State-Federal Partnerships are Key to Advancing Broad Health Care Improvements

Today’s health policy debates have brought more focus to state health policy flexibility and accountability.  The Reforming States Group’s Letter to the New Administration offered principles and policy proposals that strengthen state roles and capacity to improve population health through Medicaid and other state health programs. “Building strong state-federal partnerships is necessary to achieve our shared goals of improved population health and a more efficient and effective health care system,” noted Rachel Block, Program Officer for the Fund.

Two recent state waivers, one developed in Oregon and one in Maryland, demonstrate what can be achieved through state-federal partnerships.

Oregon

Starting in 2012, Oregon’s Medicaid waiver authorized the development of coordinated care organizations (CCOs) responsible for most services provided to almost all Medicaid beneficiaries in the state. Oregon also developed a global capitation payment system designed to cover costs for services under the waiver, including new care management and health improvement services that had not previously been part of Medicaid. The big policy question was whether CCOs could deliver care within their capitated budgets, reducing cost, while also improving access and quality.

A research team headed by Oregon Health Science University recently published data showing that the CCO program goals were largely met.  The researchers used a comparison group from Washington State’s Medicaid program, and standardized measures for expenditures, utilization, and quality.  In summary, the analysis found that:

• The CCOs achieved reductions in cost growth, mainly attributed to reducing inpatient hospital admissions and avoidable emergency department visits. Some reductions in “low-value” services were also observed (i.e., services that are used a lot but have limited benefit).
• The greatest reductions were observed in adults and those with high-risk factors for chronic disease, populations targeted by the CCOs for improved prevention and care management.
• There was no significant difference between CCOs serving urban versus rural areas, or those with for-profit versus not-for-profit ownership; i.e., positive results were achieved across the broad spectrum of participating organizations.

Clearly, the state-federal partnership provided the authority and resources for the state to implement these important innovations.  The authors note that “Oregon’s model—characterized by a large federal investment, accountability for coordinating care, and a global budget that integrates financing streams and allows for flexibility in how funds are spent—could provide lessons on controlling health care spending for other state Medicaid programs.”

Maryland

Under Maryland’s all-payer waiver, approved by CMS in 2014,  the state committed itself to limit health care cost growth and improve quality for all payers, with specific targets set for the Medicare program.  Maryland had historically set hospital fee-for-service payment rates for Medicare and other payers.  Under this waiver, Maryland received federal approval to regulate Medicare payments to hospitals as part of an all-payer global budget model.

In January, members of the Maryland Health Services Cost and Review Commission that administers the waiver reported on the cumulative results for the all-payer model in terms of overall savings and savings specifically for the Medicare program.  According to the authors:

• Maryland successfully limited the growth in the per capita hospital revenues for all payers well below the long-term growth rate of the state’s economy (3.58% per year).
• Maryland achieved an estimated $429 million in total Medicare hospital savings to date, exceeding the model’s five-year hospital savings requirement of $330 million. From 2013 through August 2016, the hospital spending growth rate underlying the savings was more than 4% below the national growth rate.
• Maryland hospitals have reduced potentially preventable complications by 48%, exceeding the five-year 30% reduction target.

In order to sustain and extend the potential benefits, the state is moving beyond its initial focus of improved hospital performance and will focus its attention on other components of the health care system, including payment and delivery system reforms targeting primary care management of chronic conditions, coordination of long-term and post-acute care services, and rural hospitals.  Maryland is using a combination of regulatory and market-based strategies to advance the next stages of its model.

The state-federal partnership is an essential component to the continued evolution and success of Oregon’s and Maryland’s innovative work.  “With federal support for state flexibility coupled with strong accountability measures, these states were able to implement very different models with very similar goals, and the results have been successful so far,” said Ms. Block.