Governor’s consultant report recommendations for Medicaid savings are baseless

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It’s not in the headlines but the biggest source of potential savings, $200 million, proposed by the Governor’s controversial report from Boston Consulting Group (BCG) to save money in state government to  is to go back to failed Medicaid financial risk models. There are two problems with the proposal. First, the financial risk models don’t work – not the ones we’ve tried in Connecticut Medicaid, nor for other systems around the US. Second, the consultants provide no evidence to support their vague savings estimates, nor do they provide details on the proposal. The worst part is that we paid $2 million for this report.

 Adopting the unassuming label of “value-based purchasing” (VBP), the consultants are pushing models that give providers incentives to lower the cost of care. VBP is very fashionable now in health policy circles. The idea is a good one – that we will pay for better quality and stop paying for low-value care that doesn’t really work. In these models, large health systems make more money by providing less care and get to keep some or all of the savings. The risk, of course, is that patients won’t get the care we need, and these models never include robust monitoring for harm. In practice, despite years of trials covering millions of people across many plans and programs, VBP doesn’t work to either improve quality or save money.

BCG’s report recommends VBP through capitation for Medicaid to save money. Under capitation, providers or insurers are paid a set amount for all the care needed by members, whether or not they get any care. Connecticut Medicaid was run under capitation for twelve years; it never saved money, access to care was terrible, and quality suffered. It was a massive failure. Since we replaced capitation in 2012 with a system that coordinates care and rewards providers for better quality, access to care is better, far more providers participate in the program, quality is up, and the program has saved billions of taxpayer dollars. Connecticut Medicaid has already experimented with another VBP program, PCMH Plus, but it has not saved money or improved quality.

BCG’s report offers no specifics on how Connecticut could achieve more savings with VBP. They mention modest savings from an unnamed much larger state that are less than we are already saving with our successful reforms. I asked for any information on the other state or details about how they arrived at their $200 million figure, but there aren’t any.

Overall, the report promises a lot and delivers little. Hopefully it won’t be used as an excuse by proponents of capitation and for-profit insurers to re-enter our Medicaid program. We know what that looks like and we don’t need to make that mistake again.