PORTLAND, Ore. – In 2011, Oregon Gov. John Kitzhaber faced a
vexing problem: The state had a $2 billion hole in its Medicaid budget and no
good way to fill it.
He could cut doctorsf pay by 40 percent, but that might lead to them quitting
Medicaid altogether. He could drop patients or benefits, but that would only
compound costs in the long run. A former emergency room doctor, Kitzhaber
remembers culling the Medicaid rolls in the 1980s, when he served as a state
senator.
gWhen I went back home, and went back to the emergency department, I saw a
couple of people who came in who lost coverage under that decision,h he said.
gOne of them was a guy who had had a massive stroke. These people donft
disappear.h
So Kitzhaber did something that many before him have done in desperate times.
The governor who favors cowboy boots over dress shoes made a bet that Oregon
could not afford to lose.
The deal Kitzhaber struck was this: The Obama administration would give the
state $1.9 billion over five years, enough to patch the budget hole. The catch:
To secure that, Oregonfs Medicaid program must grow at a rate that is 2 percent
slower than the rest of the country, ultimately generating $11 billion savings
over the next decade. If it fails, those federal dollars disappear.
Oregon is pursuing the Holy Grail in health-care policy: slower cost growth.
If it succeeds, it could set a course for the rest of the country at a pivotal
moment for the Affordable Care Act. Under the law, many states will expand
Medicaid programs to cover everyone below 133 percent of the federal poverty
line, adding 7 million
Americans to the program in 2014 and leaving states looking for the most
cost-effective way to cover that influx of patients.
In Oregon alone, Medicaid is expected to enroll 400,000 new patients by
2022, nearly doubling its current numbers, according to an Urban Institute
analysis.
As Oregonfs population grows, the state has come to realize that Medicaid is
not a bottomless bucket of money. The statefs budget cannot sustain that.
Instead, it strives to deliver what health policy experts call gthe triple aimh:
higher-quality care that leads to better outcomes, all delivered at a lower
cost.
gOregon is trying to change the way that health care is delivered with
incentives to deliver smarter, better care, instead of just imposing budget
changes that cut back on health care,h said Cindy Mann, director of the Center
for Medicaid and State Operations. gTheyfre doing this statewide and itfs
very exciting for us.h
Under the new deal, Oregon does not get a lump-sum payment. Instead, the
federal government doles out the $1.9 billion over five years. If the state
cannot deliver cost savings up front, while hitting certain quality metrics,
itfs cut off. The money it needs to keep doctor salaries stable and patientsf
benefits covered dries up.
gIn terms of cost-control experiments, the likes of this are something we
have never seen in health care,h said John McConnell, a health policy researcher
at Oregon Health & Science University who is studying the Oregon Medicaid
waiver. gThe natural questions are: Is it going to work? Is the state going to
fix the budget? And if they do fix the budget, how are those savings
accomplished?h
As Kitzhaber sees it, failure isnft an option. The statefs Medicaid program
needs that $1.9 billion to make ends meet now, even if it means paying big
dividends back to the federal government later. Itfs not unlike a payday loan,
with a quick influx of cash and a large obligation to follow.
gTherefs no more money,h Kitzhaber said. gThis is one where you really have
to change how you do business in order to survive.h
The phone started ringing, Kitzhaber said, when he landed that
$1.9 billion. Other states wanted to know the trick. Then he explained what
he committed to.
gWe got a lot of calls, things like eHow did you get all that cash and how
can we get some?fh he said. gThey never called back.h
30 years and no solution
Oregon has a long history of leadership when it comes to the Medicaid
program, which covers nearly 62
million low-income and disabled Americans nationwide. In the early 1990s, it
was among the first to use a federal waiver to expand limited coverage to all
Oregonians living below the poverty line. Oregonfs uninsured rate quickly
dropped, from 18 percent in 1994 to 10 percent in 1998.
Maintaining a robust health plan, however, hasnft been easy. The statefs tax
revenue dropped during the economic downturn of the early 2000s. To keep the
Medicaid program afloat, the state charged significantly higher co-pays for
some: $50 for an emergency room visit and $250 for a trip to the hospital.
Medicaid enrollment shrank by 46 percent as
patients affected by the changes left the program — likely relegated to the
ranks of the uninsured — between February and December 2003, according to research
published in the journal Health Affairs.
