In early 2012, Oregon launched a new way of delivering Medicaid—the Coordinated Care Organizations (CCO’s). I’d been spending much of my free time during the previous two years reading books and articles about how to reduce the unsustainable growth in health care costs. When I read the description of the new CCO’s, I realized they incorporate many of the needed innovations. I was initially surprised that Medicaid would be at the vanguard of reforming our delivery system. Why not Medicare or private insurance companies? As I’ll explain below, I soon realized there’s a good reason why Medicaid is now taking the lead.
Each CCO will receive a fixed number of dollars each year from the state and federal governments based on the number of Medicaid recipients living in the part of Oregon that the CCO serves. Local providers, e.g., doctors and hospitals, will form the CCO governing boards and assume responsibility for determining how to reorganize medical services so quality care is provided within this global budget. The Oregon Health Authority (the agency that administers Medicaid in Oregon) will monitor the CCO’s to ensure that quality standards are maintained, but otherwise will let local authorities innovate. Medicaid had already changed the way it pays primary care providers—going from fee-for-service to “managed care.” The CCO’s will expand managed care by putting all providers—including primary care doctors, hospitals, specialists, dentists, and mental health agencies—under one global budget.
The rest of our health care system suffers from two fundamental problems. First, Medicare and private health insurance plans aren’t required to operate within a fixed budget. Medicare recipients are allowed open-ended access to all the medical services they desire and Medicare pays whatever this costs. Private insurance companies raise their premiums to offset cost increases. Workers ultimately pay for these premium increases through slower wage growth. Second, successful reforms must be lead and supported by medical professionals and we currently aren’t motivating them with the right incentives. The widespread use of fee-for-service payments has caused doctors and hospitals to focus on providing more services and often to ignore the effects of their actions on costs.
I realized that Medicaid is the only part of our health care system facing a firm budget. With both state and federal budgets under severe pressure, the growth in Medicaid funding is likely to be flat or, at best, to increase slowly. The traditional approach of reducing Medicaid costs by cutting payments to providers has gone about as far as it can go. Further cuts will cause an unacceptable number of providers to stop seeing Medicaid patients. I believe the local medical community realizes all this. With a fixed budget, the only way providers will receive adequate compensation and have the resources to provided needed new services is to make the system more efficient. With the new CCO structure, providers have been given the power and a new motivation to make changes—so the limited resources go where they will provide the most benefit.
Last April, I attended my first CCO meeting—a regional kick-off luncheon in Hood River featuring a panel of local providers and public health officials plus an inspirational talk by Dr. Bruce Goldberg, the Director of the Oregon Health Authority. I learned that the medical community in Wasco and Hood River Counties was in the process of forming the Columbia Gorge CCO (CGCCO) and I decided to attend their meetings over the next year. Their next step was selecting an insurance company to make payments and help with administration. They interviewed two insurance companies—PacificSource and ColumbiaPacific—and, after two close votes, PacificSource was selected.
I suspected that county governments would be involved in the CCO’s since I’d seen Karen Joplin, a Hood River County Commissioner, on the panel in Hood River. I didn’t see anyone from Sherman County (where I live) at the initial meetings. Sherman County has a health clinic in Moro that provides primary care for the majority of Sherman County Medicaid patients. However, most of the specialist and hospital care is provided in The Dalles (the closest large town) and it seemed logical that Sherman County would be part of the CGCCO. I contacted the Sherman County Court and offered to report what I was learning at the CGCCO meetings. The Sherman County Court then appointed me as one of their two representatives on the group forming the CGCCO.
Over the next several months, we spent almost all our time wrestling with how the governance structure should be set up—particularly how the three county governments would be involved. During these meetings, I was impressed with all the people I met, but especially with Dr. Kristen Dillon (the chair of the formation group), Dr. Judy Richardson, and Ellen Larson. Coco Yackley was very helpful in providing administrative support and keeping the group moving forward. I always saw a cooperative spirit at the meetings. I didn’t observe “turf battles”—even between the two rival hospitals. Before the last meeting of the formation group, my county decided to join the Eastern Oregon CCO rather than the CGCCO. The EOCCO includes most of the rest of Eastern Oregon, including all the counties to the east of Sherman County. The EOCCO promised to focus on the special problems of providing health care in sparsely populated rural counties. The Sherman County Court’s deliberation was more difficult because neither CCO had yet started making substantive decisions about planned changes. Sherman County’s decision left important questions unanswered. How will care for Sherman County Medicaid patients be coordinated and paid for when care is provided by providers located in a different CCO?
I started attending CCO meetings for two reasons. First, I wanted to meet the health care leaders in my local area and observe how they and their organizations work together. I’m well on my way to accomplishing this goal. I very much appreciate the friendship and help I’ve received. My second objective is to learn how the governing board will tackle the huge problems it faces of controlling costs and better coordinating care. These issues are just starting to be addressed and the upcoming meetings should be even more interesting. I plan to continue attending. Keeping cost growth within a very slowly growing global budget will involve limiting payments to some of the organizations represented on the governing board. To paraphrase one of my favorite health care economists, “Every bit of waste and inefficiency in our healthcare system is someone’s current income.” From what I’ve seen over the past year, I’m confident the CGCCO’s governing board will be able to make the hard choices necessary to make the CCO a success.