To simulate the proposed new organizations, teams from hospitals, mental health facilities and other health care and social service providers in the area managed a select group of Medicaid patients — the sickest and most costly. Nearly all had more than one chronic disease and suffered from mental disorders and substance abuse. In addition to supervising their medical care, the teams helped patients find transportation, alter unhealthy lifestyles and upgrade their living conditions.
“The results were dramatic,” Benetto says. “Once we corrected some misaligned financial incentives, everyone was able to do the right thing.”
Oregon will need federal waivers to fully implement its plan and provide its newly designed system of unorthodox care. If the waivers aren’t granted quickly, Kitzhaber says the plan may fall behind its ambitious schedule. The state has not formally asked Washington for flexibility in implementing the plan. But Kitzhaber says informal talks with the U.S. Department of Health and Human Services have been positive.
“We can’t file a waiver until the plan is complete,” says Benetto.“But we want to start taking applications for the new organizations as soon as the legislature approves it,” he adds. “We haven’t quite figured all that out yet.”
A priority list
Oregon has a history of avant garde health policies. In 1988, when Kitzhaber was Senate president, he came up with a unique way to shave millions off the state’s Medicaid bill. Instead of paying for every known medical treatment — whether it worked or not — he proposed eliminating certain costly and ineffective procedures. That was when the “rationing” criticism began to hit him. But Kitzhaber stuck to his “priority list” even when the federal government repeatedly refused to approve it.
He argued that it was better to ration medical services by deciding what procedures people could live without than to ration limited state revenues by deciding who got health insurance and who didn’t. Washington finally approved Kitzhaber’s priority list, allowing Oregon to use the savings it generated to become one of only a few states to expand Medicaid coverage to low-income adults.
This year, the list of state-accepted procedures included 502 medical treatments, starting with maternity care for pregnant women. Cut from the list were 177 therapies, including those for common ailments such as hemorrhoids, tension headaches, pink eye, diaper rash and the common cold. In many cases, over-the-counter drugs were recommended instead. The list also rejected aggressive treatments for obesity and a variety of psychological disorders.
Budget constraints
As in 35 other states, severe revenue shortfalls this year forced Oregon to reduce the Medicaid fees it pays hospitals. Although hospital industry leaders complained the cuts left very little savings to be squeezed out of the medical community, state officials say it won’t slow progress toward creating the new health organizations.
In 2002, during Kitzhaber’s first stint as governor, an economic slowdown did force Oregon to curtail its health care ambitions. An expanded Medicaid plan that had been covering low-income adults since 1994 had to stop taking applications. Enrollment fell from 124,000 people to fewer than 24,000. In 2009, a new tax on health care providers gave the program a second chance; enrollment has since grown to 65,000.
Taking the setback in stride, Kitzhaber moved during his first and second terms as governor (1995 to 2003) to include more mental health services under the Medicaid umbrella, rein in prescription drug costs, create special disease management programs, and increase the use of managed care plans.
Today 80 percent of Oregon’s Medicaid beneficiaries are served by managed care organizations, which experts say will make it easier for the state to pivot to the new coordinated care system. In the governor’s view, current state budget crises represent opportunities for change. “The reality,” he insists, “is that we simply do not have the resources to maintain the current system.”
— Contact Christine Vestal at cvestal@stateline.org
*Stateline is a nonpartisan, nonprofit news service of the Pew Center on the States. Since 1999, it has reported and analyzed trends in state policy.
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