UPDATE: The governor today essentially opened up this process of coming up with their own plans to other sub-groups of providers. See here for details. If the state does end up using managed care (or reforms based on the patient-centered medical home model) for some high-cost populations while nursing homes get a carve-out to pursue their own plan, all of these questions remain relevant.
As I reported yesterday, rumors abound that Gov. Asa Hutchinson
has negotiated a side deal with the nursing homes to allow them to opt out of the managed care plan that the governor is pushing for other high-cost populations in the Medicaid program
, such as behavioral health and the developmentally disabled.
These high-cost populations drive the overwhelming majority of total Medicaid spending and the Health Reform Legislative Task Force
has been examining ideas on how to make them more cost effective. The Stephen Group
, the consultant hired by the task force, has suggested that the state could save almost $2 billion over five years by moving this group to managed care.
These high-cost beneficiaries, sometimes referred to as "ABD" for aged, blind, and disabled, can be divided into three big subgroups: long-term care (the highest spending of the three), behavioral health, and developmentally disabled (DD). Long-term care providers for the elderly have promised Hutchinson that they can produce equivalent savings on their own, without managed care. The governor has agreed to give them a "carve-out" — instead of going to managed care, long-term care providers would come up with their own cost-saving reforms.
Details remain fuzzy about just how this side deal would function, but the basic concept seems to be that the nursing homes would present a plan to the state that would presumably be scored for cost. If the projections met savings benchmarks set by the governor, the long-term care providers could proceed with their own reforms, without managed care. The governor and state agencies would then monitor the situation to see if the savings were actually being achieved. If not, the state would end the carve out and the nursing homes would go into managed care along with behavioral health and DD. Basically, the governor would be saying, we'll try it your way but if it doesn't work, we're going to managed care
The governor will be addressing the legislature today. Here are some big questions about this deal.
Who exactly is carved out?
Broadly speaking, the subcategory that is getting the carve-out is "long-term care" but it's likely that the governor is negotiating specifically over long-term care for the elderly. That likely includes the private nursing homes (which make up about three quarters of Medicaid spending on long-term care), public institutions, as well as home- and community-based care. It would likely not include people institutionalized because of DD or mental health. People with physical disabilities
are covered by traditional Medicaid for their regular medical care, which would not be included in the high-cost pool under consideration for managed care. But those with severe physical disabilities who are were getting some kind of long-term home or institutional care are
included in the "long-term care" pool. So would, say, someone getting home care for a physical disability be included in this carve-out along with the elderly? Likely so, but unclear at this point. Operationally, this could get confusing; presumably the determination of which patients were carved out would be based on their primary presenting condition, but there will inevitably be overlap or gray areas.
Why are the nursing homes getting special treatment?
Whatever one's opinion of managed care, it's hard to justify a scheme that puts some high-cost populations — behavioral health and DD — into managed care, but carves out the highest-cost population. It is particularly hard to justify when long-term care represents the single biggest cost
and when nursing-home care probably represents the area most ripe for reform that would both produce major cost savings and
produce much better outcomes for beneficiaries. From a policy standpoint, there really is no argument for bringing in a managed care company to oversee reforms across Medicaid's high cost long-terms services and supports (LTSS)
programs but then carve out the biggest piece of that pie. That leaves politics: did the governor simply cave to the private nursing homes, which don't want any part of managed care, because they flexed their lobbying muscle?
What is the nursing homes' plan?
And here we come to the giant hole. We'll see what the governor says today, but thus far, all indications are that the nursing homes have made vague promises but are somewhat short on details. Some skeptics of this deal think that they're basically bluffing at this point. We know that the private nursing homes may be worried about their bottom line if a managed care company backed reforms that give beneficiaries more options for home or community based care. That means less Medicaid bucks for the nursing homes. And those savings — hundreds of millions of dollars according to the Stephen Group report — are a major driver of the overall cost savings. What is the plan to come up with equivalent savings?
Will "rebalancing" be possible if the nursing homes are carved out of the plan?
The Stephen Group report found that the state could save $500 million over five years via "re-balancing" the LTSS populations — using more home and community-based care, which is much cheaper and which many beneficiaries may prefer. Efforts by a managed care company to achieve this re-balancing would almost certainly be more difficult if the private nursing homes were carved out and pursuing their own separate plan. The same is true even if the state doesn't go down the path of managed care and state agencies attempt to implement a rebalancing plan on their own. That's basically impossible if nursing homes are siloed
What is the savings target?
The idea is that the long-term care providers would come up with equivalent savings
via their own plan, whatever that might be, versus the savings projected by the Stephen Group from long-term care going into managed care. The number being floated is $250 million. But there's nothing in the Stephen Group report that clearly points to that number. Again, the Stephen Group suggested $500 million in savings from LTSS re-balancing, which is inclusive of long-term care, as well as behavioral health and DD. Perhaps the relevant benchmark is meant to be the portion of that $500 million attributable to long-term care for the elderly? But "carving out" the nursing homes could have other costs. The Stephen Group testified yesterday, for example, that it would mean the state would lose $35 million annually in premium taxes that would otherwise be owed to the state by managed care companies for covering those populations. Carving out the nursing homes could make it more difficult or costly to achieve re-balancing for the other
high-cost populations. And it's hard to know how the governor's deal might calculate "halo effects" — these beneficiaries may require care in multiple settings and have medical costs outside the program.
How will the deal be structured?
Some have suggested that the state might have a contract that enforced the cost benchmarks the long-term care providers agreed to. But it's hard to imagine just who this contract would be with, or how it would have legal teeth. It would be one thing if there was an entity overseeing the (as yet unspecified) plan — for example, opponents of managed care have suggest the Arkansas Foundation for Medical Care
might manage reform efforts for other high-cost populations instead of a managed care company. But all indications of this side deal are that the long-term care providers
themselves would be implementing this alternative reform plan. Does this amount to a firm handshake agreement with firm warnings? What would be the process for state agencies (or the Stephen Group) to verify the plan's projections ahead of time? Would state agencies oversee and evaluate the benchmarks going forward? Would there be a timeline? It sure sounds like none of the providers would be taking on any risk if they failed to meet savings goals. If the teeth in this agreement is just the governor's threat to move them to managed care in the future, how viable is that threat given how quickly he caved this time around?
Will long-term care beneficiaries end up being punished if the nursing homes are in charge of cost-cutting "reform"?
Here's the scary part. Let's say, just for the sake of argument, that private nursing homes might be looking out for their bottom line. Let's say, just for the sake of argument, that they might be skeptical of lots of beneficiaries using home- or community-based care instead of nursing homes. They're promising to come up with savings equivalent to those which would be achieved by precisely that re-balancing. So...where does that cost-cutting come from? I think there's plenty of reason to worry that it would come from changes that harm quality of care for beneficiaries. That seems like a design flaw if you put providers in charge of hundreds of millions of dollars in cost-cutting. Will that come out of their pockets or on the backs of the patients they serve?