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The federal government has taken the unprecedented step of giving a state almost $2 billion for what amounts to a health care experiment. Oregon's governor has convinced the Federal Center for Medicare and Medicaid Services that he has a way to make Medicaid treatment better and cheaper.
Kristian Foden-Vencil of Oregon Public Broadcasting explains how.
KRISTIAN FODEN-VENCIL, BYLINE: Oregon is planning nothing short of a complete change in the way sickest people get health care. The plan is that each town - like Portland, Salem, Eugene - will have its own so-called Coordinated Care Organization. It's like a large umbrella, under which most of the big hitters in the town come together, like the hospitals; the doctors' offices; the mental health providers and dentists.
Governor John Kitzhaber used to be an emergency room doctor. His plan is that all those health care businesses will stop competing so directly, and instead have computers that can talk to each other so patients can go wherever they need to get the best care. He also plans to change the way they're paid.
GOVERNOR JOHN KITZHABER: I think this is really a defining moment for health care in the state of Oregon, and I think if we are successful, probably for health care beyond our borders.
FODEN-VENCIL: One of the experiments for improving care and saving money is the creation of a new group of health care workers. They'll work with Medicaid's sickest 20 percent, the people responsible for using 80 percent of the money. These are people suffering from chronic illnesses that need a lot of attention, like diabetes and heart failure.
They're people like 69-year-old James Prasad.
(SOUNDBITE OF MACHINERY)
FODEN-VENCIL: Prasad is having his blood pressure checked at his doctor's office. He used to help travelers at Portland International Airport, pushing wheelchairs and answering questions. But health problems forced his retirement.
JAMES PRASAD: I got a bypass surgery, stomach surgery - a big surgery. And I had to go to the doctor.
FODEN-VENCIL: He's had to go to the doctor a lot, and to the hospital a lot, and to the emergency room. In fact, that's why he came to the attention of Amy Vance. Her official title is outreach worker for Care Oregon, Prasad's health plan. But think of her as his health coach.
AMY VANCE: So, I'll call doctors with you.
VANCE: What else have we done? We've talked to pharmacy before together. We'll double check on meds together, so I'll come to an appointment. And then at home, we'll make sure that the medications are actually out of his med-pack.
FODEN-VENCIL: It might seem expensive to have a personal health guide. But while Vance is paid $20-an-hour, the reasoning goes that if she can keep Prasad out of hospital or the ER, it will save thousands, even tens-of-thousands of dollars. Vance says that with her help, patients take control of their illnesses and do all the things they have to, to get healthy.
For example she says, Prasad was asked to record his weight everyday. He took it to heart and started writing down all kinds of things
PRASAD: My weight, my diabetic, my blood pressure. How much medicine I put in.
FODEN-VENCIL: Prasad's doctor, Judy Becher, says she can now look at his notebook and adjust his medications.
DR. JUDY BECHER: When you felt poorly, you can point to what time it started based on the entry.
FODEN-VENCIL: Vance, the health coach, deals with about three patients a day. She carries a caseload of about 30 people and her cell phone is always on for those in crisis. But coaches are just part of Oregon's experiment, which enjoys surprisingly popular support from Republicans, Democrats, unions and business owners.
Here's Malia Wasson, the president of US Bank in Oregon, at the announcement that the feds were backing the state's experiment.
MAHLIA WASSON: Governor, I know that you're not prone to being overly demonstrative. But would you indulge me with a high five?
(SOUNDBITE OF LAUGHTER AND APPLAUSE)
FODEN-VENCIL: Indeed, the state's leaders are putting their political reputations on the line for this deal. The legislature passed its entire budget in the blind faith that the feds were going to come up with the money.
But there are skeptics. Republican State Representative Jim Weidner was one of the only politicians to vote against the plan.
STATE REPRESENTATIVE JIM WEIDNER: It doesn't really drive down the cost of health care. It's just shifting costs into different spots.
FODEN-VENCIL: He says it's an experiment that's going to end up costing the state a great deal of money. But Kitzhaber has an answer for that. He plans to pay the new Coordinated Care Organizations with a lump sum.
The thinking goes that hospitals and doctors don't have the financial incentive to make people better. Quite the opposite, if patients keep coming back, they keep getting paid. But under the new system, the quicker a patient gets better, the more money the Coordinated Care Organization can keep.
In fact, Governor Kitzhaber believes that over the next five years, Oregon will be able to save the feds every penny of the $2 billion the state has been promised.
KITZHABER: We estimated that if every state Medicaid program in the country were to adopt this model, the net savings would be about $1.5 trillion over 10 years.
FODEN-VENCIL: To put that into perspective, Congress is looking at $1.2 trillion in cuts after the supercommittee failed to come up with a budget.
Meanwhile, Oregon is pretty pleased with itself. But the feds have said that if the state doesn't show it cuts Medicaid spending by two percent next year, all this new money could well dry up.
For NPR News, I'm Kristian Foden-Vencil in Portland.
BLOCK: This story is part of a partnership with NPR, Oregon Public Broadcasting and Kaiser Health News.