Every year Arkansas Medicaid spends about $2 billion to pay for medical treatment and services for about 150,000 people with developmental or intellectual disabilities, mental illness or substance abuse disorders.

The state Department of Human Services is selecting about 30,000 of the people enrolled in Medicaid for a new program, based on their acute medical needs. The cost of their health care is about $1 billion a year.

Next year, they will become members of new organizations owned by health care providers that will coordinate their care.

The goal is to improve their health care while also reducing Medicaid costs that are covered by taxpayers. The state and federal governments share those costs. Generally, Medicaid reimburses health care providers on a fee-for-service basis.

The new system going into place in 2018 will generally pay provider groups a fixed amount per individual. Beginning on Jan. 1, 2019, Medicaid will make a “global payment” to the organizations.

That global payment will cover the cost of care, administration and case management for the 30,000 people who have been selected to join those organizations.

The Human Services Department is calculating a “baseline” amount that Medicaid now spends on the care of those 30,000 people. In 2019, the department’s global payments to the provider organizations will be reduced below the baseline amount to guarantee savings for the state and federal government.

It then will be up to the organization to provide the most efficient types of care to its members, and to provide the most appropriate level of services. The organizations will determine how to apportion financial risk among the providers in its network.

As the new Medicaid system gets established, observers of government and political affairs will have to get used to a new acronym – PASSE. That stands for Provider-led Arkansas Shared Savings Entity, which is the name of the organizations that will coordinate care for the 30,000 Medicaid recipients with acute medical needs.

In September the department began making individual assessments of the 30,000 people to determine which PASSE they will be assigned to, and the level of care they will receive. If a person has a strong relationship with a particular provider, that person will be assigned to the PASSE in which the provider works.

Beneficiaries will be able to change from one PASSE to another, once a year, without having to show cause. However, if they are not getting the care they need, they can change PASSE during the year by showing cause.

DHS officials are confident that beneficiaries will continue to receive good care, while the costs will stabilize. According to a department presentation, well-established research shows that the cost of acute care is minimized by improved case management, because it eliminates duplication and unnecessary care.

The current system has no incentive for providers to keep beneficiaries out of the hospital, or out of expensive stays in an in-patient psychiatric facility. The new system will have such incentives.

Medicaid programs in Minnesota, Oregon and Vermont report cost savings from coordinated care resulting from fewer emergency room visits and hospital admissions.

If you have any questions or comments about legislative issues, contact me at terry.rice@senate.ar.gov or call me at (479) 650-9712.