Health Policy$ense

Making Value-Based Payment Work in Medicaid

Adapting ACOs, bundled payments to meet patients' needs

If value-based payment models can work in Medicare, can they also work in Medicaid? Not without significant changes, according to LDI Senior Fellows Joshua Liao and Amol Navathe and colleague Benjamin Sommers in a NEJM Perspective.

In Medicare’s predominant value-based payment models, such as bundled payments and accountable care organizations (ACOs), providers bear a certain amount of financial risk based on cost and quality targets. Liao and colleagues recommend ways to adapt these models to meet the needs of Medicaid’s socioeconomically vulnerable patients. In particular, they highlight that 68 percent of all Medicaid beneficiaries receive services through managed care organizations (MCOs), which incentivize providers to achieve certain cost and quality goals. Thus, implementing payment policies with similar incentives used in Medicare models, such as ACOs, may yield fewer additional returns in Medicaid.

Clinicians face two other challenges in adapting Medicare’s models to Medicaid. First, it is often difficult for safety net clinicians to optimize care for vulnerable Medicaid patients with high cost or complex conditions while meeting global cost containment goals. Value-based payment policies may unfairly penalize these clinicians because their patients require expensive and frequent treatment. Second, Medicaid patients can “churn” in and out of coverage due to fluctuations in income, which complicates payment and quality measurement and undermines clinicians’ ability to improve care for patients.

Nevertheless, some state Medicaid programs have implemented successful value-based payment models that provide important examples for other states. Liao and colleagues recommend three ways that Medicaid programs can implement these models and achieve sustained success.

1. Emphasize non-financial incentives instead of cost containment incentives that overlap with existing MCO cost goals. For instance, Minnesota’s Medicaid ACOs include community organizations that address beneficiaries’ non-health care needs, while Colorado’s Medicaid ACOs are connecting clinical and social services through more robust data collection.

2. Improve coordination among Medicaid ACOs and bundled payment programs and extend ACOs to cover high-cost, complex conditions in ambulatory settings. For example, New York’s “total cost of care” ACO-like models focus on activities like referrals, care coordination, and discharge management for patients. New York is also piloting a chronic hepatitis C bundle that ties payment to future benefits of curing the disease, lessening the burden on providers to achieve short-term savings.

3. Adjust for beneficiary risk to ensure that clinicians are not penalized for taking on high-need patients who may cycle in and out of the program. For example, New York and Montana guarantee 12 months of continuous coverage to adult Medicaid beneficiaries to reduce churn and improve metric-tracking over time.

This perspective is timely given the high level of activity in value-based payment in both Medicaid and Medicare. Since the Affordable Care Act was passed, a number of state Medicaid programs have experimented with various value-based payment arrangements in their MCO contracts, including bundled payments, shared savings, and global payments, among others. At least 10 states have active Medicaid ACO programs, and roughly 10 others are pursuing them. An estimated 10 percent of the U.S. population is now covered by a public or private ACO.

Most recently, the Centers for Medicare and Medicaid Services (CMS) announced a potential significant overhaul of ACOs in the Medicare Shared Savings Program (MSSP), its flagship ACO program that comprised 86 percent of all Medicare ACOs in 2018. According to CMS, most MSSP ACOs have increased overall Medicare spending. This is consistent with previous reports of mixed results for Medicare and commercial alternative payment models, and although a number of Medicaid ACOs have reported promising outcomes, many others have not been evaluated.

In place of the existing MSSP, CMS has announced a new plan to ensure greater accountability, competition, beneficiary engagement, quality, and integrity among Medicare ACOs in part by consolidating the MSSP’s three current participation tracks into two and requiring ACOs to take on greater financial risk sooner. While CMS estimates that its proposed changes will save the Medicare program $2.2 billion over ten years, nearly one hundred ACOs may drop out of the MSSP due to these changes by 2027.

On a high level, the proposed changes move Medicare in the direction Liao and colleagues recommend for Medicaid. Going forward, the impact of these changes on costs and quality may be instructive if Medicaid policymakers continue to look to and learn from Medicare in their states’ paths to value.