Gov. Beebe Concerned Current System of Fee for Services is not Sustainable

Increasing demand for Medicaid services combined with declining state revenues as a result of budget deficits has some states facing a train wreck resulting in the need to reduce payments and\or cut eligibility.

Arkansas is in a more fortunate budget situation than many states. But even here, the state is facing potential budget problems related to Medicaid as early as July 2012. Demand continues to grow at a faster pace than increased revenues.

In late February the dominant topic at the National Governor’s Association meeting in Washington D.C. was Medicaid. Many of the governors want flexibility with the Medicaid programs because of budget deficit problems. While in D.C., Gov. Mike Beebe also met with Sec. of Health Kathleen Sebelius to propose a pilot program in Arkansas making changes in the method of payment for Medicaid.

“The governor has been saying for months the fee for service payment system is not sustainable for the long term,” said Matt DeCample, Gov. Beebe’s press secretary. “If it hadn’t been for stimulus funds we were able to use for Medicaid, we would have been in trouble sooner. Demand for Medicaid just continues to escalate. Part of the way to solve deficit problems is to change Medicaid. For us in Arkansas, we want some flexibility to help the future of our healthcare system.  We have been asking Health and Human Services (HHS) and the Center for Medicaid Services (CMS) for more flexibility.”

What the state wants to do is move to a result-based system where healthcare providers are rewarded for good results instead of just getting paid for every treatment provided.

“You get incentives for making people better instead of just running as many tests as you can and doing as many procedures as you can,” DeCample said. “That is the system now. We want to try some new ideas that will help get our costs under control, continue to provide healthcare, and hopefully improve the quality of care while still making sure our providers are being properly compensated.”

The federal government has a big say by virtue of paying more than three fourths of the costs of Medicaid in Arkansas. A big step in Arkansas adopting a new payment system is to get HHS to work with the state. DeCample said while Sec. Sebelius did not commit to anything, they got a strong feeling she also sees the potential for Arkansas to be a pilot state for the proposed changes because of the state’s size, current financial state, and the willingness of a lot of parties in the state to work on it.

“She sees potential for our state, and for us to be a possible model for other states,” DeCample said. “She is putting some people together on the federal level to work with our people on the state level to see what we can figure out.”

The demand curve for services is spiraling up more and more sharply. DeCample said they want to bend that curve down, and do it in ways that contain costs without cutting services.

Healthcare providers should understand this is a long process.

“We want to talk to everyone we can,” he said. “Providers are going to be a part of this discussion. Before we try anything, we are going to do everything we can to make sure it is the right thing.”

Julie Munsell, director of communications for the Arkansas Department of Human Services, said this could be the right time for Arkansas to be a laboratory for some evidence-based changes in payment programs.

“We want to pay for things that work,” Munsell said. “There have been some estimates that as much as 30 percent of healthcare expenditures either potentially don’t have the right outcome on diagnosis or may be unnecessary. How do we reduce that gap of inefficient practices? That is the conversation. We are looking at different models that might be viable. No plans have been developed yet, and anything we do must be approved by federal government. Part of the intention in doing that would be to move to a more episodic style of reimbursement as opposed to fee for service.”

Munsell said making sure the government is paying for the most effective services has to be balanced with flexibility for physicians to treat individual patients.

“We believe we can have a positive influence on healthcare spending in this country by looking at these fundamental approaches to how we pay for things,” Munsell said. “We do that similarly now in behavioral health. Here is what we know about effectively treating illnesses, and here is what we will pay for.”

It should be clear that two things are being talked about here. There is proposed Medicaid reform and the healthcare reforms passed by Congress. But Munsell said some provisions of healthcare reform could be helpful with Medicaid budget changes.

“It gives us a window of opportunity to make some infrastructure changes like electronic health homes, which is one repository for electronic health records,” she said. “Reform will help support changes. Even without healthcare reform legislation, we would be talking about healthcare budget reform.”

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