While federal payment reform efforts are often in the spotlight, states have also been active participants in experimenting with new payment models. In fact, state-level approaches to health care delivery reform provide separate laboratories where a range of potential models are being tested. The resulting lessons offer health care leaders—from federal government to health systems—an opportunity to start to understand how best to approach health care delivery and payment system reform.
Learn how states utilize waivers to reform Medicaid
We created the white papers below to highlight some of the most innovative initiatives that states have undertaken to transform how they deliver and pay for health care services for their Medicaid population and, in some cases, broader populations. Each paper will walk through a brief history of reform efforts, the unique model the state chose to implement, results to date, and how the state plans to improve the model in the future.
Jump to your state
At a high-level, there are three main types of reforms that states can implement in their Medicaid programs:
- Consumer-driven insurance design reform that seeks to shift incentives and accountability directly to Medicaid enrollees, such as what Indiana as implemented
- Payer-led managed care reform which relies on private payers to provide coverage and control costs, like Utah’s Medicaid ACO program
- Provider-focused delivery reform, which attempts to transform provider incentives to encourage higher-quality, lower cost care, profiled in our briefings of Arkansas, Colorado, Maryland, and New York
This infographic provides a quick reference of the facts and figures from each state profile and allows the different models to be easily compared. Click to see a larger version of the image.
Six years ago Arkansas launched an effort to transform how the state’s health care system delivers and pays for its residents’ care. The effort is a multi-payer value-based purchasing strategy called the Arkansas Health Care Payment Improvement Initiative (AHCPII). The plan, partially funded by a State Innovation Model (SIM) grant, centers on a statewide primary care strategy and the first-ever statewide implementation of an episode-based payment system. Across 2014 and 2015, the state reported $88 million in savings through the patient-centered medical home (PCMH) component of the initiative.
- Arkansas’ multi-payer PCMH program has generally been considered a success and is an example of how states can use Medicaid reform as a catalyst for broader, statewide health care transformations.
- The state has seen some cost savings in the episode-based payment program and believes they have targeted the procedures that have the most varied outcomes. However, Arkansas has yet to achieve consistent cost and quality outcomes across all participants and providers need more time to find the most actionable targets for performance improvement.
- Arkansas has faced difficulty designing a model to address the complex needs of chronically ill populations.
- The infrastructure of the AHCPII allows providers to be engaged in the evolution of the model over time.
In 2011, as part of Colorado’s efforts to shift Medicaid away from fee-for-service (FFS) payment models, the state launched the Accountable Care Collaborative (ACC). The program uses a hybrid primary care payment model that pairs traditional FFS payments with monthly care management fees and a performance-based bonus pool to encourage providers to deliver coordinated care. Although some have suggested the ACC program—which makes payments to organizations known as Regional Care Collaborative Organizations (RCCOs)—is a Medicaid accountable care program, it does not yet hold RCCOs accountable for patients’ total cost of care. Thus, it is more similar to advanced medical home programs like Medicare’s Comprehensive Primary Care (CPC) initiative. The RCCOs contract with primary care providers and utilize a state-developed data and analytics tool to coordinate members’ access to clinical and non-clinical services. Colorado estimates that the ACC has generated a net savings of $139 million since the program started.
- Colorado prioritized reform of primary care delivery and payment in its efforts to improve Medicaid and is seeking to expand the model further by integrating behavioral health services in the next iteration.
- Access to data is a key piece of any successful population health management program—Colorado’s analytic tool is one approach to give providers vital patient information.
- The state’s desire to prioritize new quality goals from year to year may hinder efforts to track progress over time.
In 2015, Indiana became the 28th state to expand Medicaid eligibility up to 138% of the federal poverty level (FPL) under the Affordable Care Act. Like a handful of other states, Indiana’s expansion came under an agreement with CMS that allowed the state to modify some typical Medicaid requirements through a Section 1115 waiver. In Indiana, this model built off a prior demonstration project. The resulting Healthy Indiana Plan (HIP) 2.0 contains distinctive features, including consumer-driven health plans, a two-tiered benefits package, beneficiary cost-sharing obligations, and lock-out penalties. The state reports that over 400,000, or about 30% of those enrolled in Medicaid, participate in HIP 2.0.
