Consultant: Most Medicaid Dollars Unaffected By Cost Reforms

The cost of long-term support and services for aged, blind and disabled Arkansans account for 74% of all traditional Medicaid costs but aren’t affected by the state’s major cost-reducing efforts, legislators were told Wednesday.

John Stephen with The Stephen Group told the Heath Reform Legislative Task Force that Arkansas is spending $3 billion of the $4 billion it dedicates to traditional Medicaid on those populations. That does not include Arkansans served by the private option, the program that uses Medicaid dollars to purchase private insurance.

Of the total, 29% is spent on both program and health costs for the elderly, 23% is spent on programs and services for the developmentally disabled, and 22% is spent on behavioral health programs.

That means that the state’s major health reform efforts don’t affect that 74% of the costs. Those include the patient-centered medical home model, where a primary care provider is responsible for helping a patient navigate the system, and the episodes of care model, where providers are rewarded if their average costs for a particular health issue are below a set amount.

Nearly half of Medicaid’s total budget, including the private option, is spent on long-term services and support.

The task force is considering ways to reform Arkansas’ overall health care system. It was created this past legislative session as part of compromise funding for the controversial private option through the end of 2016. The Stephen Group is a consultant hired by the task force. It is tasked with producing a report by Oct. 1., and the task force is planning on producing a plan by Dec. 31.

The total cost for serving seniors is $1.2 billion, or 29% of traditional Medicaid. For costs associated with long-term services and support for seniors, 65% is spent on nursing homes, Stephen said. He said nursing homes cost more than twice as much as home- and community-based services. For patients in a nursing home, the average cost is $63,649. For those in a home- or community-based setting, the cost is $27,176, according to Stephens’ analysis.

Individuals with developmental disabilities account for $900 million, or 23% of the cost of traditional Medicaid. Those who have been institutionalized account for 25% of the cost and are very expensive – $135,162 per institutionalized individual, counting the medical costs, as opposed to $36,356 for those receiving day clinic services. Meanwhile, 2,640 adults are on a wait list, though many are receiving some services.

Stephen said the 20% the state is paying in administrative costs for its developmentally disabled population is too high. Arkansas’ Medicaid system should create incentives for providers to control costs, whether or not it continues to manage its own operations or hires a managed care company to provide those services for it.

“Do you have enough money in the system today to really meet the needs of the people out there? I believe and we believe you do. But you’ve got to find those efficiencies in those areas,” Stephen said.

He said the payment system needs to move toward a system where providers face more risk.

“At the end of the day, you have a lot of contracts out there. You’ve got great people providing great service in all these areas. There’s no risk. The entire United States in Medicaid is all moving towards risk,” Stephen said.

Providers of psychiatric health and rehabilitative services for persons with mental illness (RSPMI) providers account for $900 million, or 22% of traditional Medicaid. Richard Kellogg, a senior consultant with The Stephen Group, said that 41% of RSPMI patients claimed less than $1,000 in 2014 – a low number which suggests that many are not getting comprehensive care. Meanwhile, 634 RSPMI beneficiaries claimed more than $100 a day for a total cost of $32 million.

Before the meeting, the committee’s chair, Rep. Charlie Collins, said this is the last meeting that will be primarily informational in nature. From this point forward, the task force will begin making decisions. The next meeting is Oct. 7.