The Washington Post’s Wonkblog today highlights Oregon’s Medicaid demonstration project, which uses a “global budget” in an attempt to control health care costs. In exchange for $1.9 billion over five years from the federal government, “Oregon’s Medicaid program must grow at a rate that is 2 percent slower than the rest of the country, ultimately generating $11 billion savings over the next decade.” How will they do this?

Oregon divided the state into 15 region and gave each one a set amount to care for each patient. These regions can divvy their dollars however they please, so long as patients hit certain quality metrics, like ensuring that adolescents get well-care visits and that steps are taken to control high blood pressure.

The hope is that each of the 15 regions, known as community care organizations [CCO], will invest only in the most cost-effective health care. A behavioral health worker who can prevent emergency admissions becomes a lot more valuable, the thinking goes, when Medicaid funding is limited.

In this way, the Oregon plan has some parallels to Republican ideas to “block grant” the Medicaid program, and give states a set amount to run their programs. Both rely, in part, on a fixed budget to put downward pressure on health spending.

As an application to the Centers for Medicare & Medicaid Services describes,

CCO global budgets are designed to cover the broadest range of funded services for the most beneficiaries possible. The construction of global budgets start with the assumption that all Medicaid funding associated with a CCO’s enrolled population is included. Global budgets will include services that are currently provided under Medicaid managed care in addition to Medicaid programs and services that have been provided outside of the managed care system. This inclusive approach will enable CCOs to fully integrate and coordinate services, achieve economies of scale and scope and to contain per capita costs to a sustainable fixed rate of growth. The global budget approach also allows CCOs maximum flexibility to dedicate resources toward the most efficient forms of care.

Back to Wonkblog:

As Oregon’s population grows, the state has come to realize that Medicaid is not a bottomless bucket of money. The state’s budget cannot sustain that. Instead, it strives to deliver what health policy experts call “the triple aim”: higher-quality care that leads to better outcomes, all delivered at a lower cost.

“Oregon is trying to change the way that health care is delivered with incentives to deliver smarter, better care, instead of just imposing budget changes that cut back on health care,” said Cindy Mann, director of the Center for Medicaid and State Operations. “They’re doing this statewide and it’s very exciting for us.” . . .

“In terms of cost-control experiments, the likes of this are something we have never seen in health care,” said John McConnell, a health policy researcher at Oregon Health & Science University who is studying the Oregon Medicaid waiver. “The natural questions are: Is it going to work? Is the state going to fix the budget? And if they do fix the budget, how are those savings accomplished?”

Million dollar questions, each.