The U.S. Department of Health and Human Services last week gave tentative approval to provide $1.9 billion in initial funding to help Oregon overhaul its Medicaid system, which the state says has the potential to save $11 billion over 10 years.
Under the Oregon plan, the state would move its 600,000 Medicaid recipients into health system-based Coordinated Care Organizations that would accept a flat fee for providing care and services to a defined population.
The concept, not unlike the ACO concept that private payers and delivery systems have been touting, will encourage the health system to meet quality metrics, while creating incentives to provide low-cost, high-quality care.
Gov. John Kitzhaber, who is also a doctor, took to his Twitter account last last week to promote the potential funding and the revamp of the Oregon Health plan as "a defining moment for healthcare in OR," noting that, if successful, the program will provide better care at lower costs.
When the funding arrives, scheduled to be paid out over the next five years, the state won't be working from scratch to get the system up and running. Oregon has already been accepting applications for the Coordinated Care Organizations.
The commitment from HHS comes just in time to avert severe cuts in Medicaid payments the state was planning to otherwise make by this summer in order to keep its budget balanced. According to the state, some providers could have faced cuts as steep as 30 percent.
Kitzhaber was able to get the funding for the program despite the bright lights and intense political friction in Washington that surrounds all things concerning healthcare. In a written statement, HHS Secretary Kathleen Sebelius said the program closely resembles the efforts of her agency as spelled out in the Affordable Care Act.
"This is another example of how we are collaborating successfully with states in their efforts to find innovative healthcare solutions that work for their communities," Sebelius said in a written statement.
For Kitzhaber, it was banking on these close parallels, as well as the strong evidence of potential, significant savings that gave him confidence to press forward with the program.
"I always believed we would get here because the program makes so much sense," Kitzhaber told the Oregonian last week after the funding was announced.
In return for $620 million in federal dollars in the next fiscal year, Oregon agreed to reduce overall Medicaid costs by 2 percent.