In his press conference this morning, Gov. Asa Hutchinson made his case for his plan to implement managed care for certain high-cost populations in the traditional Medicaid program. What he didn’t do, however, was establish much of an argument for why lawmakers should back his plan as opposed to an alternative known as “DiamondCare” that would pursue the same reforms but continue to have the state pay providers directly on a fee for service basis. The governor’s own rhetoric on Medicaid reform from last year could make it difficult to make that pitch. 

Outgoing DHS Director John Selig and the state’s consultant, the Stephen Group, have both made a compelling case over the course of the last year that there is real slack in the Medicaid program for these populations — with issues ranging from long-term care patients getting stuck in more expensive nursing homes when home-and-community-care would be more appropriate to behavioral health providers overbilling or overprescribing in ways that do not benefit patients. 


The question is whether managed care companies are the best tool to implement reforms. Hutchinson thinks so, and he’s spent the week publicly selling his plan, which includes a “bill of rights” meant to protect both patients and providers. 

The problem for Hutchinson is that he told the task force in December that he was “agnostic” about whether managed care companies were used to achieve reforms. The only thing that he cared about, he said, was achieving the savings. He made a dubious argument that these savings were necessary to pay for the private option, and set a target of $850 million over five years. In fact, the two policies have nothing to do with each other and the private option is already revenue positive on net according to the state’s consultant, even when the state has to start chipping in its full share (updated numbers show that it’s revenue positive even using the governor’s selective budget math, rendering the $850 million number meaningless). 


Leaving aside disagreements about budget forecasting for the private option, Hutchinson’s rhetoric in December looks like it was a strategic mistake. Completely aside from Medicaid expansion, making the pre-existing traditional Medicaid program more cost effective while maintaining high quality of care is a worthy goal. Completely aside from Medicaid expansion, it’s important for the state government to look at bending the long-term cost curve for the high-cost populations in the traditional Medicaid program. 

Unfortunately, the governor’s $850 million target shifted the discussion from making the Medicaid program as cost-effective as possible while maintaining or improving quality of care to…meeting his target. 


And the DiamondCare alternative plan beats that target, projecting to save a little more than one billion dollars over five years according to the Stephen Group (via the verified scoring method agreed to by the governor). 

Given the intensity of opposition from provider groups and their allies in the legislature, then, why not go with DiamondCare? Benji Hardy asked and Hutchinson responded that it was “in draft form and I have not studied the legislation.” He said that he looked forward to reading it and that he had a productive meeting with Rep. Michelle Gray (R-Melbourne), one of the key lawmakers opposed to managed care. He said that he hoped he could bring in Gray and her coalition of provider allies in the legislature to support his managed care plan. “That’s an open dialogue,” he said.

In terms of why he supports the managed care plan instead, Hutchinson said that using administrative services organizations (ASOs), as envisioned by DiamondCare, didn’t have the same kind of track record that managed care organizations had. “There’s just much more risk associated in terms of the state,” he said. “Ours is less risky and more specific in terms of the savings.” 

I’m guessing that DiamondCare backers are going to be pretty underwhelmed by this response. Was the governor telling the truth when he said he was agnostic about managed care? Was the target of $850 million, and the scoring that followed, meaningful — or just a political charade?


The governor’s position is even more awkward because nursing homes have been carved out of his managed care plan (as they have from DiamondCare). They have promised to meet savings targets of $250 million over five years, but according to the Stephen Group, a managed care approach for long-term care would have saved an additional $230 million over five years on top of that. In other words, because of their powerful lobby, nursing homes are allowed to pursue their own reform plan that will produce lower savings. And while the governor has stated that a contract will threaten the nursing homes with managed care if they don’t meet their targets, the truth is that in the short term, the state is taking on just as much financial risk in this arrangement as the governor fears under DiamondCare. It’s a bit harder for the governor to insist on managed care as opposed to DiamondCare for other provider groups when nursing homes dodged managed care with a sweetheart deal. 

The politics here are thorny because some private option backers are so opposed to managed care that they might threaten to hold up the PO if the governor’s managed care plan proceeds (again, the two issues are actually unrelated, but the governor has tried to tie them together, so lawmakers are following suit). 

The managed care plan projects to save significantly more money than DiamondCare — and there are legitimate concerns about whether DiamondCare would put sufficient pressure on providers and whether it would be too susceptible to the influence of lobbying that protects stakeholders’ bottom lines at the expense of the most cost-effective, high-quality care. There’s at least an argument to be made that the governor’s plan is the better approach to achieve the sorts of reforms that DHS has been trying to make since the Beebe administration. But Hutchinson is going to have to make that case — which won’t be easy since DiamondCare hits the target that the governor himself set three months ago. 

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