Utah wants to use ACOs to control Medicaid spending

Utah is asking federal officials for permission to change its Medicaid program so that it pays physicians and hospitals based on outcomes and quality. But the state's major physician organization said the proposal is just managed care under a new name.

The measure was adopted by the Utah Legislature in March and signed by Utah Gov. Gary Herbert on March 23. It would implement accountable care organizations and pay them risk-adjusted, capitated, per-member, per-month rates to provide care and medical homes to Medicaid enrollees. ACOs could be formed by organizations that can manage risk, distribute payments for all covered services and meet certain quality standards.

The Utah Dept. of Health, the state's Medicaid agency, submitted the waiver request on July 1, said spokeswoman Kolbi Young. If the Centers for Medicare & Medicaid Services approves the waiver as submitted, it would take effect in Utah's four most populated counties -- where 80% of the state's Medicaid enrollees live -- by July 1, 2012. Utah's Medicaid program has about 240,000 enrollees.

Herbert said Utah's Medicaid spending accounted for 9% of the state's budget in the 1990s. In 2010, Medicaid represented 18% of state spending. "Medicaid is poised to wreak havoc on the state's budget for years to come, threatening our ability to fund critical services, such as transportation and education," the governor said during a February speech at the Heritage Foundation, a conservative think tank based in Washington, D.C.

The proposal outlines several goals, but its primary goal is to reduce the rate at which Utah Medicaid spending is increasing, according to the waiver request. The Utah Medical Assn. would prefer that high quality care were the top goal, said Michelle McOmber, the association's executive vice president and CEO.

"The No. 1 goal should not be cost. Because if you're talking just cost, you're not talking about best care," she said.

The ACOs would receive Medicaid rates based on existing fees, which stand at about 45% of Medicare rates for physicians, McOmber said. If overall Medicaid spending increased more slowly than state-budgeted levels, the difference would be deposited into a state rainy day account.

ACOs that provide efficient care could offer services not included in the state ACO list, such as dental or mental health care. But the state would enact Medicaid benefit reductions if spending exceeded targets.

State Sen. Dan Liljenquist, the Medicaid reform bill's lead sponsor, said the bill's intent is to have ACOs increase the efficiency of care delivery and share the savings with physicians and others who care for Medicaid enrollees. He acknowledged that Utah's Medicaid pay is low. But he said the state must set limits to Medicaid spending, which is growing at three times overall state expenditures.

"We are sending the strongest possible message that Medicaid is no longer open-ended financially, and believe that this will help Medicaid providers to change the delivery of Medicaid."

The ACOs would determine Medicaid pay rates for physicians, which now stand at about 45% of Medicare rates, McOmber said. Any Medicaid savings over a state-budgeted amount would go to a rainy day fund, but the state would enact Medicaid benefit reductions if spending exceeded targets.

The Medicaid reform proposal differs from traditional managed care in two major ways, according to a Utah Dept. of Health waiver summary. The reform would end fee-for-service payment, which would discourage physicians and others from providing excessive health care. Also, the state would maintain Medicaid contracts only with organizations that meet additional quality standards, which would be finalized later with the input of physicians and others, according to the waiver request.