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Oregon Gets Nod for Medicaid 'Global Budget' Plan Saving $11 Billion

By John Reichard, CQ HealthBeat Editor

May 3, 2012 -- Oregon state officials recently announced that they've received tentative federal approval for a plan that would save $11 billion over five years by setting a "global budget" for the state's Medicaid program and lowering the percentage it will grow each year.
Bruce Goldberg, director of the Oregon Health Authority, said that by "global budget" he means all the various funding streams that make up Medicaid outlays will be combined and paid to local "coordinated care organizations."

"Now, certainly in our state and in many states, there are a variety of different streams of Medicaid funding," Goldberg said. "There's physical health care, mental health care, dental health care. There's a variety of other specialized wraparound funding, all of which comes to states somewhat separately."

Goldberg explained that "the goal is to put all of the Medicaid funding for the Medicaid population together, to give that to communities and to give them the flexibility to be able to use those dollars in ways that are tied more to [treatment] outcomes than to volume" of services delivered by providers.

"Global budgets, quite frankly, look much like a capitation rate. It's a dollar-per-person amount per month that's risk-adjusted for that community." In other words, communities with a greater number of sick people would receive more, while healthier communities would receive less, Goldberg said.

The global budget will no longer grow at medical inflation but will be held to a fiscally sustainable rate, he added.

That the Obama administration is touting the plan is noteworthy in light of the call by Republicans for turning Medicaid into a block grant program where fixed sums of money go to the states, giving them flexibility to determine how the money is used. One apparent difference, however, is that in the case of the Oregon plan, it was subject to federal review and approval.

Goldberg said Oregon officials are committed to lowering the historical cost trend by 2 percentage points. "So over the last five years or so, our historical trend has averaged about 6 percent a year, and we'll lower it to 4 percent," Goldberg said as an example of how outlays would change. "And we'll do that while improving outcomes" of treatment.

Community care organizations in some instances would include locally run managed care organizations, such as the Kaiser health plan. But their governance will have to be expanded, Goldberg said. "We have in some communities managed care organizations that are run primarily by the local physicians. And, in other communities, we have managed care organizations that are run by hospital systems. What this does is really have a community demonstrate that they're bringing together doctors and hospitals and consumers and others in the health care delivery sector to work together and problem-solve so that they're not just fighting for a bigger piece of the pie but they are actually tied together and have to work together to improve the health of the population."

Oregon's Democratic Gov. John Kitzhaber said that "with unprecedented collaboration between local communities, health care providers and our federal partners, Oregon is on the right track to create a system that will both improve care and reduce costs."

And Health and Human Services Secretary Kathleen Sebelius said Oregon's efforts to "coordinate care, which mirror our efforts at the national level thanks to the Affordable Care Act, will mean better care for those on Medicaid, better health outcomes and lower costs."

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