Yesterday, the U.S. Department of Health and Human Services conditionally approved Arkansas Governor Mike Beebe's plan to reform the state's Medicaid system.

In February, Beebe proposed a new Medicaid reform that would push state healthcare away from a "fee-for-service" model, in which doctors are given incentives to administer more tests and treatments. Beebe instead wants Medicaid to focus on the whole health of its patients. The current Medicaid system is not sustainable, Beebe says, and could lead to an $87 million budget shortfall in the 2013 fiscal year.

Specific details of how Beebe would overhaul Medicaid are lacking, because the state needs federal approval in order to even explore options for a new plan. That's why Beebe sent a February letter to DHHS Secretary Kathleen Sebelius, broadly outlining his goals for Medicaid. He asked for a response by May 1.

Now he has received federal permission to begin exploring options -- a process that should take about a year, according to Arkansas Department of Human Services Director John Selig. State officials, including Selig, Surgeon General Joe Thompson, and Insurance Commissioner Jay Bradford, will work with federal DHHS officials on crafting a plan. Beebe has not yet indicated whether, once he has a specific plan, he will seek legislative approval or enact it on his own initiative.