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Tax Law

State Net Capitol Journal – April 16, 2012

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Budget & Taxes

CT PULLS PLUG ON MANAGED CARE FOR MEDICAID: The way states used to pay doctors and hospitals for treating Medicaid patients was by directly reimbursing them for the services they rendered. But spurred by criticism that the so-called "fee-for-service" method encouraged health care providers to rack up fees for unnecessary tests and procedures, states have been switching to managed care plans, in which contracted health care organizations agree to a flat monthly fee for covering Medicaid beneficiaries, regardless of the actual costs they incur.

Connecticut, however, is going back to the old system. After struggling for years with managed care arrangements that state officials say were no longer saving the state money or providing patients adequate care, the state scrapped its Medicaid managed care system in January and began directly reimbursing providers again.

The state's payment system may be a return to the past, but its method for providing care to Medicaid patients isn't. A non-profit organization - one of the state's former managed care organizations - provides care coordination for all Medicaid beneficiaries, including intensive case management for the elderly, blind and disabled. The state is also aggressively promoting "medical home" programs by providing grants to primary care physicians for hiring case managers to track patient care. And it is taking part in a federal grant program to improve care for individuals who qualify for both Medicaid and Medicare, as well as helping seniors transition out of nursing homes.

Proponents of managed care don't put much stock in the state's efforts, however.

"We see Connecticut as an anomaly," said Margaret Murray, executive director of the Association for Community Affiliated Health Plans.

Most states are moving to managed care because it provides more budget certainty and flexibility than they can get running their own programs, Murray said. For instance, managed care organizations can create new types of services, like mental health counseling, to meet a community's needs as they arise, whereas states would have to get federal approval first, she pointed out. She also said many states don't have the personnel to coordinate care, develop a provider network and process claims efficiently.

But according to Sylvia Kelly, CEO of Community Health Network, the organization managing Connecticut's new Medicaid program, the transition there has been "a non-event." Three months in, she said most providers are signing up and few patients have reported losing care. Moreover, the state expects the overhaul to save $41 million this year and $80 million in 2013.

Oklahoma is the only one other state that has moved away from managed care. But its overhauled program, launched in 2003, is widely considered a success. (STATELINE.ORG)

WA PASSES BUDGET IN DOUBLE OT: The Washington Legislature finalized a budget last week (HB 2127b) and sent it on to Gov. Christine Gregoire (D) for her signature.

"Reaching this point wasn't easy," Gregoire said.

The governor called lawmakers into a second special session at midnight last Tuesday after they failed to agree on a budget by the end of the first 30-day special session.

Sen. Joe Zarelli (R), the Senate's minority party leader on budget issues, said the deal was "accomplished in a bipartisan way, sometimes tugging and pulling, but nonetheless, in a bipartisan way."

The plan that ultimately drew a bipartisan 64 votes in the 98-member House of Representatives and 44 votes in the 49-member Senate relies heavily on an accounting maneuver that will generate $238 million by giving the state temporary control of local sales taxes before they are redistributed back to the local jurisdictions. The budget also makes no cuts to K-12 or higher education, eliminates a tax deduction for some large banks and holds $320 million in reserve.

One of the major sticking points of negotiations was reportedly early retirement benefits for future state employees. That impasse was broken when separate legislation was approved cutting benefits up to 50 percent for workers hired after May 2013 who retire at age 55. The change is expected to save the state $1.3 billion over 25 years. (OLYMPIAN, STATE NET)

BUDGETS IN BRIEF: The public pension fund that provides retirement benefits for nearly half a million CALIFORNIA teachers is facing a projected $64.5 billion shortfall over the next three decades, according to the fund's deputy chief executive. Ed Derman told reporters last week the California State Teachers' Retirement System, the nation's second largest public pension fund, has only 69 percent of the assets it needs to meet future obligations (LOS ANGELES TIMES). • A new program that kicked off in NEW YORK in January allows homeowners to pay for energy efficiency upgrades using money they save by reducing energy use. Similar "on-bill financing" programs are in the pilot stage in at least 20 states, according to the American Council for an Energy-Efficient Economy (STATELINE.ORG). • MARYLAND's General Assembly failed to approve an income tax measure negotiated by House and Senate leaders before the end of the regular 90-day session last week, triggering a so-called "doomsday" budget, balanced solely through hundreds of millions of dollars in cuts, for the fiscal year that begins July 1. Legislative leaders said they would ask Gov. Martin O'Malley (D) to call a special session to allow them to take another shot at an income tax plan (BALTIMORE SUN). • NEBRASKA Gov. Dave Heineman (R) signed a scaled down version of his income tax-cut plan into law last Tuesday. LB 970 would initially have cost the state $327 million over three years but was pared down to $97 million by lawmakers (LINCOLN JOURNAL STAR).

- Compiled by KOREY CLARK

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