Lawmakers discuss Medicaid expansion, meaning of ‘payment reform’

Valerie Davidson, commissioner designee of Alaska’s Department of Health and Social Services listens to the State of the State Address, Jan. 21, 2015. (Photo by Skip Gray/360 North)
Valerie Davidson, commissioner designee of Alaska’s Department of Health and Social Services listens to the State of the State Address, Jan. 21, 2015. (Photo by Skip Gray/360 North)

The state House Finance Committee spent two hours this morning considering the Governor’s Medicaid expansion bill- HB 148. Lawmakers spent part of that time talking about “payment reform.” But what exactly does that mean?

The Medicaid expansion bill allows the department to consider payment reform, along with other innovations, as it works to control costs in the state’s Medicaid program.

Representative Lance Pruitt, an Anchorage Republican, wanted to know more.

“I’ve heard and seen a lot about payment reform,” Pruitt said. “There’s even parts of the bill that say payment reform. But I don’t have a definition, from what I can tell, of what does payment reform exactly mean.”

Health Commissioner Valerie Davidson spent several minutes answering Pruitt. But her main point was that payment reform would involve reimbursing doctors based on patient outcomes instead of paying for every specific service. The idea is to give doctors incentives to provide the best care instead of a lot of care:

“Alaska is a fee-for-service state and quite frankly we are interested in changing that dynamic and quite frankly we have to,” Davidson said. “And we are interested in reforming Medicaid, not just for the expansion population, but for everybody. Because we don’t have a choice.”

At the federal level, Medicare recently announced it’s also moving away from fee-for-service.

Davidson said providers in Alaska know the current Medicaid system isn’t sustainable. And they also know payment reform is coming. Davidson said the state is in a good position to bargain with providers, but she said the department also needs to involve them in the reform process:

“We have to be able to work with the providers, and they certainly know what our challenges are in this state,” Davidson said. “Our budget problem has been all over the news. All over social media. And people recognize we have to do things differently.”

Pruitt is worried about the incentives of the status quo when it comes to health care payments in Alaska. He cited an Anchorage School District report that identified 300 specialists in the state who bill over a billion dollars a year for their services. He wondered if doctors earning that much money would be willing to negotiate.

He told the story of a woman who was diagnosed with a brain tumor and spent $750 dollars to see a specialist who essentially said, “I can’t do anything for you.”

“Maybe we’re in the wrong terminology here. Maybe it shouldn’t be Medicaid reform, maybe it should be medical reform,” Pruitt said. “Because in Alaska we’ve got serious problems where just the public can’t seem to pay. I mean it’s out of control. Three times what it would cost in the rest of the us for a primary care visit, that’s insane. we have bills all the time on gas gouging, maybe we should look at medical gouging in this case.”

The Health Department is hiring a contractor to look at the types of payment reform that have worked in other states to get a better idea of what could work in Alaska.

The House Finance committee plans to spend more time considering the Medicaid expansion bill Thursday morning.

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