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President Pro Tempore Jonathan Dismang
President Pro Tempore
Arkansas Senate
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500 Woodlane St. Ste 320
Little Rock, AR 72201-1090

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91st General Assembly
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State Receives Permission to Proceed With Medicaid Changes

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LITTLE ROCK - The federal government has given Arkansas approval to make dramatic changes in how Medicaid operates.
If plans go according to schedule the changes will take effect in July of next year. Other states will be watching Arkansas closely to see how effective the changes work. Their purpose is to hold down costs. Other states would likely follow suit if the changes in the Arkansas Medicaid program prove effective.
A major change in Arkansas Medicaid will be that physicians would no longer be paid under the current "fee for service" system. Instead, Medicaid will make a payment to a group of providers who treat a patient.
For example, a Medicaid patient with diabetes may see several providers for diagnosis, testing and treatment. Instead of making an individual payment to each health care professional for each service they do, Medicaid will make a "bundled" payment they all will share.
A lot of details still must be worked out. State officials are optimistic about the new plan, but Arkansas physicians who accept Medicaid patients are not on board. For one thing, they don't believe they were included in the initial stages of mapping out the new plan.
A spokesman for the state's main association of physicians has expressed concern that there isn't enough time between now and July of 2012 to implement such sweeping changes as are being proposed. He also questioned whether the new system will actually lower costs enough to address the anticipated shortfall in Medicaid's budget.
Some health officials say the changes that Medicaid is making will eventually have to come in private insurance and Medicare as well, because traditional fee-for-service models tend to drive up costs. Inflation in health care consistently outpaces the general inflation rate.
Officials say that if the state continues paying for health care under the existing system, shortfalls in the Medicaid budget would force serious cuts in services or require the removal of some patients from the program.
The governor projects a Medicaid shortfall of possibly $80 million next year and $250 million the following year.
The alternative to cutting services would be to lower payments to physicians and hospitals that treat Medicaid patients. However, physicians, hospitals and other providers of services say that reimbursement rates are already too low to cover their costs and lower payment rates would likely prompt many of them to drop their Medicaid patients.
A fourth of the state's population, or 771,000 people, receive some form of Medicaid service. Generally, the state pays for about a quarter of the total costs and the federal government pays for three quarters of the costs. Annually, Medicaid in Arkansas pays for about $4.3 billion in health care.
Medicaid pays for about 75 percent of all nursing home care in Arkansas. It pays for most of the treatment needed by people with disabilities. Medicaid pays for medical care of poor people of all ages. The ARKids First program is part of Medicaid. It pays for medical care for children in families in which the parents work, but don't earn enough to afford private insurance.


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