Governor Discusses Medicaid Waiver With Feds

It has received little attention in this legislative session because it is not a top session concern this year, but the state’s Medicaid system is headed towards the brink of disaster.

Medicaid is a joint state-federal government health care program that typically serves lower income individuals and families. It may subsidize costs for those with disabilities or provide nursing home care for elderly citizens. For every dollar Arkansas puts into the Medicaid system, it draws nearly three additional dollars in matching funds from the federal government.

The stress on the Medicaid program is being driven in large part by a growing population. Arkansas saw its state population rise by nearly 250,000 residents during the past decade. And, the number of aging baby boomers accessing the health care system with greater needs has and will continue to compound the situation.

But with health care becoming a political football in Congress and the courts and an increasing appetite among newly-elected legislators in Washington to address entitlements, the future of Medicaid, Medicare and other big government programs is dangerously uncertain for the states.

Gov. Mike Beebe has warned legislators that his opposition to additional tax cuts is in part due to the projections he sees down the road for the state’s health care safety net. He also considers it time to rethink the 45-year old Medicaid program and search for a better way to address the state’s more vulnerable citizens and their health care needs.

In a pre-session interview with Talk Business, Beebe said that he was "worried about Medicaid" and felt that within a year and a half, the state would be in trouble if something isn’t done soon to restructure the program.

"We will have hundreds of millions of dollars of deficit in Medicaid alone if we don’t change something," Beebe said in the new year interview.

But is the situation really that dire?

This year, Arkansas’ Medicaid program remains afloat in large part due to the fact that Beebe "rat-holed" Medicaid monies and took advantage of federal stimulus funds that were allowed for the program.  That money won’t be repeated.

In the forthcoming fiscal year, Beebe has proposed about $692 million for Arkansas’ portion of Medicaid – a figure expected to meet state needs. But in FY 2013, which begins July 1, 2012, Beebe has built in an additional $174.3 million for Medicaid growth, which will raise program expenses to $865.9 million.

That will be about $87 million short, say administration officials. Triple the federal match and Arkansas will lose another $261 million from Uncle Sam.

Beebe was in Washington this week for a National Governors Association meeting. He said that the future of Medicaid topped his counterparts’ list of concerns.

"It’s not just an Arkansas problem. I think every Governor up here’s number one issue that they were griping at the feds about was the cost of Medicaid. If there’s any unanimity between Republican and Democratic governors, it’s on the need to make some changes and, in effect, have some flexibility for the states in Medicaid," Beebe said.

The Governor met with Kathleen Sebelius, U.S. Health and Human Services Secretary, about a potential waiver to try something different to control costs with Medicaid in Arkansas – in effect, he’s asked the feds to allow the state to be a laboratory for experimentation.

"It was a good meeting," Beebe said afterwards. He said Sebelius made no guarantees and the only deadline discussed was "as quickly as possible."

"She sees the potential to see if Arkansas can try to be a model because of everyone’s willingness to try to work together and because of our size – we’re not too small, we’re not too big. No promises yet, but she’s put her top people on it with our top people to see if we can forge a new model that addresses quality but also addresses cost," Beebe said.

Beebe wants to change Medicaid’s "fee-for-service" model and move to a more holistic approach to managing health care through the entire system.

Right now, an X-ray or routine procedure is reimbursed at a Medicaid rate. Inpatient and outpatient services at hospitals are often covered by Medicaid reimbursement fees as are home health visits, occupational therapies, travel costs, equipment and supplies and in some states even dental exams and procedures. Nursing homes and rural health clinics are guided by Medicaid reimbursement fees, too.

But how much could be saved if the pay model was overhauled? That’s a question that no one – not even the Governor – can answer at this time.

"What we’re trying to do is change the whole paradigm for the way we pay for some of this stuff, to get some more predictability in it, and to also address some of the shortfalls of the ‘fee for service’ model. I think ‘fee for service’ is an obsolete concept that this country can no longer afford."