How 10 States Are Reforming Medicaid Payment and Delivery

By Sara Rosenbaum, Rachel Gunsalus, J. Zoë Beckerman, Sara Schmucker & Sara Rothenberg, The Commonwealth Fund
Twitter: @commonwealthfnd

Ever since Medicaid’s managed care transformation began in earnest in the mid-1990s, states have been leaders in the effort to improve the accessibility, quality, and efficiency of care for low-income populations facing elevated health risks. Today, with Medicaid enrollment approaching 75 million, the imperative to improve patient and population health is all the more pressing. Medicaid’s long-standing managed care policies, updated to the modern era, are the principal payment and delivery reform tools for tackling this challenge. In recent years, the federal government has given states flexibility to experiment and innovate. This managed care modernization effort has been crucial, since the Affordable Care Act’s Medicaid expansion rests on the assumption that newly eligible beneficiaries will be enrolled in managed care plans.

In 2017 we undertook a study of 10 states — California, Colorado, Connecticut, Maryland, Massachusetts, Michigan, Minnesota, New York, Ohio, and Washington State — that implemented the Medicaid expansion and have long-standing experience with managed care for traditional beneficiaries. Together, these states account for 43 percent of the national Medicaid population, 63 percent of the expansion population, and 42 percent of all Medicaid beneficiaries enrolled in comprehensive managed care plans operating under financial risk. One state, Connecticut, directly oversees its managed care system, using plan administrators (much like a self-insured employer) to operate and support key aspects of plan management. Through a review of policies, including the contracts under which managed care systems are organized and operated, as well as discussions with officials, we sought to understand how states are putting the tools of managed care to work at a time of unprecedented demand for services.

Our findings underscore not only the crucial role played by Medicaid managed care but the extent to which the program today is on the leading edge of delivery and payment reforms aimed at better meeting the needs of the nation’s most complex populations. To succeed, such efforts will need time and a stable policy and regulatory environment.

States are active health care purchasers. States are focusing on meeting beneficiaries’ complex health care needs while achieving as much efficiency as possible. This focus shows up in the policies they establish, the purchasing agreements they write, and the sheer scope of the payment and delivery reforms they are attempting. Each of the 10 states has sought evidence-based approaches to caring for high-need populations, and each is working to achieve a greater level of integration between clinical care and social services that can improve overall health. States vary in their areas of emphasis, but all view their efforts to combine expansion with managed care reforms as central to their ability to achieve better health outcomes at lower cost.

State initiatives place attention on certain key populations. Most states are focusing efforts to improve and coordinate services on adults with chronic physical and mental health conditions, people with addiction and substance use disorders, and homeless individuals — not surprising, since the expansion brought many such individuals into the program. Children served through the child welfare system remain a universal and intense area of focus. In order to address the needs of these groups, states are emphasizing greater alignment of physical and behavioral health care, stronger relationships between clinical and social services, and networks that include providers with specialized capabilities on matters such as high-need children in the child welfare system, people living with HIV/AIDS, and people who have spent time in the criminal justice system.

Delivery reform is a key focus. States frequently are going beyond reforms at the health plan level and becoming directly involved in delivery reform. Most of the 10 states have promoted accountable care or are in the process of doing so. Efforts to better integrate social and health care services are a key strategy, whether through health care entities that expressly align health and social services, or through the use of plan administrators that carry out these functions.

States are testing a variety of quality improvement strategies. States are working to put into place payment incentives linked to designated quality improvement goals. Incentives include the use of both add-on bonuses and return of withhold payments. The goals come from evidence-based sources such as the Healthcare Effectiveness Data and Information Set (HEDIS). Some states have set performance goals for providers and have built them into plan performance measurement.

States are testing new payment approaches. States are beginning to test innovative payment approaches that move away from volume and toward outcomes-based payment that shifts some risk onto providers. These include bundled payments, payments for episodes of care, and partial-capitation payments for designated services.

A Stable Environment
In our current era of expanded coverage and as Medicaid programs seek to enhance their effectiveness as health care purchasers, it’s imperative for states to use modern tools of payment and delivery reform. States that use these tools range widely in their areas of emphasis, the purchasing strategies they employ, and the population health priorities they emphasize. But they share a common vision of a higher-performing and more efficient health care system that ultimately can improve population health. State officials’ observations drive home the basic factors that underlie health system performance improvement generally, and performance improvement for low-income populations specifically: the importance of having stable enrollment and coverage over time, a supportive and reliable federal regulatory environment, and the ability to achieve sustainable cross-agency collaboration in order to promote integration of health and social services.

This article was originally published on the Commonwealth Fund Blog.