Arkansas Medicaid Officials Apply For $60 Million Federal Grant

Arkansas Medicaid officials are seeking $60 million in federal funds for a grant program to help plan its payment reform initiative, which hopes to close the gap on an expected $250-$400 million Medicaid shortfall.

More than a year ago, state health care officials began overhauling the state’s Medicaid payment system to shift the state from a “fee-for-service” model to a “bundled services” program in key areas. Part of the new system went into effect on July 1 and other aspects are expected to roll out during the next several months.

On Monday, Arkansas Department of Human Services Director John Selig disclosed that the state is seeking a $60 million grant from the feds to help with planning of the new payment model.

Selig shared the following information on the state’s payment initiative portal for stakeholders:

First, today Medicaid begins tracking three conditions (upper respiratory infections, perinatal care, and Attention Deficit/ Hyperactivity Disorder) and will use the knowledge gained to reward high-achieving providers, improve the quality of care, and lower costs.  Arkansas Blue Cross and Blue Shield and QualChoice of Arkansas will soon follow.

This is a landmark moment for our state’s health care system, and we could not have made it this far without your input and sincere interest in making the system better for those who need care and those who provide it. Though we believe we will see quality improvements and cost savings in the first year of the initiative, this is merely the beginning. We still have much work to do.

Over the next three to five years, we are moving to a system where (1) nearly every insured Arkansan has access to a medical home that coordinates their care and emphasizes prevention and wellness and (2) most acute care and complex chronic conditions are better managed through our episode-based payment model.

Second, because Arkansas’s work may well become a model for the nation, we are asking the federal government to help cover the development and implementation costs and to partner with us.

To that end, last week Medicaid filed an application with the CMS Center for Medicare and Medicaid Innovation for a $60 million State Innovation Model Testing grant. You can find a copy of the abstract here.

We’ve also posted the various components of the grant application in the “Guides & Materials” section on the www.paymentinitiative.org website.  Among the items posted, you will find nearly two dozen letters of support from Arkansas businesses, provider associations, private insurers and government agencies. We are thankful for their support and belief in what we’re doing.

The grant application notes that the estimated cost to the state for this system transformation will be about $32.8M over a three and a half year period beginning in January 2013.  That’s a significant sum, but putting it into perspective, that would allow us to achieve lasting and fundamental quality and cost improvements for less than 1% of our current annual expenditures with the potential, if successful, to return over $1 billion in savings to the state Medicaid program through 2020.

Moreover, the initial investment is far less than the cost that would be incurred if the state were to outsource the program to a managed care company as many states have done.

While we await CMS’s decision on our application, we will move forward with the next wave of episodes and on implementation of medical and health homes. As the initiative progresses, we will continue to seek your input and will work to address your concerns. Over the last 18 months, we have maintained an open dialogue with our stakeholders. It is our sincere hope that this collaborative relationship continues.