This is an archived article that was published on sltrib.com in 2012, and information in the article may be outdated. It is provided only for personal research purposes and may not be reprinted.

The federal government buys into the core principle of Utah's ambitious Medicaid overhaul: steering patients into managed care networks.

But officials have rejected key pieces of the plan and asked the state to regroup.

News of the partial denial came by way of a conference call last Friday between the Centers for Medicare and Medicaid (CMS) and state Medicaid Director Michael Hales. Moving patients into Accountable Care Organizations (ACOs) was "essentially OK'd," said CMS regional spokesman Mike Fierberg.

But Utah will have to abandon portions of the 91-page blueprint that run afoul of federal laws and rules, Fierberg said. "We told [state officials] we are more than happy to work with them to resubmit the waiver."

That didn't sit well with state leaders, who have asked CMS to prepare a formal denial letter with legal citations showing why some ideas are banned. Among them: higher co-payments and subsidies to pursue private insurance instead.

"Honestly, I think the Obama administration punted in an election year," said the plan's architect, Sen. Dan Liljenquist, R-Bountiful, who recently resigned from his legislative seat to run for Congress.

Liljenquist wants health officials to resubmit the request, but preferably under a Republican president.

"That's why we need a change in the White House," he said. "These guys are judge, jury and executioner... We should not be beholden to mid-level bureaucrats in Washington as to how to administer Medicaid in Utah."

Hospital, provider and patient advocacy groups contend all is not lost.

"The box has been drawn in terms of what the state can and can't do... We can now get to work," said Lincoln Nehring, senior health policy analyst at Voices for Utah Children.

Said Michelle McOmber, at the Utah Medical Association, "This was sort of a first step; let's throw everything in there and see how much flexibility we'll have and then get down to details."

But the denial stings and could make reform more difficult.

"It's not a deal-breaker. But I'm disappointed CMS is being so narrow-minded and trying to protect the old paradigm," said Rod Betit, CEO of the Utah Hospital Association. "It shows they are not giving state proposals full consideration."

Backed by health industry chieftains and unanimously approved by the Legislature, the overhaul was pitched as a way to preserve Utah's low-income health safety net, which is taking up a greater share of the budget.

It envisions handing Medicaid over to ACOs, managed care networks that would be paid lump monthly sums per patient. If an ACO spends more than allotted for care and prescription drugs, it absorbs the loss. If it spends less, it gets a share of the leftovers — similar to old HMOs of the '90s.

At issue for federal officials were some of the more controversial elements, such as allowing ACOs to charge patients higher co-payments than is currently allowed.

Utah's Medicaid program is limited to only the poorest of the poor, and "CMS is concerned about lumping more expenses on them," said Betit.

He noted the feds indicated higher co-pays might be allowed for families at 150 percent to 250 percent of the federal poverty limit.

Also of concern: a tool for cutting the use of high-cost, unproven treatments, similar to a strategy adopted more than a decade ago in Oregon; and a plan to allow eligible Utahns to forgo Medicaid in favor of subsidies to purchase private health policies on the state's Health Insurance Exchange.

These tools are aimed at aligning incentives so that patients, providers, insurers and hospitals are all responsible for using Medicaid dollars wisely — for medical care that works and doesn't break the bank, said Liljenquist. "We need these tools and we'll keep fighting."

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