Health reform task force punts on managed care question | Arkansas Blog

Monday, March 7, 2016

Health reform task force punts on managed care question

Posted By on Mon, Mar 7, 2016 at 4:54 PM

The Health Reform Legislative Task Force was split today on managed care, and made no recommendation on the thorny issue. 

There is broad agreement across the task force that the traditional Medicaid program needs some form of care management for the high-cost populations (long-term care for the elderly and the severely disabled, developmental disability, and behavioral health). The billion-dollar question is whether to make use of a "full-risk" managed care company to implement those reforms. On that question, up for vote today, the task force punted, and it will be up to the full legislature to decide what to do when it convenes for a special session in April. 

The Stephen Group estimates that a proposal backed by the governor to use managed care companies for high-cost populations would save $1.439 billion over the course of five years (the governor's plan has a carveout for nursing homes; they would still be required to implement cost-saving reforms, but would not be under a managed care company). An alternative proposal dubbed "DiamondCare," backed by lawmakers who oppose bringing in managed care companies, still involves using an outside management entity to oversee and implement reforms, but not a full-risk managed care company (again, the nursing homes would be carved out). The Stephen Group estimates that "DiamondCare" would save $1.057 billion over the same period. 

Eight members of the task force voted for the managed care plan (Rapert, Dismang, Sanders, Hammer, Meeks, Collins, Bledsoe, Hendren); seven voted for the "DiamondCare" alternative (Chesterfield, Ingram, Cooper, Farrer, Ferguson, Gray, Boyd). Rep. Reginald Murdock abstained. With no majority, the resulting deadlock means that the full legislature will consider both options.  

With three Democrats joining forces with Republican allies of providers (and the provider lobby) to vote against managed care, the key vote was Murdock. He could have killed the managed care plan, but his abstention will punt the issue to the legislature in April. He told me after the meeting that he supports maximizing efficiency and high-quality care and said he wanted more information on which plan was the best course. He added that because there was clearly not a consensus on the task force, he thought that the legislature should have the chance to consider both options. 

To be clear, in either case there would be more care management. The Stephen Group report makes a compelling case that the state could save money and improve quality of care by moving away from the completely unmanaged fee-for-service model and towards more care coordination, more focus on primary care doctors, incentives for providers to provide cost-effective and high-quality care, and a "re-balancing" 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. Backers of DiamondCare believe they can achieve these goals without bringing in managed care companies and note that their proposal would produce significant savings; backers of managed care point out that, according to the Stephen Group, their approach would save the state even more — more than $400 million more than the DiamondCare alternative. 

The choice on managed care comes down to how much risk the management entity takes on. The governor, outgoing DHS Director John Selig, and the Republican leadership on the task force favors fully capitated managed care for most of Medicaid's high-cost populations. "Fully capitated" is a fancy way of saying that the managed care company takes on all the risk. The state would negotiate a per-person cost with the managed care company; 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. Typically, managed care companies also pay providers with this same form of capitated risk. In practice, while the reforms in question would theoretically provide better care for beneficiaries, the savings accrued might eat into some providers' bottom lines. 

Meanwhile, the DiamondCare alternative still involves using an outside management entity to oversee and implement reforms, but this entity would only take on partial risk. If the state failed to achieve savings targets, the management entity would be on the hook for some portion of the cost overruns, but the state would eat the rest of the costs. This likely also means much less risk for providers, which helps explain why providers' allies in the legislature are pushing this plan rather than full-risk managed care. 

The Stephen Group argues that the higher levels of risk that managed care companies take on leads to greater savings. 

In both plans, the nursing homes are carved out. They have developed their own plan to transition beneficiaries to home-or-community-based care when appropriate. There would be an outside entity auditing this process and the state's Department of Human Services would develop contracts to incentivize nursing homes to actually follow through, including potential financial penalties if they failed to meet savings targets. In theory, this agreement would have teeth: the state would establish clear benchmarks and if the nursing homes failed to comply, they would lose their carveout and be put under a managed care company (or a partial-risk care management entity of the kind envisioned by DiamondCare). Worth noting, however, that the more that contracts or oversight have to go through legislative committees, the more that the nursing home lobby can throw up roadblocks via their powerful lobbyists. One argument for managed care is that it creates an independent agent to implement reforms outside of the lobbying shark tank at the Capitol. The carveout for the nursing homes allows the provider group with the most powerful lobby to stay in the muck of legislative committees. It's worth monitoring the shape of the contacts to come. 

The stalemate means that this battle, unresolved in the task force, will have to be fought in the full legislature. This is at least in part a fight between provider lobbyists and managed care company lobbyists. It bears repeating that if done right, the reforms outlined by the Stephen Group — whether implemented by managed care companies or by DiamondCare — wouldn't just save money, they would offer better care for beneficiaries. But at this point, we're down to stakeholders defending their piece of the Medicaid pie. 

Earlier today, the task force voted to recommend implementing "Arkansas Works," the governor's plan to continue the private option with conservative tweaks. Hutchinson has attempted to tie that question to this separate issue of reforms to the rest of the Medicaid program. The private option can only continue, the governor argues, if the state comes up with at least $835 million in savings to the traditional Medicaid program over five years via these reforms. Just how to do that is what has split the task force and will surely lead to more fireworks in the legislature.

Both the governor's managed care proposal and the alternative DiamondCare proposal will surpass the $835 million target, according to the Stephen Group. The governor has argued that those savings were necessary to pay for the state's share of the private option in 2020 and beyond, when the state has to start chipping in for 10 percent of the costs. However, today updated projections from the state's consultant, the Stephen Group, show that the state will save money on net even in the years when it's on the hook for the full 10-percent tab — and even using Hutchinson's selective math. The governor's already flimsy argument that $835 million in savings was necessary to pay for the private option has been rendered completely nonsensical. Nevertheless, the governor continues to insist that these savings are necessary to proceed with the PO; in any case, there are strong arguments on the merits for making reforms toward better care management regardless of what happens with the private option. 

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

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