Medicaid’s new thrift baffles lawmakers

State director’s payment-overhaul explanation met with skepticism

The rapidly shrinking state Medicaid deficit can’t be explained by anything other than an “announcement effect” of the state’s far-reaching payment overhaul, which prompted healthcare providers to rein in costs and resulted in reducing the $5 billion program’s growth rate to a 25-year low, the state Medicaid director told lawmakers Wednesday.

The state’s projected fiscal year shortfall in the program for the poor, frail elderly, disabled and low-income children was lowered from $138 million to $61 million earlier this month.

On Wednesday, about two dozen lawmakers interested in a deeper explanation of why that happened gathered at the Capitol for a late afternoon briefing from Andy Allison, the program’s director.

Allison told the legislators that while enrollment has grown, costs have plummeted — something not seen in at least a generation. And he told them he doesn’t really know if the current trend will hold.

“It’s hard to predict the unpredictable,” Allison said.

Some lawmakers appeared baffled by the Department of Human Service’s explanation for the improved fiscal outlook.

“So you’re reporting this to us because it’s good news, but we don’t know exactly what it means other than it’s good news,” said state Sen. Joyce Elliott, D-Little Rock.

Allison said a process of elimination leads him to credit the state’s payment

restructuring plan for the de- cline in costs.

Rising enrollment signals that an improving economy isn’t the answer. No identifiable trends have emerged from an examination of specific programs either, he said.

The only credible answer left is the state’s “payment reform,” he said.

The state has embarked on a payment overhaul of Medicaid in which paying for each test and procedure is being scrapped for an episode-ofcare model that holds providers financially accountable for their average costs for a specific illness or condition. The changes began in October with just three “episodes.” Two more were added this month.

Reimbursement changes for treating attention deficit hyperactivity disorder or upper respiratory infections couldn’t possibly have led to a drop of 0.7 percent in spending per recipient in the first half of the fiscal year, which began in July, Allison said.

“That couldn’t have been true,” he said.

Instead, he said, Arkansas’ widely publicized overhaul has had a singular “intensity of effort and consistency of message” that has persuaded doctors, hospitals and other providers to trim costs for the program’s roughly 780,000 beneficiaries.

At least one lawmaker suggested that the state started to enforce procedures and protocols on the books long before the payment improvement initiative came along.

“I just hear that we’re tightening up the ship a little,” said Sen. Missy Irvin, a Mountain View Republican.

Allison and lawmakers also

referenced a story in the Arkansas Democrat-Gazette on Sunday that showed more than half of the growth in Medicaid spending since 2007 could be attributed to a sharp rise in the number of people who qualify for Medicaid because they receive Supplemental Social Security Income.

Rep. Debra Hobbs, a Rogers Republican, asked Allison if the rise in SSI recipients in recent years could be resolved somehow. SSI recipients automatically receive Medicaid, but federal officials with the Social Security Administration determine who gets SSI, not state Medicaid officials.

Allison said his conversations with federal officials about the issue have been met with “blank responses.”

Federal officials don’t understand the effect that SSI claims have on state Medicaid budgets, he said. And it’s politically challenging to “address” the issue, he added.

Rep. John Burris, R-Harrison, along with Sen. Cecile Bledsoe, R-Rogers, called for the meeting. Afterward, Burris said that Allison’s message wasn’t anything new and that the uncertainty of the origin of the unexpected savings tempered many lawmakers’ enthusiasm.

“It was stuff that we heard before. The answer is that they’re not really sure ... It’s not bad news, but it’s not necessarily jump up and down and blow up the balloons either,” Burris said.