Legislators on Wednesday moved within one day of voting for a non-binding “road map” that the author estimates will save $963 million or more in Medicaid costs over five years.
The plan, written by the consulting firm The Stephen Group after two years of meetings with the Health Reform Legislative Task Force, envisions a variety of ways the state could save on health costs in programs related to developmental disabilities, behavioral health, dental health, elder care and pharmaceuticals.
The final report will be voted on by the task force Thursday. Members of the task force heard a review of the report by The Stephen Group Wednesday, asking relatively few questions.
The task force by law must present its final report by the end of the year, when it disbands. The report is not binding, but its aims would be accomplished through rule changes and potentially through legislation.
The task force was formed in early 2015 as part of Gov. Asa Hutchinson’s effort to extend the private option, the program that uses federal Medicaid dollars to purchase private health insurance for more than 300,000 Arkansans with incomes up to 138% of the federal poverty level.
As part of that extension, the task force was tasked with creating a replacement for the private option and to find savings in the overall Medicaid program, the health program funded primarily by the federal government with a state match. The task force hired New Hampshire-based The Stephen Group to help create those savings. It also had input in Hutchinson’s new version of the private option, Arkansas Works, which recently received a waiver from the Obama administration to go into effect next year.
The Medicaid program is slated to grow 5% a year for the next five years, from a cost of $5.4 billion in 2017 to $6.9 billion by 2022, or $31.2 billion from 2018-22. Arkansas Works will cost $1.7 billion in 2017 and $2.3 billion in 2022, or $10.2 billion from 2018-22. Together, the programs will cost $7.1 billion in 2017 and $41.4 billion between 2018-22.
Hutchinson asked for $835 million in savings. Instead, The Stephen Group and the task force identified $963 million that would come from improvements in case management, better coordination, and a reduction of duplication and unnecessary services.
More specifically, those include therapy caps for developmental disability services and $262.5 million over five years in pharmacy savings through a variety of initiatives. The state on May 20 entered a memorandum of understanding with the Arkansas Health Care Association, which represents the long-term care industry, to reduce costs by $250 million over five years.
Rep. Charlie Collins, R-Fayetteville, the committee’s co-chair, said afterwards that a key facet of the report is that the $963 million is “planned savings as opposed to guesswork savings.”
The Stephen Group envisions bigger savings of $1.2 billion if the state adopts a model where the Department of Human Services works with private behavioral health and developmental disability providers to develop regional cooperative groups managed by a coordinating entity owned by those providers.
The plan envisions $1.3 billion in savings if the state adopts a managed care model for developmental disability and behavioral health services. In managed care, a private company administers the program with financial incentives to reduce costs. The idea has split the task force between supporters and opponents.
Still unknown is what will happen in Washington, D.C. President-elect Donald Trump and congressional Republicans have vowed to repeal the Affordable Care Act, also known as Obamacare, which makes Arkansas Works possible. Some state leaders are hopeful the new administration will offer states greater flexibility in managing the money they receive for Medicaid.