In Plain English: Five Trends for Medicaid Innovators to Know About

Making Sense of Dollars, Data, and Demonstrations


We had the opportunity to attend the 11th Annual Medicaid Managed Care Summit in Washington DC last week. It was an energetic two days of expert perspectives, stimulating panel discussions, and illuminating examples of how organizations are responding to the challenges facing the Medicaid program, from community streets up to the halls of the Senate.

You’re probably aware that Medicaid has been under tremendous political pressure for quite some time in DC, long before the new administration rolled into town. To be fair, these sessions often resulted in more questions than answers. But the detailed discussions that ensued were both wonky and insightful, and when framed against the wealth of examples from the trenches, as told by a dozen actual Medicaid program directors past and present, the event left us with a clear sense of Medicaid’s potential to transform care delivery.

Here are five summary trends and takeaways to consider.

1. Is Medicaid Safe? Yes, probably, for now, sort of, but maybe not

The opening session featured a great two-way discussion between Claudia Schlosberg, a State Medicaid Director in Washington DC, and Cindy Mann, partner at Manatt Phelps & Phillips. They offered up a timely reading of the tea leaves from the Hill, where a 2019 budget proposal seeks to derail the Affordable Care Act (ACA) by eliminating Medicaid expansion, introducing block grants, putting per capita caps on federal cost sharing, and in general, wreaking havoc on the ACA’s coverage mandates (more detail on work requirements below.)

The good news was that both panelists agreed that these deals were more or less ‘DOA,’ due in part to the ongoing challenges this administration seems to be facing in getting anything done, as well as to the GOP’s reluctance to rock the boat by clawing back coverage as the mid-term elections loom. Yet, Ms. Schlosberg offered a word of caution:

“It’s a very strong signal that the winds blowing against the ACA are not going to stop — While we’re probably not going to see any major legislation between now and midterms, we should still think about entitlement reform and welfare reform are other doors for cuts…I see this time as an opportunity for everyone to get educated about these policies and their business implications, because it’s very unlikely that they’re going to go away under this administration.”

Throughout the rest of the conference, it became clear that most states have given up trying to keep up with the political drama, in favor of rolling up their sleeves to deal with the many challenges of operating and reforming their own Medicaid program at home.

Moreover, the last major Medicaid reform, awesomely nicknamed the “Mega Managed Care Rule” looks to be mostly free from political attack. In part this is because it served as a long overdue modernization bill, full of procedural updates and alignments rather than expensive addendums. More philosophically however, the bill’s goal was to introduce more flexibility for states to define programs and invest budgets.

Source: Navigant Presentation at the 11th Annual Medicaid Managed Care Summit

2. Medicaid Managed Care: It’s growing, but is it working?

The vast majority of Medicaid patients today are enrolled in managed care programs, which offer global budgets to provide comprehensive services. In general, managed care has a good reputation in the world of health policy: It’s a step away from fee-for-service (FFS), it encourages measurement and management of quality, and lately, it offers avenues for plans to invest upstream, moving from reactive acute care delivery to proactive health promotion.

While the numbers are clear on growth of this program, they’re less clear on whether or not managed care is working. A session by Anne Jacobs, from Navigant, brought a dose of “tough love” to the topic. She started off with a sobering statistic: States are spending roughly 30% of their global budgets on Medicaid. And while there are positive examples of quality and efficiency in Medicaid managed care, she pointed out that these tend to be isolated, cherry-picked incidents — more comprehensive, peer-reviewed studies don’t exist at a national level. She pointed to a recent study that suggests the variability in program design and execution from state to state is a major issue - it prevents higher level analysis of what works and what doesn’t when it comes to efficient and effective use of Medicaid dollars.

While Medicaid is state-run by design, that shouldn’t explain drastic inefficiencies of the program. Several such red flags pop up. One is the enormous variability of the Medical Loss Ratio (MLR) across programs; (e.g. Minnesota’s MLR is 30% higher than DC’s). Another is a strange competitive phenomenon in some Medicaid markets, where the more managed care plans there are, the higher the payment rates become to providers. This flies in the face of the usual rules of competition; it may be a result of plans ‘bidding’ to secure contracts with favorable healthcare systems and hospitals, either because of high quality scores, or brand cachet. Either way, the end result is a dilution of the impact states can achieve with their Medicaid budgets.

