine percent (99%) of the clean provider claims within thirty (30) days of the receipt by the managed care organization; and The prevailing dispensing fee rate for pharmacies, unless mutually agreed upon by the provider and managed care organization; 

Offers a provider agreement to all safety-net healthcare providers, including without limitation: Federally qualified health centers; Rural health clinics; and Critical-access hospitals; 

Establishes healthcare provider advisory committees to consider: Healthcare provider compensation; Healthcare provider credentialing; Pharmacy and therapeutics; and Quality improvement; 

Enters into contract negotiations with any willing healthcare provider; 

Uses a standard credentialing process to ease administrative resources;

and Provides reporting to healthcare providers on utilization and other metrics, as established by rule of the Department of Human Services.

Hutchinson and the Republican leaders on the task force back the managed care proposal because it projects to save more. However, a coalition of Republicans and Democrats who are allied with provider groups (the most vocal lawmakers in this coalition are themselves either providers or family members of providers) are vehemently opposed to managed care. 

The legislature will consider both options when it convenes for a special session in April. 

The legislature will also take up “Arkansas Works,” the governor’s plan to continue the private option. Draft legislation for “Arkansas Works” was circulated earlier today

In all cases, the legislation will likely be tweaked and revised in the coming weeks. 

Support for special health care reporting made possible by the Arkansas Public Policy Panel.