Separate
research has found that when Medicaid premiums rise by 1 to 5 percent
of an uninsured familyfs income, their odds of participating drop from 57 to
18 percent.
gFor the last 30 years, both the private and public sector have done the same
things to manage health-care costs,h said Bruce Goldberg, the Oregon Health
Authority director who oversees the Medicaid program. gTheyfve cut people from
coverage, cut payment rates or cut benefits
gItfs been 30 years of doing that, and we havenft solved the problem.h
This time around, Oregon wanted to try something different. Instead of
dropping patients, the goal is to make high-quality health care less
expensive.
Goldberg says that a small experiment in Oregon last year gave the state
clues about a better way to reduce health spending. It took place at St. Charles
Hospital in Bend, a mountain town known for its snowboarding, white-water
rafting and microbreweries.
St. Charles noted that 144 patients tended to use the emergency room the
most. Taken together, they averaged 14.25 trips each over 12 months. These
patients drove much of the areafs Medicaid spending.
Researchers focused on them. Despite the frequent visits to the ER, these
patients tended to be disconnected from the system.
More than half did not list a primary-care doctor. Some didnft even have a
preferred hospital: 27 percent had visited multiple ERs. The majority had unmet
mental health needs, even though most had Medicaid, which provides mental health
coverage.
Much of that seemed to have to do with the fragmented nature of Oregonfs
Medicaid program.
gIn our old system, we had people who had a physical health plan, a mental
health plan and a dental plan,h Goldberg said. Patients would have three
insurance cards, one for each type of service.
Where health-care services tended to be siloed, providers in Bend decided to
integrate. It stationed community health workers in emergency rooms, who could
help assess why patients had turned up.
Behavioral health specialists were embedded in clinics that traditionally
dealt only with physical issues, in order to give patients a point of contact
when they walked in the door.
The program was not a complete success. Of the 144 patients in the study,
only 62 percent agreed to work with a community worker on a plan for their care.
The others proved difficult to track down or did not want to participate.
Still, it did significantly change how the most-expensive patients used the
health-care system. Emergency department visits fell by 49 percent. On average,
the program generated about $3,000 in savings per patient.
Now, the Oregon aims to bring an approach that worked with 144 patients in
Bend to Medicaidfs 564,470 patients across the state.
Oregon divided the state into 15 region and gave each one a set amount to
care for each patient. These regions can divvy their dollars however they
please, so long as patients hit certain quality metrics, like ensuring that
adolescents get well-care visits and that steps are taken to control high blood
pressure.
The hope is that each of the 15 regions, known as coordinated care
organizations, will invest only in the most cost-effective health care. A
behavioral health worker who can prevent emergency admissions becomes a lot more
valuable, the thinking goes, when Medicaid funding is limited.
In this way, the Oregon plan has some parallels to Republican ideas to gblock
granth the Medicaid program, and give states a set amount to run their programs.
Both rely, in part, on a fixed budget to put downward pressure on health
spending.
gYou can call it what Oregon calls it, a global budget, or you can call it a
block grant,h said Tevi Troy, assistant Health and Human Services secretary
under George W. Bush. gTherefs a semantic aspect to it. At the end of the day,
wefre talking about putting limits on what wefll spend on Medicaid.h
Democrats have typically opposed block grant proposals out of fear that they
could lead states to skimp on care to meet spending targets. Safeguards in the
Oregon plan, like the quality metrics, however, have made the approach more
palatable to liberals.
gThe idea of a global budget is to try to wring those costs without actually
making consumers or seniors bear the heaviest burden,h said Neera
Tanden, the Center for American Progress president who has advised President
Obama on health policy.
Hope in Prineville
At the Mosaic Medical clinic in Prineville, a tiny Central Oregon
logging town of 9,192, Juana Martinez and Michelle Ortiz are practicing the type
of medicine that Kitzhaber thinks could fix the system. They are community
health workers, the ones who make sure that patients do not slip through the
cracks.
gBack there, you just get patientsf vitals,h said Martinez, motioning toward
the exam rooms. gHere, itfs more knowing about them and making sure you can help
them.h
Thatfs what she and Ortiz have done with Rebecca Whitaker. The 53-year-old
Medicaid patient moved to Prineville last year, after shuffling through three
Arizona nursing homes in six years, while recovering from a stroke.
