Federal Officials Likely to Approve Waivers to Transform Oregon’s Healthcare System

January 30, 2012 -- Discussions are under way with federal officials to provide Oregon with another $2.5 billion in Medicaid funds over the next five years to help transform its healthcare system and also approve the necessary waivers to implement the new plan.   

That was the message Governor Kitzhaber and Dr. Bruce Goldberg brought back from their discussions in Washington DC recently.

Now it’s up to the Legislature to approve the business plan that will lead to coordinated care organizations charged with integrating physical, mental and dental care for 600,000 people on the Oregon Health Plan.

Without the assurances of more federal support, lawmakers would have faced a $593 million shortfall to fund the Oregon Health Plan next fiscal year ($239 million in state; $354 million in federal matching funds).

“I think we’ll come pretty darn close to being able to make up all of that with the combination of federal support as well as some savings from transforming the healthcare system to get us through the next year,” said Goldberg, director of the Oregon Health Authority.

By giving Oregon additional revenue, the federal government is expected to save more than $10 billion over the next decade.  

“For every dollar we pay, they pay close to $1.75 right now and they’re impressed with what doing to improve care and save money,” Goldberg said. “They’d like to help us get this up and running and are willing to help by making an investment in transformation. If we can do this and achieve the savings and improve care, we have the opportunity to save the federal government a fair amount of money. If all 50 states did this, it would amount to over $1.5 trillion over 10 years through Medicaid transformation.”

Federal officials made it quite clear they were unwilling to provide more revenue to bail out Oregon’s current Medicaid program.

“This will clearly be an investment in transformation,” he said. “We came back from DC feeling fairly good; there was a lot of positive response and movement forward to make this happen.”  

Goldberg also impressed upon federal officials the need for a waiver to set the transformation process in motion and implement global budgeting, giving coordinated care organizations a risk-adjusted budget to manage utilization. Another waiver would allow community health workers and other non-traditional providers to be paid; currently there’s no insurance billing code for them.    

A global budget allows communities to manage their own healthcare, taking those decisions out of legislators’ hands, said Rep. Tim Freeman (R-Roseburg) at a dinner meeting hosted by FamilyCare recently.

“You can figure out what’s best for the people you serve,” he said. “We want to see outcomes; you need to figure out how to manage these people and when you do that, you’ll save the system money and be able to capture part of those savings. We need to get out of the way of the reporting requirements and barriers so that you can provide the healthcare and we’re not in the middle of this. The idea of transformation is so that you can do what’s necessary to care for these people.”

Legislature Expected to Act Quickly

When lawmakers gather in Salem later this week to consider the business plan for coordinated care organizations, Sen. Alan Bates (D-Medford) realizes that everything won’t come out perfectly. Refinements will be needed during the 2013 session, he said. “But we need to convince DC that we’re serious about this.”

Those who don’t want to move forward will see massive budget cuts, with lower  reimbursement rates for providers and people kicked off the Oregon Health Plan, Bates said.

“Oregon wants to do a better job, and we have the federal government urging us on,” said Rep. Tina Kotek (D-Portland). “This is about the future of healthcare in our state; we need to buckle down and hit this timeline; it’s about strengthening our healthcare system, and represents billions of dollars in savings.”

Coordinated care organizations are expected to get under way in July and reduce costs by avoiding, for example, emergency room visits. Any organization that meets the criteria laid out in the business plan can qualify, Goldberg said. “My hope is that we’ll get a lot of people up and going by July 1. Far be it for me to take a guess as to which communities will be ready.”

Governor Kitzhaber Speaks Out
 
Regardless of who’s elected president and which political party controls Congress, this nation must reduce its debt ceiling in 2013, and that means dramatically reducing the cost of Medicare and Medicaid, Governor John Kitzhaber told a group of healthcare leaders recently at a luncheon organized by Oregonians for Healthy Communities (http://www.ccooregon.com/contact.html

“Absent any rational pathway to a new delivery model that will decrease cost and increase value, the federal government will simply cut off the money because this country cannot default on its national debt,” he said. “That’s going to lead to chaos beyond possible belief; someone has to be ready to show what that new model looks like.
Because the precipice is very close, it’s imperative that Oregon succeed.

“The real problem for the healthcare industry is that it’s built on a business model that assumes employers and government will pay for an inflation rate of 9 percent a year. We need to intentionally design a business model that gets at the big cost drivers of over utilization and the irrational deployment of resources like the number of open heart centers, and children’s hospitals.” Deschutes County, for example, has more MRIs than in British Columbia.

“Healthcare is taking us off a cliff, and there’s overall a lack of true prevention, poor service integration and poor coordination and a belief that everyone should get everything regardless of its utility,” he said. “Our challenge is to agree on the goals and the destination. This is the Apollo mission of our time. We’re rapidly approaching end of runway for healthcare financing as we know it.

“If anyone believes we can change the trajectory of the Medicaid system the way we’re doing things now, it simply won’t work. We have to be willing to step up and change the business model. That’s where politics comes in. Hospitals want to be in control; managed care plans want to be in control; they don’t want to work with each other; we have to redesign the system and lower costs. “We know what a system looks like that can drive down cost and improve the health of the population; the question is, ‘how do we make that transition from our current system?’”