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Welcome to the official website for the
Texas Senate
February 16, 2011
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(AUSTIN) — Changing to an outcome-based model for reimbursing physicians is the key to controlling spiraling Medicaid costs, said Lt. Governor David Dewhurst and Flower Mound Senator Jane Nelson on Wednesday. Medicaid is one of the biggest costs to the state budget, accounting for 28 percent of general revenue. This is up from 19 percent eleven years ago, and costs are projected to rise even more in the coming years. Nelson has filed two bills aimed at reining in Medicaid costs while increasing the quality of care for patients.

Senator Jane Nelson, Lt. Governor David Dewhurst
Senator Jane Nelson and Lt. Governor David Dewhurst laid out a plan Wednesday to reduce Medicaid costs while improving quality of care.

While the U.S. spends more than twice as much per capita on healthcare than any other developed nation, American health is no better, and in many cases worse, than other countries. Part of the reason for this is that Americans pay hospitals and physicians per procedure, even if the procedure is unnecessary or ineffective. "Those dollars should reward healthy outcomes," said Nelson. Also to blame is the focus on reactionary medicine, rather than preventative medicine. By encouraging doctors and patients to make wellness and prevention a primary goal of healthcare, Dewhurst said Texans would avoid expensive treatments and emergency room visits. Rather than mandate these changes, Dewhurst and Nelson want to use market solutions, making it worthwhile for doctors and hospitals to encourage prevention.

The first bill, SB 7 by Nelson, seeks to achieve this goal by lowering reimbursements for doctors in cases of preventable complications, or readmissions for the same medical issue. This way, doctors make more when their patients get well and stay well, but doesn't punish physicians if complications arise beyond their control. It would also offer incentives for hospitals that operate more efficiently and would establish a pilot study to look at the effectiveness of the pay-for-performance model in long-term care.

Nelson's second bill, SB 8, would develop a state plan to implement and use pay-for-performance as a way to improve the quality and efficiency of healthcare in Texas. It would require the public reporting of preventable complications and readmissions, so patients can choose a hospital or doctor that provides better outcomes. It would standardize hospital wristbands across the state; sometimes the same color of wristband can mean two completely different things in different hospitals, which can cause confusion. SB 8 is also intended to develop a framework to track preventable conditions that arise in long-term care.

Dewhurst said the savings to the state from an outcome-based model could be substantial. Studies estimate reductions in primary and acute care costs by a third, he said. While he said he didn't want to get ahead of the process, such savings could even offset proposed cuts to Medicaid in the current budget.

The Senate will reconvene Thursday, February 17 at 11 a.m.

Session video and all other Senate webcast recordings can be accessed from the Senate website's Audio/Video Archive.