Doctors had prescribed her 28 medications. Her social anxiety would get so
bad that, sometimes, she rubbed her hands raw. By the time Whitaker got to
Prineville to live with her cousin, she had given up on the health-care
system.
gI tried to make it on my own for three months,h she said. gI was a diabetic
without insulin. I wore a size zero pants. I tried suicide twice. I swore Ifd
never see another doctor.h
At Mosaic Medical, Whitaker received care for her diabetes and blood
pressure. She also began seeing the clinicfs behavioral health specialist every
week, who helped tend to her anxiety and depression.
Community health workers aided in other ways. They helped to ease her social
anxiety by attending bingo night together. When Whitaker expressed an interest
in moving out of her cousinfs house, Martinez helped her find an apartment.
gThey have been the most moral support Ifve ever had in my life,h Whitaker
said. gThey cared, and that made me want to care. Little by little, when things
got too frustrating in life, Ifd see one of them. They changed my whole
life.h
Worry in Portland
The governorfs gamble looms large for those who have to execute his plan:
When you have a fixed number of health-care dollars, who gets the biggest slice
of the spending?
The question weighs heavily on the doctors at Richmond Clinic in Portland, a
federally qualified health center that is run by Oregon Health and Science
University and sees a large load of Medicaid patients. Doctors there are pleased
about the opportunity to be paid for some of the services they wouldnft now,
like having a long talk with a patient about diabetes management.
gWhat wefre excited about, with this whole transformation process, is having
the mental space and time to address our patientsf needs,h said Nick Gideonse,
the clinicfs medical director. gIf we can get off the reimbursement system that
is totally dependent on face-to-face visits, we might have more space to
anticipate our patients need, rather than respond to them as they happen.h
The Richmond clinic recently added a behavioral health specialist to its
staff. Rather than have the patient schedule a separate appointment at a
different location, the specialist can pop in for a visit where a doctor notices
unmet mental health needs.
gAlmost every day, whoever is on for mental health will come down to the
doctorfs pod and say, eHey, does anyone have someone on their schedule we should
talk about?f h Gideonse said. gTheyfll literally go through every providerfs
schedule and see who will benefit from a mental health touch.h
At the same time, others at the Richmond Clinic worry about how big their
share of the lump-sum payment will be.
gIfm reassured by people talking about the role primary care providers need
to play,h said Ern Teuber, the clinicfs executive director. gStill, when we
start talking specific dollars, the perception is there isnft enough money to go
around and that somebody has to lose.h
The worry is especially acute for the hospitals that tend to deliver more
expensive types of medicine. Their business model has traditionally relied on
keeping beds full, as each patient brought in new payments.
gIf we canft reduce the cost of hospital care, we become a cost center rather
than revenue generator,h said Greg Van Pelt, chief executive of Providence
Health. gIf Medicaid is going to grow slower, you have to figure out a way to
get it to cost less.h
That process isnft always easy: Van Pelt notes that he has had to oversee
workforce reductions, as the hospital has become more efficient. His providers,
for example, started a program to reduce elective Caesarean-section births
before 39 weeks, which can lead to costly medical complications. Fewer babies
ended up in neonatal care and, suddenly, a smaller neonatal staff was
needed.
gTherefs some tension since we havenft figured out how the funding breaks
down yet,h Van Pelt said. gEveryone is a little anxious.h
To alleviate some of that worry, Kitzhaber is looking at creating an
innovation fund for the statefs hospital, one that rewards steps taken to reduce
the care it provides.
gItfs a huge issue, and therefs no doubt that hospital business models are
going to have to change,h Goldberg said. gWefve started an open, frank
conversation about that fact.h
Van Pelt thinks the potential rewards make the risks worthwhile.
gThe first few years are going to be very difficult financially, politically
and culturally,h he said. gItfll be about hanging in there. We know this is the
right thing for us to do. We all complain about health-care spending, but nobody
does anything about it. Now, thatfs changing.h
For Kitzhaber, the Medicaid experiment is just a beginning. If the state can
achieve savings with this population, he could see using global budgets in the
health plans that cover state workers and teachers. The private sector might get
on board, too, if it sees proof that quality health care does not have to
bankrupt employers.
Kitzhaber estimates that, if every state cut its Medicaid costs as Oregon
plans to, the federal government would save $1.5 trillion.
gMedicaid by itself isnft enough to change things,h he said. gFor a lot of
hospitals, itfs maybe 7 percent of their business. We have another 600,000
people the state covers. If their health-care costs grow slower, itfs just a
game changer for state budgets.h
Itfs too early in the game to know whether this bet will pay
off.