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Global Budget Cuts Costs but Reduces Access

Oregon’s global budget has unintended consequence of cutting access for poor kids (Volume 9, Issue 44)

Efforts to replace the Affordable Care Act have increased pressure to contain Medicaid spending, which now accounts for the greatest share of national health expenditures. In 2012, Oregon reformed Medicaid by organizing care delivery into 16 globally-budgeted coordinated care organizations (CCOs).

CCOs manage the cost and quality of health care of defined populations and differ from other models (e.g. Medicare ACOs) in that: 1) CCOs accept risk-adjusted prospective payments from the state, manage claims, pay providers, and carry upside and downside financial risk; 2) their governance structures include providers, community members, and local stakeholders; 3) CCOs have flexibility in how they spend their budgets which allows them to: 4) provide nontraditional services addressing social determinants of health, including behavioral and oral health, addiction services, and care coordination.

A recent study evaluates the effect of Oregon’s Medicaid reform on quality, utilization, and spending. The authors use a difference-in-differences design to compare pre-intervention (2011) to post-intervention (2013-2014) expenditures to Medicaid enrollees in nearby Washington state. The intervention was associated with slower increases in total health expenditures ($1 in Oregon vs. $7 in Washington, p=0.004), representing a 7% relative decrease in standardized per-member-per-month expenses.

The savings were primarily attributable to relative decreases in inpatient expenditures in Oregon ($5.80 PMPM), in addition to relative decreases in evaluation and management services ($1.95 PMPM). There were minimal relative changes in costs of testing ($0.22 decrease), imaging ($0.16 increase) and procedures ($1.17 increase) in Oregon compared to Washington.

They also observed fewer primary care visits and inpatient days, decreased access to primary care based on changes in HEDIS measures among children, an increase in HEDIS measures among adults, and a greater decrease in avoidable ED visits in Oregon compared to Washington.

Oregon Medicaid’s global budget payment reform reduced total health expenditures, largely by reducing hospitalizations. Further research is needed to explore unintended consequences suggested by fewer primary care visits and decreased primary care access among children. Oregon’s program stands in marked contrast to consumer-based cost-sharing reforms in Indiana, Arkansas, and Michigan. Evidence from Oregon’s program should inform efforts to improve Medicaid’s value.

commentary by Michelle Lin


In 2012 Oregon initiated an ambitious delivery system reform, moving the majority of its Medicaid enrollees into sixteen coordinated care organizations, a type of Medicaid accountable care organization. Using claims data, we assessed measures of access, appropriateness of care, utilization, and expenditures for five service areas (evaluation and management, imaging, procedures, tests, and inpatient facility care), comparing Oregon to the neighboring state of Washington. Overall, the transformation into coordinated care organizations was associated with a 7 percent relative reduction in expenditures across the sum of these services, attributable primarily to reductions in inpatient utilization. The change to coordinated care organizations also demonstrated reductions in avoidable emergency department visits and improvements in some measures of appropriateness of care, but also exhibited reductions in primary care visits, a potential area of concern. Oregon’s coordinated care organizations could provide lessons for controlling health care spending for other state Medicaid programs. PMID: 28264946

McConnell, KJ, et al. Health Affairs. 2017; 36 (3): 451-459.

Michelle Lin, MD, MPH, SM
About Michelle Lin, MD, MPH, SM

Dr. Michelle Lin is an assistant professor of Emergency Medicine at the Icahn School of Medicine at Mount Sinai. She completed residency at NYU/Bellevue Hospital Center followed by a health policy research fellowship at Brigham and Women's Hospital. She earned undergraduate and graduate degrees at Northwestern and Harvard. Contact: Website | Twitter | More Posts