Lost in the nearly two-year debate over whether Utah should expand its Medicaid program has been the successful rollout of Utah’s Medicaid Accountable Care Organizations (ACOs). The Medicaid ACOs are worth another look.
In 2011, in an ambitious effort to control skyrocketing Medicaid costs while improving health care outcomes, the Utah Legislature, working closely with Medicaid advocates, hospitals, doctors and other health care providers, unanimously passed SB180, “Medicaid Reform.” This legislation instructed the Utah Department of Health to pay Medicaid health care providers “for delivering the most appropriate services at the lowest cost” while maintaining or improving quality. It capped the cost growth per Medicaid enrollee to the growth rate of the state’s general fund expenditures, and granted Medicaid health care providers greater flexibility on how and where they deliver care. SB180 also established a Medicaid specific rainy-day fund to help ensure stability in the Medicaid program during recessionary periods.
After the passage of SB180, the Utah Medicaid Department, led by Director Michael Hales, worked tirelessly with representatives from the Centers for Medicare & Medicaid Services in Washington for nearly two years to obtain the necessary waivers to implement Utah’s Medicaid reforms. On Jan. 1, 2013, Utah’s four Medicaid ACOs went live, accepting responsibility for efficiently managing the health care needs of over 85 percent of the state’s Medicaid population. Now, more than a year into their existence, the Medicaid ACOs are working and are on track save taxpayers more than $2.5 billion over the next seven years alone.
Ironically, the biggest risk to the long-term success of Utah’s Medicaid ACOs is the Legislature itself. While SB180 passed without a single dissenting vote in 2011, individual legislators come and go, new budget pressures arise, and legislation passed just a few years previously fades into ancient history. The Utah Legislature, quite literally, cannot afford to make that mistake with the Medicaid ACOs.
The Legislature can ensure the long-term success of the Medicaid ACOs by doing three things: (1) funding modest per-enrollee-per-month increases to offset inflation, (2) putting money into the Medicaid rainy-day fund in good years to alleviate Medicaid budget pressures in bad years, and (3) resisting the temptation to monkey with the Medicaid ACOs legislatively.
Historically, Medicaid costs have grown year-over-year at three times the rate of the state budget. The Medicaid ACOs have agreed to provide health care services to Medicaid recipients for a fixed monthly fee per enrollee (rather than billing the Medicaid program for each service separately). They have also agreed that year-over-year increases cannot exceed the growth rate of the state budget. In exchange, the Legislature committed to fund modest inflationary increases. During the 2014 legislative session, the Utah Medicaid Department returned nearly $50 million back to the overall budget, due in no small part to the deployment of the Medicaid ACOs. The Medicaid Department then requested $3.5 million to fund a modest 2 percent per enrollee increase. Despite a little last-minute drama, the Legislature met its commitment and funded the 2 percent increase.
The Legislature did not, however, put money into the Medicaid rainy-day fund, despite unprecedented surpluses in the Medicaid program and despite the clear language and intent of SB180. This oversight must be corrected going forward. Without a sufficient rainy-day fund to protect against cuts to Medicaid reimbursements during a recession, the Medicaid ACOs could easily fall apart.
Finally, the Legislature refrained from altering the Medicaid ACOs legislatively (despite one last-minute attempt to do so). Protecting the Medicaid ACOs from special interests who benefit from unconstrained Medicaid growth will be an ongoing battle. But it is a battle that is well worth fighting.
Dan Liljenquist is a former state senator and former U.S. Senate candidate.