- The Healthy Indiana Plan (HIP) is a chance for health care stakeholders to assess whether benefit design aimed at encouraging personal responsibility and use of preventative services significantly impacts enrollment, utilization of services, and health care costs.
- To date, HIP has yielded some good outcomes including increased coverage of low-income residents and possibly decreased unnecessary use of the ED. Yet the program is complex for beneficiaries and it is still too early to tell whether it has successfully reduced health care costs. Providers appreciate that the program pays them at Medicare rates and that increased coverage has led to less uncompensated care.
- The Trump administration includes two key architects of HIP—Vice President Mike Pence and CMS Administrator Seema Verma— which suggests that HHS will be comfortable allowing other states to implement HIP’s unique features in their own Medicaid programs.
For the past forty years, the state of Maryland has pioneered a unique approach to financing hospital payments as a means of limiting spending growth. The state launched a statewide hospital rate-setting system across all payers in the 1970s and, beginning in 2014, implemented a global budget cap for hospital services while adding robust quality goals. While other states also adopted various forms of all-payer rate-setting models in the 1970s, Maryland’s system is the only one that remains in place today. And although the state’s efforts have produced mixed results and undergone adjustments over the years, state officials recently announced that the latest iteration produced nearly $116 million in Medicare savings in its first year of operation. This white paper provides an in-depth look at Maryland's model, including details on its history and evolution, lessons learned to date, and broader implications for the future of payment reform.
- Maryland’s model has persisted and improved because the state has gradually evolved it, allowing it to withstand many changes in the state’s health care environment.
- Capping hospitals’ revenue seems to have been a successful approach to checking the growth of health care spending in the state.
- The multi-payer payer nature of the model helps catalyze delivery system changes more than single payer efforts would.
In 2011, New York embarked on a unique and comprehensive redesign of its Medicaid delivery and payment systems. To facilitate this transformation, the state negotiated a $6.42 billion Delivery System Reform Incentive Payment (DSRIP) agreement with CMS in 2014, one of the largest such waivers in the country. The state is using the federal funds as incentive payments for safety-net provider coalitions, known as Performing Provider Systems (PPS), to focus on Medicaid system transformation, clinical management, and population health at both local and state levels. At the end of the initiative’s second year (March 2017), the state reported that the PPS reduced preventable readmissions by 14.9% and preventable ER visits by 11.8%.
- New York is relying on significant federal funding to enable its Medicaid reform efforts.
- The state attempted to bring uniformity to care delivery improvements across providers by creating a list of approved reform project options.
- In order to ensure provider accountability for progress on statewide objectives and to encourage collaboration between providers, New York tied provider performance payments to statewide metrics.
Starting in 2013, Utah restructured its contracts with Medicaid managed care plans to advance accountable care principles, control costs over time, and encourage efficient, quality care for beneficiaries. The state refers to these unique arrangements as Medicaid Accountable Care Organizations (ACOs) and the ACOs receive a risk-adjusted per-member-per-month (PMPM) capitated payment that covers health care services for members. Unlike most ACO models, Utah’s contracts are with health plans rather than directly with providers, though each of the four health plans contracted as a Medicaid ACO is a provider-run health plan. Utah is among the first states in the country to implement a Medicaid ACO program and it is estimated that the model has saved the state $11 million across 2014 and 2015.
- Too early to tell whether requiring managed care organizations to adopt features of accountable care organizations positively impacts cost and quality.
- The state’s expansion of the model over time to cover additional beneficiaries and regions seems to indicate the state sees the program as successful.
- Utah’s unique approach requiring beneficiaries to receive care within the ACO network could provide a model for other ACO programs looking to address the challenges of ACOs face when beneficiaries do not have incentives to stay within the network for care.
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