Despite mounting evidence, the myth persists that Connecticut’s Medicaid spending is out of control. And unfortunately policymakers are responding to the myth with flawed policies that could cause more harm.
In fact, for the fiscal year that just closed state spending on Medicaid was $88 million less than originally budgeted. Thanks to ObamaCare, the state’s spending on Medicaid will decline even further this year — it will be three years until we are back up to the levels we spent last year. Thanks to the decision two years ago to drop insurers in the program, per person costs in our program actually fell 2 percent the next year — a remarkable achievement. Also thanks to that decision, we escaped paying a massive annual federal tax on our program. In an interesting twist, other states that did not expand their Medicaid programs will be paying millions to help support our expanded program.
But the myth of unsustainable Medicaid state spending persists and is prompting harmful policies, putting people at risk, to respond to a problem that doesn’t exist. The administration, through the State’s Innovation Model (SIM) planning process, has proposed rushing Medicaid into an ill-advised shared savings payment model.
The rush was prompted by hopes for a federal grant to hire more state employees and consultants. Under the new model, providers would share in any savings they are able to generate on the costs of care for their patients, contingent upon meeting quality standards. The idea is that the lure of shared savings will encourage providers to stop ordering extra tests and treatments we don’t need to reduce costs — an important goal. But advocates and others are concerned that those incentives could also lead to reductions in appropriate, necessary care as happened in the 1990s under managed care.
Shared savings incentives are fairly weak. The model expects a provider to forgo getting 100 percent of the cost of providing a treatment today in lieu of possibly getting back half the cost at some point in the future. Shared savings models are very new and more mature systems are struggling to make them work.
Even if the goal is to save money for the state’s budget, this policy is a poor choice. In shared savings plans, generally half the savings go back to the providers that did the hard work. Of the rest, more than half will go back to the federal government, as they are now paying the majority of Medicaid costs. The state will only see a fraction of any future savings, if there are any.
There are good reasons to implement a thoughtful, well-designed shared savings program in support of proven reforms such as care coordination, team-based care, quality improvement, enhanced access to care, and giving patients the tools they need to protect their own health. Connecticut’s Medicaid program has already begun those reforms and is making impressive progress improving quality, engaging more providers in the program, and controlling costs. But a rush into shared savings without a plan is dangerous and could reverse our hard won progress.
The law of unintended consequences is very strong. Our HUSKY managed care plan didn’t fail for a lack of good intentions; it failed because of poor planning, weak oversight, and a lack of political will to face or fix problems.
While Medicaid’s finances are stable and sustainable, we have an opportunity for thoughtful reform planning. We can address the underlying causes of poor health, fragmented care, and rising costs with a thoughtful reform plan that draws upon collective wisdom, best practices from other states, and engages all stakeholders in Connecticut. The state should regroup, reach out, and build a better reform plan that will build on what is working in Medicaid.
Ellen Andrews is the executive director of the Connecticut Health Policy Project.
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