A group of lawmakers opposed to managed care in Medicaid today presented their alternative plan for reforming the traditional Medicaid program — which they called "DiamondCare"
— to the Health Reform Legislative Task Force
. The discussion helped highlight the division on the task force over managed care, with hundreds of millions of Medicaid dollars at stake.
The task force has two big-picture votes tomorrow: #1 Whether to move forward with a version of the private option
that has conservative tweaks, pending federal approval. This increasingly seems like a foregone conclusion. Instead, the drama is over #2: How to reform the traditional Medicaid program
(that is, everything other than the private option expansion). Specifically, the task force will be deciding whether or not to turn over high-cost populations — such as the elderly, the disabled, and the blind — to managed care.
Gov. Asa Hutchinson
, Department of Human Services Director John Selig
, and the task force leadership have backed a plan to move the high-cost populations (long-term care, developmental disability, and behavioral health), which together amount to three quarters of traditional Medicaid spending, to managed care. Meanwhile, the rest of the Medicaid program (stuff like ARKids, for example), would move toward more care management
, implemented and coordinated by state agencies (and vendors they subcontract with), via the patient-centered medical home
(PCMH) model. PCMH focuses on care coordination centered on a primary care doctor, as well as incentivizing providers toward more cost-effective care. Lawmakers are calling this blended approach the "hybrid model" — managed care for the high-cost populations, PCMH for the rest of the program.
As I reported this morning
, multiple sources have told me that the governor has cut a side deal with the nursing homes, the highest of the high-cost populations, and that they will not be put into managed care under the "hybrid model" but let's leave that issue aside for now — more here
Led by Rep. Michelle Gray
, the DiamondCare group opposes this hybrid model. Made up of five task force members who are either medical providers or have family connections to medical providers, the group is against using managed care companies even for the subset of high-cost populations. They propose instead moving the entire Medicaid program, including those high-cost populations, to the PCMH model.
The task force's consultant, the Stephen Group
, found that moving to the PCMH-only model would save the state $708 million over five years. The "hybrid model" would save just under $2 billion. Moving all
of the traditional Medicaid program to managed care, a move that the task force has basically taken off the table since the governor came out in favor of the hybrid model, would save $2.4 billion over five years according to the Stephen Group.
The DiamondCare group argued that bringing in managed care companies could harm providers and quality of care for beneficiaries and said that the state of Arkansas should try to take the lead on reforms rather than bringing in outside companies.
"We wanted to show the governor and the task force that there was a viable model that was different from managed care — and that it would also produce the cost savings that he had asked for," Gray testified today. Gray said that their proposal was similar to the PCMH-only model in the Stephen Group report and argued that the $700 million in savings the consultant projected would be sufficient to meet the governor's request.
However, certain aspects of DiamondCare remain vague and John Stephen
, managing partner of the Stephen Group, testified that DiamondCare's PCMH plan might not accrue the same savings as the Stephen Group's PCMH plan.
The question basically boils down to risk, and who is on the hook for delivering savings as the state attempts to implement cost-effective reforms. The state's Department of Human Services
currently uses the PCMH model for a subset of Medicaid beneficiaries (but not the high-cost pool currently under debate). DHS currently gives providers a carrot but no stick: the PCMH providers can share in the cost savings if they meet benchmarks of quality and cost-effectiveness, but they aren't penalized if they don't. The Stephen Group's PCMH model would include putting providers on the hook if they failed to meet PCMH benchmarks; more importantly, PCMH management entities
would be at risk, on the hook for some of the difference if total costs exceeded targets.
The DiamondCare plan, as it stands, has much more limited risk for providers and it's unclear whether the management entity would be at risk at all. Gray told me after the meeting that the group was open to more of the risk envisioned by the Stephen Group, but added that the state should proceed with caution. Too much risk for providers could lead them to stop accepting Medicaid patients altogether, she said.
The DiamondCare group suggested that Arkansas Foundation for Medical Care (AFMC)
, led by former Arkansas Medicaid director Ray Hanley
, manage their proposed PCMH reforms. Other task force members asked whether the contract would be put up for bid; the DiamondCare group suggested that AFMC could be awarded a sole-source contract.
Hanley was asked whether AFMC could take on the risk if total costs were higher than expected and they failed to make the PCMH model's savings goals. Hanley said that it would be possible to put penalties in the contract if expectations were not met but AFMC could not assume full financial risk. "No, we're not an insurance company so we're not able to assume risk in the way a licensed insurance company is," Hanley said. "We're not at risk for the full amount of the capitation the way an insurance company would be."
And that's basically the argument that backers of the hybrid model make: the higher levels of financial risk that managed care companies take on will lead to more cost savings. In a managed care model, in what's known as "capitated risk," the managed care company agrees to cover beneficiaries at a per-person rate that is agreed upon ahead of time; if costs turn out to be higher than that, the managed care company is on the hook. That higher level of risk is one factor that contributes to the Stephen Group's estimates, which project more than a billion dollars in additional savings using the hybrid model versus the PCMH-only approach. The Stephen Group testified last month that in other states, managed care consistently produced significantly higher savings than alternatives like PCMH.
The DiamondCare group argued that managed care companies dodge risk in practice by coming back to state governments to renegotiate contracts if costs get high. Ultimately the success or failure of managed care — both in terms of financial risk and in terms of protections for beneficiaries — would be closely tied to how tightly the contract was written and enforced.
The divide at this point isn't partisan — the DiamondCare group includes both Democrat Rep. Deborah Ferguson
and Tea Party stalwart Rep. Joe Farrer
. Instead this is more about stakeholders.
It's hard to avoid noticing that the DiamondCare group has a particular interest in representing the provider community. Gray is the chief financial officer at her husband's family practice clinic and her husband also serves as medical director for multiple nursing homes; Ferguson is a dentist and her husband is a radiologist who serves on the AFMC board; Farrer is the director of Therapy Services for North Metro Medical Center; Sen. Missy Irvin
works at her husband's medical clinic; Rep. Justin Boyd
is a pharmacist. At times, this made their presentation awkward given the potential conflicts of interest: Boyd, the pharmacist, criticized a Stephen Group finding that reimbursement rates were too high for pharmacists in Arkansas.
Irvin argued that it was precisely their experience as providers that should make the task force listen closely to their arguments. She said that if she wanted expertise on plastics, she would turn to Sen. Jim Hendren
, who owns a plastics company. The task force should look to the medical providers in the legislature for their expertise on health care issues, she said. “We’re trying to treat our patients, who are your constituents, who are my constituents," Irvin said. "We’re trying to utilize what we know has worked. You cannot dismiss that. I can't dismiss your expertise in your personal business and I would just hope that our colleagues in front of us wouldn't dismiss collectively what we're bringing to you."
Of course, providers aren't the only ones with a financial stake. Centene
, which sells insurance plans on the private option, is rumored to have interest in securing a managed care contract if the state moves in that direction. Centene is a client of former state legislator John Burris
in his capacity as a "consultant" for the Capitol Advisors Group
, and Burris still has allies in the legislature.
The governor will present his own recommendations tomorrow, expected to be the hybrid model with the special carve-out for nursing homes.