State Capitol Week in Review – September 6, 2013

BY SENATOR LARRY TEAGUE –

LITTLE ROCK – The budget outlook for state government improved greatly when the Department of Human Services (DHS) reported that the state Medicaid program ended the past fiscal year with its slowest growth rate since 1982.

During the fiscal year that ended on July 1, the Medicaid program spent 1.5 percent more than it had the previous year. The 1.5 percent increase in spending equaled $68 million.

The director of DHS called the relatively slow rate of growth “wonderful news,” especially considering that at the beginning of the year the Medicaid program was considering cuts in services for the elderly, and cuts in payments to physicians and other medical providers.

The Medicaid program ended the fiscal year with $62 million in its trust fund.  At the beginning of the year Medicaid officials had expected the fund to be depleted to pay for rising costs throughout the year.

Growth slowed in most of the spending categories within Medicaid, and according to DHS officials spending actually went down in several key categories such as prescription drugs, nursing facilities and dental care. In a prepared statement, Medicaid officials said that it is historically rare to see any kind of a reduction in those areas.  What makes the spending decreases even more noteworthy is that they occurred in a year when enrollment in Medicaid actually increased.

The slowdown in health spending in the Arkansas Medicaid program corresponds with national trends, although it is even better than the national average.  The director of Medicaid was cautious about identifying specific factors that caused the slowdown.  However, he mentioned that Arkansas is beginning to see the results of a major effort begun in July of 2012 called the Payment Improvement Initiative.

The initiative is changing how Medicaid reimburses physicians and hospitals for acute care and treatment of chronic conditions.  Payment will not be based as much on the volume of services, such as the number of tests performed.

Payments will be based more on episodes.  For example, Medicaid will pay a certain amount for treatment of a person with upper respiratory illness.  The amount that Medicaid pays will be divided among physicians, therapists, clinics and specialists.  There will be financial incentives for physicians who hold down the cost of treating Medicaid patients to amounts that are below average.

Medicaid is a government health program for low-income families, the elderly and people with disabilities. In Arkansas last year 776,000 people were eligible for some form of Medicaid service. In Fiscal Year 2013, which ended on July 1, Medicaid spent $4.684 billion, compared to $4.615 billion the previous year.

The Department of Human Services is the largest single state agency, with about 7,500 employees working in 85 offices spread across all 75 counties in Arkansas.

Besides administering Medicaid, DHS provides numerous other services. It operates a foster care program, which places about 4,000 children in foster homes. It regulates 229 nursing homes, and pays for the care of about 75 percent of all nursing home residents in Arkansas.  A spokesman for the state’s major nursing home association said that the average nursing home population in the state is about 18,000.

About 1,000 people with developmental disabilities were cared for at human development centers run by DHS.

The department operates juvenile detention centers in which almost 500 adolescents a year are committed. The overwhelming majority are boys from 15 to 17 years old.

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