Allies of medical providers in the legislature today released draft legislation for “DiamondCare,” their plan to produce savings in the traditional Medicaid program. 

Here is the DiamondCare legislation, numbering 30 pages. 


“This is a draft, it’s in the legislative process to be tweaked and made as good as possible,” said one of the sponsors, Rep. Michelle Gray, in testimony today before the Health Reform Legislative Task Force

The legislation is an alternative to Gov. Asa Hutchinson‘s own plan, which would use managed care companies to aim for savings in two high-cost Medicaid populations — the developmentally disabled and people with severe and persistent mental health issues. Many provider groups, and a bipartisan block of legislators, are strongly opposed to using managed care companies in Medicaid.  The DiamondCare approach would still implement care management practices for the same populations, enacting the same slate of reforms, but would continue to pay providers directly on a fee for service basis rather than using managing care companies. 


The governor earlier said that he did not want DiamondCare to be considered during this week’s special session; today he announced that he would not put his own managed care plan on the call either. The legislature appears to be split on which way to go, but the Republican leadership said that there was not a majority to pass the governor’s managed care plan at this time.

It’s worth being crystal clear on this point: in terms of policy, none of this has anything to do with the private option, the state’s Medicaid expansion program (the governor proposes continuing the program, which he has re-named “Arkansas Works”). The legislature is still taking that question up at the special session this week. Neither the managed care plan nor the DiamondCare plan has any impact on the 275,000 Arkansans who have gained health insurance via the private option.  


The other question facing the legislature has to do with high-cost populations in traditional Medicaid — the program that already existed prior to the expansion. That question — whether to use the governor’s managed care plan or the DiamondCare plan instead — is now on hold. 

Both the governor’s plan and DiamondCare have the same big goals: more care coordination, more focus on primary care doctors, more preventative care, incentives for providers to provide cost-effective and high-quality care, incentives for evidence-based best practices, tiered levels of service, independent assessments of beneficiaries, transparent quality measures, and a “rebalancing” 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. Both plans proceed under the assumption that there is some low-hanging fruit — that there are avenues to provide the same or better quality health care for less money. Both plans aim to curb the same sorts of problems: long-term care patients getting stuck in more expensive nursing homes; behavioral health providers overbilling or overprescribing in ways that do not benefit patients; treatments that are more expensive and/or lower quality than best-practice alternatives; a lack of care coordination that can lead to less preventative care, unnecessary hospitalizations, and redundancies or inefficiencies that increase costs without improving care (and sometimes make things worse for beneficiaries). 

The big difference between the two plans has to do with who takes on the risk for potential cost overruns and how providers are paid.

Under the governor’s proposal, the state would negotiate a per-person cost with managed care companies to cover the beneficiaries in the behavioral health and developmental disability populations; 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.


DiamondCare would also use an outside entity to manage care, just not a manged care company. Instead they would use an administrative services organization (ASO) — most believe that their hope is to use the Arkansas Foundation for Medical Care in this role. The ASO wouldn’t take on the same level of risk if cost targets were not met (and providers, who would still be paid directly on a fee-for-service basis, might face relatively limited financial risk). 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; DHS would be tasked with monitoring the ASO to ensure that quality of care was maintained and would determine whether benchmarks were achieved. But other than collecting the fee from the ASO, if DiamondCare failed to meet its benchmarks, the state would be on the hook for cost overruns.

The simplest way to look at it is that both sides agree that there is room to encourage better practices for more cost-effective, high-quality care. But the governor’s plan has more teeth in putting pressure on providers to enact the reforms. The Medicaid program’s budget would take on more risk in DiamondCare and providers would have more protections for their own bottom lines. 

The DiamondCare backers are clearly interested in protecting providers (all five of the architects of DiamondCare are either medical providers or have family connections to medical providers). But they also argue that managed care would end up squeezing beneficiaries in order to achieve savings. While Medicaid managed care would still have to cover Medicaid benefits by law, the DiamondCare backers argue that managed care companies will impose unnecessary prior authorizations and create additional red tape that will end up harming access to care for vulnerable patients.  

Backers of the governor’s managed care plan have questioned whether DiamondCare would put sufficient pressure on providers, whether it would be too susceptible to the influence of lobbying, and whether state agencies and the ASO could deliver on results. The governor said last month that Medicaid managed care had a track record, whereas DiamondCare was “riskier for the state.”

The Stephen Group has estimated that the governor’s managed care plan would save $1.4 billion over five years and the DiamondCare plan would save $1 billion over five years (those savings estimates are compared to a baseline of 5 percent annual growth in the Medicaid program). 

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