An Unlikely State Schools Nation on Healthcare Payment Reform

With a head start on most of the country, Arkansas is pioneering a series of system-wide payment reforms designed to create a value-based healthcare delivery system.

When you think of fiscally progressive, trend-setting states, Arkansas probably is not the first to come to mind.

But the home of the Razorbacks is on the cutting edge of healthcare reform efforts nationwide, with the state building the country's first public-private, universal-payer, value-based healthcare delivery system.

In 2012, state officials launched the Arkansas Payment Improvement Initiative, a gain-sharing/cost-penalty payment system for healthcare providers. The first payers to enter into the new system were the state's Medicaid program and the dominant commercial-insurer duo, Arkansas Blue Cross Blue Shield and Humana.

"Medicaid almost has to lead the way," Andy Allison, the state's Medicaid director, told me earlier this month. "Medicaid typically adopts the policy changes first, then the private payers adopt later."

Arkansas' universal payer system is so innovative, that federal officials are studying whether Congress would have to pass a new law for Medicare to fully participate, Joseph Thompson, MD, the state's surgeon general, told me earlier this month. "We have stimulated debate in the federal Department of Health and Human Services," he said. "They may be concerned they don't have statutory authority."

Thompson told me that a universal payment system can be a powerful driver of change in any state's healthcare reform efforts, such as setting consistent incentives for providers to attain quality and cost containment goals. "We have all of our public and private payers pulling in the same direction," he said. "We are looking at a total system transformation."

Crisis Spurs Healthcare Payment Reform in Arkansas

I have been politically aware since Jimmy Carter was elected president and a member of the workforce nearly as long. The level of cooperation and conciliation that is on display in Arkansas appears unprecedented.

The political maneuvering to establish and maintain a key element of the state's healthcare reforms, Medicaid expansion, has been an epic struggle.

After Election Day in 2012, Democratic Gov. Mike Beebe faced a huge obstacle in his quest to expand Medicaid to provide coverage for half of the state's uninsured residents – as many as 250,000 adults. Republicans had taken control of both houses in the Arkansas legislature for the first time since Reconstruction. The GOP caucus opposed Medicaid expansion. And 75 percent majority votes were required in the House and Senate to change the state's Medicaid program.

"There were two general groups of Republicans, all of whom don't like the ACA, don't like Obamacare," Beebe told me last week. "Some are honestly opposed, some are afraid of elections."

The political impasse was broken last spring, when a group of business-friendly Republican senators led a drive to expand Medicaid through private insurance policies purchased on the state's new public exchange, Arkansas Health Connector.

Payment Reform Naysayers 'Better Wake Up'

The "private option" for Medicaid expansion has since become a rallying cry for expansion advocates in nearly two dozen states where Republican lawmakers have been blocking expansion of the program. Last month, New Hampshire became the latest state to adopt Medicare expansion, again with Republican senators taking up the private option banner.

State Sen. Jonathan Dismang, who helped lead the GOP effort to enact private option Medicaid expansion in Arkansas, told me last week that The Natural State has shown the country how to make the difficult compromises necessary to advance healthcare reform. "We would like to transform Medicaid. We have something that can be replicated in other states," he said. "I feel good about what we've done."

I feel good about it, too. Arkansas is showing the country that it is possible to tear down the political and economic barriers to healing what ails US healthcare.