05/03/2012 06:32 pm ET

Health Care Reform In Oregon Gets $1.9 Billion From U.S. For Poor Residents

Oregon may have found a way to improve the health care it provides poor residents while saving money. The federal government has agreed to give the state $1.9 billion to try it out.

The roughly 600,000 people enrolled in the state's Medicaid program, called the Oregon Health Plan, will gain access to "coordinated care organizations" designed to help patients maintain their health and stay on top of treatments for chronic medical conditions.

If it works, Oregon will save $11 billion over 10 years, Gov. John Kitzhaber (D) and U.S. Health and Human Services Secretary Kathleen Sebelius said in a statement today. "Oregon is on the right track to create a system that will both improve care and reduce costs," Kitzhaber said in the statement. Medicaid is jointly financed by the federal government and states, which administer the programs.

Holding down Medicaid spending has been a huge challenge for states, especially since the recession began in 2007. Medicaid accounts for 23.6 percent of state budgets, more than they spend on education or any other area, according to the National Governors Association and the National Association of State Budget Officers.

The economic downturn has made matters worse as people lost jobs and became eligible for Medicaid benefits. States have responded by slashing fees to medical providers, eliminating optional benefits like vision and dental coverage, and dropping beneficiaries. Pennsylvania recently removed almost 90,000 children from Medicaid while Hawaii struck 3,500 adults off its rolls.

Oregon's initiative aligns with the aims of President Barack Obama's health care reform law. The federal statute, now under appeal in the Supreme Court, includes provisions designed to coordinate care between doctors, hospitals, and other medical providers for people with chronic medical conditions.

People with the worst health and with chronic diseases like diabetes, who account for a hugely disportionate share of health care costs, get special attention, according to the Statesman Journal of Salem, Ore. The program would provide patients with assistance they don't currently get, such as caseworkers who will help set up doctor's appointments and make sure patients stay on the drugs their physicians prescribe, according to the Associated Press.

Oregon would have been forced to cut payments to medical providers and state's budget would have blown up without the agreement with federal authorities, Kitzhaber told the Oregonian. Instead, the state will receive $620 million during the fiscal year that begins July 1. The remaining funds will be parsed out during the four following years. Kitzhaber visited Washington this week to finalize the deal, the newspaper reported.