Medicaid trend called right one

Adviser: 1%-2% growth key

Arkansas could surpass Gov. Asa Hutchinson’s goal of achieving $835 million in cost savings in the state’s traditional Medicaid program over five years simply by keeping the growth of spending in the program at the same level it has been for the past three years, a consultant told a legislative task force Wednesday.

John Stephen, managing partner of The Stephen Group of Manchester, N.H., told the Health Reform Legislative Task Force that Hutchinson’s goal is to reduce spending in the program that, if no significant changes are made, is expected to grow at a 5 percent annual rate.

But according to the state Department of Human Services, spending in traditional Medicaid has grown by about 1 percent or 2 percent a year since the fiscal year that ended June 30, 2012.

Keeping the rate of growth at that level would be more than enough to meet Hutchinson’s goal, Stephen said.

But he said it’s unlikely the state will be able to hold

the growth of Medicaid at that level without making changes.

“There’s going to be some impact here” from the changes needed to hold down the growth of spending, Stephen said. “In some cases it may be substantial.”

The Legislature formed the task force last year to recommend changes to the private option and other parts of the state’s Medicaid program. The private-option program pays the private health insurance premiums for Medicaid-eligible Arkansans.

Last month, the task force endorsed Hutchinson’s goal of reducing the growth of spending in the Medicaid program by enough to cut the state’s share by about $50 million a year.

That’s the approximate projected net cost to the state in 2020 of providing coverage for private-option enrollees and other Arkansans who became eligible for Medicaid under the expansion of the program approved by the Legislature in 2013.

Revenue from the premium tax on private-option plans, a reduction in spending on medical care for the uninsured and a shift of some Arkansans from traditional Medicaid to the private option is expected to cover the rest of the state’s expected $200 million share.

The federal government would pay the remaining 90 percent of the cost — about $2 billion.

The federal government is paying the full cost of coverage for the 250,000 Arkansans on the private-option program through the end of this year.

Next year, the state will be responsible for 5 percent of the cost. The state’s share will increase each year until it reaches 10 percent in 2020.

Because the federal government pays about 70 percent of the cost of the traditional Medicaid program, creating $50 million in annual savings means curbing the growth of overall Medicaid spending by about $167 million a year, or $835 million over five years.

In the fiscal year that ended in June, spending on the traditional program — which covers primarily children from low-income families, as well as disabled and elderly people — grew 2.3 percent, from almost $4.8 billion in fiscal 2014 to almost $4.9 billion.

If the spending grows at 5 percent through fiscal 2017, then slows to 3 percent from 2017-2021, the time period targeted by Hutchinson, the state would spend a total of $29.1 billion on the traditional program over the targeted period, Stephen said.

That’s almost $1.2 billion less than what the state would spend if the growth rate was 5 percent from 2017 to 2021, Stephen said.

Human Services Department Director John Selig said Wednesday that part of the low growth in recent years is from a national slowdown in health spending that is not expected to continue.

“We don’t think we can stay where we are without more aggressive savings,” Selig said.

Human Services Department officials have credited the Health Care Payment Improvement Initiative with helping to hold down Medicaid costs in the past few years.

Under that initiative, the Medicaid program and private

insurers reward doctors, hospitals and other providers for keeping patients’ costs low and penalize some providers whose costs are considered excessive.

The program and insurers also make upfront payments to doctors who agree to take steps to coordinate their patients’ care.

Next month, Stephen said he will present the task force with a plan for achieving Hutchinson’s savings goal without hiring managed-care companies to provide benefits.

The task force voted last month to request the plan.

Stephen said his proposal will involve hiring companies to coordinate the care of highcost populations, such as the elderly, disabled and mentally ill.

Those companies will face potential financial penalties if the cost of serving those populations is too high, Stephen said.

But he said the state would still pay health care providers under a traditional fee-for-service system.

By contrast, under a “capitated” managed care system, the state would pay companies a fixed monthly fee for each recipient, and the companies would be responsible for providing the benefits.

Sen. Jim Hendren, R-Sulphur Springs, and a chairman of the task force, said he also asked Hutchinson to update the panel next month on possible changes to the private option, including requiring some enrollees to pay premiums and providing benefits through employer plans for enrollees with access to jobbased coverage.

The task force will vote on recommendations in March, he said.