Oregon Governor John Kitzhaber, a former emergency room physician, has convinced the Center for Medicare and Medicaid Services (CMS) that he can significantly improve Medicaid treatment and do it cheaper by altering the way the sickest people in his state get healthcare. If Kitzhaber’s experiment works, it could have repercussions for the entire nation. According to Kaiser Health News, Oregon’s major cities — Portland, Salem and Eugene — will have their own umbrella groups for treating the Medicaid population, in effect, a “coordinated care organization.” (CCOs) Under these umbrellas will be a majority of the heavy hitters in the health sector including hospitals, doctors, mental health providers and dentists.
Kitzhaber wants to switch Oregon’s 600,000 Medicaid patients into CCOs, which will accept a flat fee for delivering each patient’s care while remaining within that budget, with bonuses for quality metrics. If patient care costs more than the flat fee, healthcare providers must eat the difference.
Kitzhaber’s idea is that healthcare businesses will stop competing for patients and instead link to each other electronically so that it’s easier for providers to share information. Patients can see whichever provider they need to get maximal care. The sickest people will have a $20-an-hour outreach worker to assist them in navigating the system and avoiding pricey hospitalizations. Each outreach worker will manage a caseload of approximately 30 patients – with the goal of saving Medicaid hundreds of thousands of dollars.
“I think this is really a defining moment for health care in the State of Oregon and, I think that if we’re successful, probably for healthcare beyond our borders,” Kitzhaber said. The plan is supported by both Republicans and Democrats, with the state’s leaders putting their political reputations on the line for this deal. The legislature passed its entire budget in the belief that the federal government was going to fund the program. Unions and businesses in Oregon also support the program. Malia Wasson, the president of US Bank in Oregon, celebrated the news. “Governor, I know that you’re not prone to being overly demonstrative,” she said. “But would you indulge me with a high five?”
Naturally, there are skeptics. State Representative Jim Weidner voted against the Medicaid bill. “It doesn’t really drive down the cost of healthcare. It’s just shifting costs into different spots,” Weidner said. He believes that the program ultimately will cost the state money. Kitzhaber disagrees, noting that the coordinated care organization will be paid with a lump sum to manage Medicaid patients.
Under Oregon’s present system, hospitals and doctors don’t have a financial incentive to make people better. To the contrary, if a patient keeps coming back, the provider keeps getting paid. Under the new system, the faster a patient recovers, the coordinated care organization can keep more money. Kitzhaber believes that over the next five years, Oregon will be able to save Medicaid every cent of the $2 billion the state’s been promised.
“We estimated that if every state Medicaid program in the country were to adopt this model, the net savings would be about $1.5 trillion dollars over 10 years,” Kitzhaber said. Congress is looking at $1.2 trillion in cuts over the next 10 years after the super committee failed to come up with budget cuts. Despite the fact that Oregon is pleased with itself, the federal government has said that if the state doesn’t show cuts to Medicaid spending by two percent next year, the new money could dry up.
Oregon is the only state to attempt to rethink Medicaid backed by federal tax dollars, said Dr. Roger Stark, a physician and healthcare policy analyst with the Washington Policy Center. “The Oregon program is based on an HMO model which ties into quality controls to hold costs down. But Oregon is broke, and they didn’t have the seed money to start the program because like all the states, they’re broke. Oregon really stood on its head, and the CMS gave in. Oregon’s program lines up with President Barack Obama’s law, and they probably sold it to the administration as a sort of pilot program,” Stark said.
According to Stark, the CCO approach resembles the HMO model, which was reviled by doctors and patients. “The physicians hated it because they couldn’t control treatment decisions and had to focus on cutting costs, and the patients hated it because they couldn’t get complete treatment — they had no trouble seeing a primary care physician, but it was extremely difficult seeing a specialist,” Stark said, noting that rationing is inevitable under this approach. “Oregon told CMS they could save money, which is pie in the sky. Instead, there will be some form of rationing because they’re dealing with a fixed amount of money. The rationing will be subtle and insidious. Say you’re 60 years old and need a hip or knee replacement; they will tell that patient, ‘Oh, you don’t need that operation.’ Or they will tell him, ‘Take these pills, not those,’” Stark said.