The Health Reform Legislative Task Force will convene for the final time this morning at 10 to review draft legislation designed to implement the task force’s two big recommendations: 1) continue the private option with a few alterations that Gov. Asa Hutchinson negotiated with the Obama administration and 2) institute reforms incentivizing more cost-effective care in the traditional Medicaid program. 

On this second point, the task force is sharply divided. Hutchinson and the Republican leadership on the task force want to use managed care companies to institute reforms for certain high-cost populations (developmental disability and behavioral health). Meanwhile, a coalition of provider allies — which includes Republicans like Sen. Missy Irvin and Rep. Michelle Gray and Democrats like Rep. Deborah Ferguson — want to pursue the same slate of reforms via an administrative services organization (ASO) and continue to have the state pay providers directly on a fee for service basis.


Under the governor’s plan, managed care companies would be paid a per-person cost negotiated up front, so they would be on the hook for cost overruns if savings failed to materialize.  Under the alternative managed fee-for-service plan, dubbed “DiamondCare,” the ASO would take on some risk — paying a fee if savings targets were not met — but the state would take on most of the risk for cost overruns. The Stephen Group estimates that the governor’s plan 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 over the same period (or $317 million for the state). 

In both plans, the nursing homes are “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. They have promised $250 million in savings over five years, savings that are included in the total savings of both the managed care and the DiamondCare plans described above. The state’s Department of Human Services 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). 
No action is expected at today’s meeting. The drama at this point will come when the full legislature convenes at the special session next week and the fiscal session that follows. 


One thing to watch today: draft legislation is already circulating for “Arkansas Works,” the governor’s plan to continue the private option, as well as the managed care plan and the DiamondCare alternative. But there will be additional draft legislation likely released today covering changes in rules related to Medicaid regulation, in order to implement either managed care or DiamondCare. We’ve been saying for a while that the devils are in the details, and this represents the first bit of detail.

The crucial point: past efforts to institute reforms have been met with a buzzsaw of provider lobbyists during legislative committees. The Beebe administration’s effort to implement reforms incentivizing best practices for these high-cost populations went nowhere for this reason (I suspect that’s a major reason that outgoing DHS Director John Selig came out for managed care for these high-cost populations). Whether the state goes with managed care or DiamondCare, any hope for reforms that actually improve the Medicaid program might be dead in the water if the same roadblocks remain in place for lobbyists to protect provider bottom lines over best practices (you might argue this has already begun with the nursing home carve-out). I expect we’ll see draft legislation today addressing this question. 


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