Meanwhile, while states are spending more and more on Medicaid, health plans have been profiting. Two large health plans with a multi-state footprint, Centene and Anthem, have made hundreds of millions in profit over the last two years, even while states have spent more and more for the same results.

Ms. Jacobs sought to reframe the question: It’s not about whether plans are allowed to profit, but how much profit we can consider reasonable at a time of budget shortages and limited proof of impact on cost and quality compared to FFS. With increasing political scrutiny on fraud, profiteering, and effectiveness in the Medicaid managed care program, she cautioned health plans against focusing on short-term revenues at the risk of long-term sustainability of the program.

3. The Wild World of Waivers

If you’ve never heard of waivers, it’s time to get caught up, as they represent the cutting edge of experimentation and innovation in the Medicaid program. In a nutshell, a waiver is an experimental demonstration project that states propose to CMS; if approved, the programs permit states to try something new in how they design their coverage, approach eligibility and enrollment, or determine which services and supports to pay for. Some waivers are relatively new, such as the 1332 Waiver, which just became active last year. This heavily regulated waiver provides flexibility in how states design their insurance marketplaces, and to date it’s only been awarded to three states.

The most notable is the 1115 Waiver, which been around since the 1990’s, and has become a popular springboard for a diverse array of state level innovations. From CMS.gov: “Section 1115 of the Social Security Act gives the Secretary of Health and Human Services authority to approve experimental, pilot, or demonstration projects that are found by the Secretary to be likely to assist in promoting the objectives of the Medicaid program. The purpose of these demonstrations, which give states additional flexibility to design and improve their programs, is to demonstrate and evaluate state-specific policy approaches to better serving Medicaid populations.”

Just a few examples of how states are using the 1115 Waiver: Washington DC expanded eligibility to cover more low-income childless adults; Massachusetts has integrated social and behavioral services into their Medicaid ACO model; several states, including Pennsylvania, Florida, and New York, have used the program to address Medicaid beneficiaries’ food insecurity through coordination with the SNAP program.

The waiver programs typify the complexity and dynamism of the Medicaid program as the nation’s largest insurance program, split up into state-level sandboxes that test new ideas, for better, or for worse (as described below.)

4. The shortsightedness of ‘gotcha’ policymaking

One of the hot discussion topics in Medicaid these days is that of work/eligibility requirements. In a nutshell, they decree that in order to qualify for insurance coverage, people have to demonstrate they are working, in effect, to “earn” the right to coverage. Kentucky has already received approval for a 1115 waiver to build this into their state Medicaid program. Indiana has shown signs of moving forward as well, and about eight other states have also expressed interest.

The political response would be to point to the ample data showing that compared to an average population, Medicaid patients are disproportionately physically disabled and under-educated, with higher probabilities of behavioral health issues, criminal records, and spotty work histories, all of which add up to make it very difficult to get a job. The moral outrage response can be found all over the internet, probably starting on your Facebook feed.

Several panelists took the more pragmatic response, which states that administratively, programmatically, and actuarially, this is a bad idea:

  • Work requirements require drug testing for eligibility, even though the majority of states have legalized medical marijuana, and more importantly, in a day and age when 115 Americans die every day from an opioid-related drug overdose. Who seriously thinks it’s a good idea to require people who are addicted to drugs to pass a drug test to get healthcare coverage to treat their addiction?
  • One panelist cited a recent Urban Institute study that points out that people in KY work an average of 36 hours per week, but perhaps not for a full 50 weeks a year, due to the very nature of part-time, seasonal labor market. This doesn’t line up with the requirement of 20 hours per week/80 hours per month, which would punt them from eligibility.
  • Late paperwork would also disqualify people from coverage, a challenge when online consumer portals for Medicaid remain a thing of the future, and government offices are only open the same hours that people are working. One thing that wasn’t talked about directly, but which we imagine is a serious issue, is the additional burden created on the state level agencies to process additional paperwork to keep this process running.
  • While Kentucky and other states looking to introduce these requirements claim they want to exempt requirements for the most vulnerable, such as the homeless, or those with severe psychiatric illnesses, the program rules still require these folks to submit paperwork and identification to prove their exemption, creating additional paperwork at best, and a surge of uninsured downstream emergency department costs at worst.

