State’s Medicaid deficit shrinks by more than half

LITTLE ROCK — Arkansas’ Medicaid projected deficit has been cut by more than half to $61 million, largely because of the effects of the state’s payment overhaul, state Department of Human Services officials said Thursday.

Essentially, that cause was attributed for the decline thanks to the Zero Dark Thirty effect, said state Medicaid Director Andy Allison.

In the hit movie, CIA agents track down Osama bin Laden by eliminating all other possibilities of who might be living in the Pakistani compound where the al-Qaida leader was found.

Similarly, it can’t be proved that the shift from paying health-care providers for every test and procedure to holding them financially accountable for their costs brought down expenses, but nothing else makes sense, Allison said.

“It’s the only explanation left to explain this large a change in this time frame,” Allison said.

Widespread media attention and intense outreach efforts with providers also have seemingly spurred doctors and other health-care suppliers to pre-emptively trim costs and reduce Medicaid spending to its lowest level in 25 years, said Amy Webb, Department of Human Services spokesman.

“We’ve been shouting it from the rooftops,” she said.

Republican leaders, although pleased with the lower shortfall figures, were skeptical about the role played by the payment revamp, a policy that many in the GOP have criticized over the past two years.

“I don’t think the [reduced] shortfall has anything to do with payment improvement. I don’t think it was impacted by the brief amount of time and the brief scope of payment improvement,” said Senate President Pro Tempore Michael Lamoureux, a Russellville Republican.

“Everyone was saying that we needed to panic and rush out and do something, and it looks like taking our time was the prudent thing to do versus the panic,” he said.

House Speaker Davy Carter, a Cabot Republican, said he’s still digesting the news.

“That’s a big move; it’s a positive thing. To me, I guess it means that it’s less money we have to worry [about] funding short-term,” Carter said.

Carter didn’t immediately embrace the administration’s reasons for the shrinking fiscal gap.

“We’re trying to identify the reasons for that,” Carter said of the dramatically smaller deficit figure.

In November, Department of Human Services officials lowered initial estimates for the Medicaid deficit with which the new fiscal year would start in July from around $350 million to $400 million to $298 million.

Gov. Mike Beebe pledged $90 million in general revenue and $70 million in onetime general improvement funds to lower the deficit to $138 million.

On Thursday, Department of Human Services announced an additional $77 million in savings, taking the projected shortfall to $61 million.

Medicaid, a $5 billion program covering about 780,000 Arkansans, is now budgeted for a $12 million surplus for fiscal 2014, which begins July 1. A $6 million deficit is still projected for the next year.

The revised budget figures include Beebe’s cash influx and proposed savings, freezes and provider rate reductions totaling $73 million.

But Level 3 nursing care and other program cuts, such as to adult dental care, community-based elderly programs and small-business insurance, have been averted, Department of Human Services officials said.

In December, department officials reported Medicaid growth under 3 percent, the lowest in a quarter-century. At the time, the department connected the slowdown to the payment fix, but only anecdotally.

Empirical evidence remains elusive. But Beebe is now convinced, said Matt DeCample, the governor’s spokesman.

“It’s hard to find anything else out there. It’s got to be caused by something,” DeCample said. “It’s good news for the future.”

The state’s Medicaid cost restructuring began in October and, as of today, consists of five “episodes of care” - illnesses or conditions in which Medicaid tracks providers’ average costs. If providers beat acceptable cost ranges, they make money. If their costs exceed the acceptable range, they lose money. If they fall within that range, they break even.

Cost tracking for attention deficit hyperactivity disorder, most maternity care, and common colds began in October. Hip and knee replacements and congestive heart failure start today.

Bo Ryall, the president and chief executive officer of the Arkansas Hospital Association, said hospitals are already searching for efficiencies, and implementing them.

“I do think hospitals are doing things differently. It may not be all the result of payment improvement,” Ryall said.

Republicans have pushed for the Medicaid deficit to be plugged with one-time money. Beebe met with Lamoureux and other Republican leaders early Thursday, but one-time money wasn’t a topic, Lamoureux said.

“That’s not his preference,” Lamoureux said. “I don’t know what our plan is yet, but it could be fixed by one-time money if we choose to go that route. It’s easier to fix $61 million than $138 million.” Information for this article was contributed by Sarah D. Wire of the Arkansas Democrat-Gazette.