3 Medicaid Payment Innovations Worth Paying Attention To

Collectively, state Medicaid agencies cover 74 million Americans, more than any other insurer by a longshot, including Medicare. To manage constrained budgets, growing enrollment numbers, and high utilization by high risk members, Medicaid agencies have particularly strong incentives to pursue alternative approaches to delivering high-quality care while reducing spending growth.

Prompted by increased attention on health care budgets from Governors, national policymakers, and other state agencies, many innovative Medicaid agencies are pursuing various models of care delivery and payment beyond the traditional Fee-For-Service (FFS) and Pay-For-Performance (P4P) models, like bundled episode-of-care payment models and population-based payment models, among other innovations.

What can we learn from the Tennessee, Minnesota and Arkansas Medicaid programs, who have each experimented with new payment and delivery reform?

1. Tennessee is leading a shift to Episodes of Care: TennCare’s Episodes of Care Value-Based Strategy aims to refine and streamline pathways for care delivery. Under an episode-based payment system, providers are compensated per episode of care delivered. An episode includes all acute or specialty care delivered for a specific-condition within a designated time period. TennCare’s strategy specifies a “Quarterback” for each episode of care. The quarterback is the primary provider assigned to the case, accountable for care coordination and delivery throughout the episode. Within this model, the provider quarterbacking the episode is eligible for performance rewards based on the quality of care delivered to the Medicaid beneficiary, the efficiency of the episode, and the patient’s satisfaction. Tennessee is in the process of developing standards for episodes of care and plans to release all 75 episodes of care by 2019. All Medicaid beneficiaries already enrolled in TennCare’s three managed care organizations (Amerigroup, Blue Cross and Blue Shield of Tennessee, and UnitedHealthcare Community Plan) participate in the episode-based payment model.

Tennessee is one of several innovative state Medicaid agencies experimenting with episode-based payments for care. Others include Connecticut, Ohio, Oklahoma, and New York.

2. Minnesota looks to ACOs to tackle social determinants of health: To address the financial strain created by Minnesota’s growing Medicaid enrollment, Minnesota has enrolled Medicaid recipients into Accountable Care Organizations (ACOs). Twenty-one health systems supporting Medicaid beneficiaries in Minnesota are participating in this population-based payment, totaling nearly 500,000 Medicaid beneficiaries. Minnesota is betting on these models to provide needed incentive to address social determinants of health, substance abuse, and nutrition.  This is because hospitals and physicians are rewarded for minimizing costs by promoting population-wide health.  How is Minnesota’s strategy faring?  According to The Washington Post,  Minnesota’s ACOs have produced savings of $213 million since 2013, $70 million of which has been shared by hospitals and doctors.

3. Arkansas’ opts for the Private Option over expansion: So far, Arkansas’ private option has increased overall competition in the state marketplace and has led to an overall reduction in premium prices. Arkansas first began using Medicaid as a platform for payment innovation in 2013 as the first state to gain CMS approval for a Section 1115 Waiver. Under the 1115 waiver, Arkansas utilizes Medicaid funding to purchase private health insurance coverage on state exchanges for the Medicaid expansion eligible population. Since implementation, 220,000 Medicaid beneficiaries have gained coverage using commercial provider networks. Arkansas has successfully reduced the state’s uninsured rate and uncompensated care costs using this model. Policymakers in Arkansas decided upon the private option in lieu of traditional Medicaid expansion under the Affordable Care Act.

Although it may be too early to draw conclusions for many states’ payment reform efforts, the variety of payment models that states have initiated for Medicaid recipients is encouraging. We are fortunate that multiple innovative state Medicaid agencies are CPR Members, helping our larger group of purchasers understand both successes and failures from these programs and how private and public payer strategies can align.  Are you a Medicaid agency pursuing similar innovations? We’d love to hear from you.