25 states to start testing new Medicaid models

WASHINGTON - The Department of Health and Human Services said on Thursday that it would provide 25 of the 50 states with funding to test new ways to lower costs and improve care within the national Medicaid program for the poor.

The first states to receive State Innovation Model awards are Arkansas, Maine, Massachusetts, Minnesota, Oregon and Vermont, which will implement plans to transform their healthcare delivery system under President Barack Obama's healthcare reform law, which sets aside $300 million for the overall venture.

Medicaid, jointly funded by federal and state funds, accounts for about one-quarter of state budgets nationwide and has taken on new urgency as a funding item since the recession expanded the program's enrollment in many areas.

"I understand the real sense of urgency that states feel to improve the health of their populations, while also reducing total health care costs, and it's critical that the many elements of health care in each state - including Medicaid, public health, and workforce training - work together," Health and Human Services Secretary Kathleen Sebelius said in a statement.

One of the biggest cost areas includes about 10 million people known as "dual-eligibles" because they qualify for both Medicaid and Medicare. The group, which includes some of the oldest and sickest Americans, represents 15 percent of the Medicaid population but 40 percent of Medicaid spending.

The six selected states will use funds to test multi-payer payment and service delivery models, including Accountable Care Organizations, on a broader scale within their state. Another 19 states will receive awards to further develop proposals for comprehensive health care transformation, HHS said.

The innovations are seen by healthcare policy experts as a potential lever for reining in healthcare costs in Medicaid, the Medicare program for the elderly and disabled, and potentially spending across the $2.8 trillion U.S. healthcare system.

Medicare and Medicaid, which together serve about 100 million people, are expected to spend a combined $1.1 trillion in 2013, according to the federal Centers for Medicare and Medicaid Services. By 2021, spending on the two programs is forecast to top $1.9 trillion.