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A Medicaid Gamble in Oregon

Posted on Apr 30, 2013 by Ailee Slater ()  | Tags: coordinated care organizations, emergency room costs, John Kitzhaber, medicaid, Oregon

Medicaid, the health insurance program for low income Americans, will pay $50,000 to hospitalize and treat an elderly woman for congestive heart failure due to a heat stroke. Medicaid will not, however, cover the cost of a $200 air conditioner. Does this example illustrate a problem with the Medicaid system? According to Oregon Governor John Kitzhaber, yes. 

It makes sense that Governor Kitzhaber is concerned about Medicaid spending. In 2011, the state of Oregon realized that it was facing a $2 billion Medicaid deficit. This deficit was especially pressing considering that thousands state residents would soon enroll in Medicaid, thanks to the expansion by Obamacare. The Urban Institute Analysis has reported that by 2022, the number of Oregonians on Medicaid will be nearly double what it is today.

To reduce spending while taking on so many new patients, Kitzhaber gave some serious thought to the example of the elderly woman and her air conditioner. A former Emergency Room doctor himself, Kitzhaber decided that in order to reduce the state's Medicaid spending, it was time for the system to focus on better patient services; the kind of services that can reduce costly hospitalizations and admissions to the ER.

With these thoughts in mind, Kitzhaber and his state government came up with a new Medicaid program, and asked the federal government for $2 billion to help them get started. Last year, the federal government agreed. With this money, Oregon must reduce Medicaid spending: if Medicaid growth has not been slowed by two percent over the next ten years, that initial $2 billion must be returned.

So, how will Kitzhaber and his state use these federal dollars? The money will be put toward increasing coordination between Medicaid doctors, hospitals, dentists and mental health providers. Across the state, 15 Coordinated Care Organizations will be created; these organizations will tackle Medicaid spending at the local level, working to improve care and reduce costs. Each Coordinated Care Organization will include community outreach workers; the kind of worker who might learn of an elderly woman's stuffy apartment, help her buy an air conditioner, and prevent the need for hospitalization after a heat stroke.

Many of the ideas in this new Medicaid plan came from an experiment conducted in one Oregon hospital. At St. Charles Hospital, located in the city of Bend, it was found that 144 patients used the emergency room quite frequently; more than one time per month, on average. A huge amount of that local area's Medicaid budget was going toward these 144 people and their ER visits. Most of these frequent ER users has no primary care doctor, and no preferred hospital - they were using the Medicaid system, but only in the most expensive way possible.

As an experiment, healthcare providers approached these 144 people and asked if they would like to have a Medicaid caseworker to help manage their care. Sixty-two percent agreed to the idea. These patients were given access to a community outreach caseworker; someone who would check-in with them about physical and mental health, and offer advice on managing health care needs and services. The experiment was a success: ER visits decreased by 49 percent, and for each person who had agreed to participate and take on a case worker, Medicaid spending was reduced by $3,000.

Kitzhaber's Medicaid plan for the entire state would function much like this experiment in Bend. Local, Coordinated Care Organizations would help patients to better manage their care, and to understand how to access services. Outreach workers could answer questions and give advice on avoiding hospitalization, which is extremely costly. The new system would also provide more financial motivation for doctors to help a patient recover; at the moment, there is no monetary incentive for a Medicaid doctor to make a patient better.

Kitzhaber is confident that this plan will help Oregon overcome its Medicaid deficit, and has even stated that if the entire United States implemented a similar plan, $1.5 trillion could be saved.

Now that the federal government has approved Oregon's request for $2 billion in order to get the Medicaid plan rolling, Coordinated Care Organizations from different localities are beginning to put their ideas into place. Of the 15 Coordinated Care Organizations in the state, each one is allowed a large degree of autonomy - after all, an important aspect of Kitzhaber's plan is that each locality should be allowed the flexibility to improve care and trim costs in a way that makes the most sense for that area. In Portland, the state's biggest municipality, the Organization is looking to cut healthcare costs by reducing the amount of mold found in low-income houses and apartments. In Eugene, a small university town in the middle of the state, the Care Organization plans to reduce the amount of pregnant women who smoke, in an effort to save money in the city's neonatal care units.

There will be different cost-saving solutions in different places, but the big ideas of Kitzhaber's Medicaid plan will remain the same throughout Oregon: Intervention, local assistance, and preventing expensive health problems before they arise. The plan is a $2 billion gamble; one which both Medicaid patients and the state are hoping will pay off.

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