The Impact of Medicaid Global Budgets on Hospital Care: Evidence from Oregon

Background: In 2012 Oregon transitioned its Medicaid program to cover 90% of its enrollees in Coordinated Care Organizations (CCOs). CCOs can be seen as a type of Medicaid Accountable Care Organization, but include an administrative layer (similar to a Managed Care Organization) and are at full financial risk through a global budget. As part of its 1115 Medicaid Waiver, Oregon agreed to reduce its historical rate of health care spending growth from 5.4% to 3.4%. The global budget and prespecified rate of growth have analogies to per capita caps and block grants, features that were prominent in several “repeal and replace” bills that were put forth in 2017. We provide an assessment of the Oregon model on inpatient admissions, a high cost service area.

Study Design. We estimated changes in inpatient care using a difference-in-differences approach and data from the Healthcare Cost and Utilization Project (HCUP) and monthly and county Medicaid enrollment data from Oregon and comparison states of Washington, Colorado, New Mexico, and Arizona. We used 1-1 nearest neighbor matching to identify similar county and demographic matches across these comparison states. Using 2 years of pre-intervention data (2010-2011) and 2 years of post-intervention data (2013-2014), we assessed the impact of the CCO model on inpatient admissions and length of stay. In subanalyses, we also assessed changes in hospitalization rates for elective vs. emergency admissions; ambulatory-care sensitive admissions, and admissions among individuals from low-income neighborhoods. Finally, since the CCO model provided care for more than one out of every four Oregonians, we tested for spillover effects among the commercially insured. We assessed parallel trends among the treated and comparison groups and found no statistically significant differences across multiple groups, including all admissions, length of stay, and emergency and non-emergency admissions.

Results. Oregon’s transition to global budgets was associated with significant reductions in the rate of inpatient admissions of approximately 1 admission per every 1000 enrollees per month, equivalent to a 9% reduction in the admission rate. There were significant reductions in both the emergent and elective rate of admissions, although the changes were larger among elective admissions, and, within that group, particularly among admissions for births and maternity care. The length of stay among Oregon Medicaid enrollees was low prior to the CCO transformation and remained low in the two years following the intervention, suggesting that changes in the extensive margin were not offset by changes in the intensive margin. In subanalyses, we found significant reductions in ambulatory care sensitive admissions and admissions among individuals from low-income neighborhoods. We found no evidence of spillover in the commercial market.

Conclusions. Oregon’s global budgets were associated with significant reductions in Medicaid inpatient admissions relative to matched counties in western states. The extent to which the Oregon model can continue to place pressure on inpatient utilization will depend on the longer-term success of infrastructure investments and a portfolio of delivery system changes that are designed to provide care in less intensive settings. These changes may have lessons for Medicaid reforms in other states.