LITTLE ROCK — The recently lowered projection of Arkansas’ Medicaid shortfall for the next fiscal year cannot be wholly attributed to reforms in the state’s health care payment system because those reforms are still in the early stages, the state Medicaid director told a legislative panel Wednesday.

Medicaid chief Andy Allison appeared at a joint meeting of the House and Senate committees on public health, welfare and labor to discuss the new shortfall estimate. On Jan. 31 the state Department of Human Services announced that the Medicaid program’s shortfall for the next fiscal year is projected to be $61 million, down from its previous projection of $138 million.

Allison said per-person spending on Medicaid beneficiaries is down, even though enrollment is growing. He said the economy cannot explain the trend, nor can the state’s initiative to move from a fee-for-services system to one in which health care providers are paid for episodes of care and rewarded for efficiency and healthy outcomes.

That initiative was only in effect in two treatment areas and for only three months during the period that it could have contributed to the decline in costs, so it could not have produced the cost savings directly, Allison said.

But he also said that DHS officials have traveled across the state talking to health care providers about what they can expect from the initiative, and he suggested that providers may have modified their behavior to prepare for the coming changes.

"We have demonstrated the legitimacy of the effort, that we were not just talking about it, we were actually doing it. That’s actually unusual for government work," he said, to laughter from some on the panel.

But Allison also said that as an economist he is reluctant to offer an explanation that is based only on eliminating explanations that could not be true.

"So you’re reporting this to us because it’s good news, but we don’t know exactly what it means other than it’s good news?" asked Sen. Joyce Elliott, D-Little Rock.

"I want to make sure that you all know what I know," Allison said.

"I’m not sure I know anything," Elliott said.

The revised projection assumes lawmakers will approve Gov. Mike Beebe’s proposal to boost the Medicaid program with $90 million in general revenue and $70 million in one-time surplus funds in the fiscal year that begins July 1, and with $222 million in general revenue and $70 million in surplus funds the following year.

Beebe has proposed various efficiency measures and cuts in services to close the $61 million gap, although some cuts, such as elimination of funding for some nursing home residents, have been dropped because of the revised shortfall projection.

Cuts that are still in the governor’s proposed budget include skipping one year’s inflationary increase in Medicaid reimbursements paid to health care institutions and reducing reimbursements to other health care providers to 3 percent below what they would otherwise be.

The Legislature also is deciding whether to opt for an expansion of the Medicaid program that would be mostly funded by the federal government under the Affordable Care Act. Beebe supports the expansion, but Republican legislative leaders have said they are not convinced the state can afford it.

Rep. John Burris, R-Harrison, chairman of the House Public Health Committee, said after the meeting that the revised shortfall projection is "not bad news, but it’s not necessarily jump-up-and-down-and-blow-up-the-balloons either."

"The payment improvement initiative has been active for a quarter," he said. "If it’s having this effect and it will sustain itself and will be evident in subsequent quarters after that, then the savings will be there. It’s just kind of wait and see."

Rep. Debra Hobbs, R-Rogers, said she was left feeling frustrated.

"I sat through a lot of the meetings (on the payment improvement initiative) and it was like, we’re doing this to save money. Now we’re saving it, but we don’t believe it’s because of what we did," she said. "You can make numbers look any way you want, and it’s hard to have confidence in the numbers we’re being given."