(AP Photo/Don Ryan)

SALEM, Ore. (AP) — Oregon Gov. John Kitzhaber, D, has signed Senate Bill 1580, creating a new law that will replace the managed care organizations now in charge of the state’s 600,000 Medicaid enrollees with care coordination organizations (CCO).

Oregon’s new CCO law will let officials assign caseworkers to manage all aspects of some Medicaid patients’ care, from medical to dental to mental, with the goal of eliminating redundant tests and procedures and reducing expensive hospital stays.

Kitzhaber says he believes the CCO will improve health care and reduce costs so much that getting the whole country to shift to the CCO approach could help fix the federal budget.

The Obama administration is watching with keen interest — and so are critics who say Gov. John Kitzhaber’s plan is just another example of government overreach.

Proponents say that, if all 50 states adopt the approach, it could save the federal budget more than $1.5 trillion over the next 10 years — $300 billion more than Congress’ failed “super committee” was trying to save over the same period.

“Today we set out on a path … to create a system here in Oregon that will be good for our people, that will be good for our state budget,” Kitzhaber, a former emergency room doctor, said before signing the bill.

Skeptics say the plan is bound to overpromise and under deliver. They criticize the idea as just another way to increase the government’s control over health care, and some are not convinced of the plan’s potential for significant savings.

A recent report from the Congressional Budget Office shows that pilot efforts of such coordinated care programs have yet to provide conclusive evidence of savings.

The plan requires federal approval to waive standard Medicaid requirements. Also, Kitzhaber is counting on federal money to help pay upfront costs.

Oregon officials have presented the concept to Obama administration officials.

Cindy Mann, a deputy administrator at the federal Centers for Medicare and Medicaid Services, said the concept holds “a lot of promise” for “improving care, improving health and lowering costs.”

Kitzhaber’s plan would focus on rewarding doctors for healthy patients, starting with 600,000 low-income patients on the state’s Medicaid plan.

Proponents hope to expand the program to cover government workers and, eventually, the general public.

The overhaul would focus on patients with chronic diseases, mental illnesses and addictions who account for the largest share of health care spending.

Proponents envision new efforts to keep in touch with those patients, ensuring they’re making appointments and taking medications so they don’t need to visit an emergency room.

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