It’s easy to get lost in the wonky details of how these programs are designed, and how they might be designed better. But at the highest level, the issue is simple. Who really wins when people with lots of health problems lose insurance? Numerous panelists in later sessions brought up the importance of continuity of care, namely developing and maintaining relationships with patients and communities, as a means of decreasing downstream utilization costs. The issue of churn in health coverage — people switching onto and off of programs, adds needless administrative as well as clinical costs.

Later in the day, one of the speakers addressed this approach as “carving up” the whole person, as opposed to addressing their various social, legal, economic needs as parts of their health. The various “gotcha” policies, from those intended to mitigate fraud and abuse, to reporting requirements for eligibility or drug testing, have been proven to add costs and decrease quality.

Source: Kaiser Family Foundation

5. A (data-driven) long view on whole person health

Jay Ludlam, North Carolina’s new assistant secretary for Medicaid Transformation, shared an optimistic overview of how his state’s managed care program hopes to re-write the story for their 11M Medicaid beneficiaries.

North Carolina’s vision is that the beneficiary is “a single person, with bio-psychosocial needs that all need to be addressed” in order to rein in healthcare spending and have a positive impact on their population; it falls on the state to line up their administrative work accordingly. For NC, this means streamlining how they currently manage various state level programs, with an overarching emphasis on quality and value. They ask themselves, “Are we buying health?” or simply creating new, redundant administrative layers across programs.

A big goal of the program is figuring out how to address unmet social needs: “As people touch our department’s programs, through SNAP, child services, housing assistance, or the Medicaid programs, we intend to make sure we’re able to identify and assess them. Once you’ve identified that they need care, then you need to align resources.” This is big — we’ve written previously on the impact potential of screening and data capture at the state level.

The last piece that ties it all together, according to Mr. Ludlam:

We need data. If we’re going to invest in food or housing, we’re going to need to demonstrate that we’re buying health.”

He described how their proposal under the 1115 Waiver program would seek to validate and expand early pilot work at Cone Health, who repurposed emergency department dollars to rip out moldy carpets in the homes of their asthma ‘frequent flier’ pediatric patients.

In closing: More innovation needed

Beyond the macro trends happening at the policy level within the Medicaid program, we took note of three talking points that surfaced again and again throughout the conference:

  • Reforming healthcare in the US is not about spending more money, but about moving around the dollars that we’re already spending.
  • Data management is the single most important factor for reform, innovation or other change to the status quo. This holds true for federal and state policymakers, health plan operatives, social impact investors, and startups alike.
  • Whole person health is the future of healthcare. Addressing the social, psychological, environmental and other determinants of a population’s health is becoming the new norm in theory, if not yet in practice.

Innovating within the Medicaid program is a double-edged sword: It represents one of the trickiest spaces for disruption, due to endless complexity, state-by-state regulations, difficult populations to engage, and more. Yet at the same, time, it’s where some of the most progressive social investments are happening, it’s changing very quickly from year to year, and it remains the single largest insurance program in the country.

So, for industry outsiders who may be unsure of where to begin, or discouraged by the endless acronyms and regulatory uncertainty — know that new ideas and approaches are needed, and in a growing list of states, welcomed. Look into startups and pilots happening across the country, and very possibly in your state, as a starting point. A little bit of internet research goes a long way — check out great resources from CHCS, KFF, CHCF, The Commonwealth Fund to get the ball rolling. And don’t be afraid to ask your nerdy, wonky healthcare friends for help — that includes us!


Naveen Rao is Managing Partner of Patchwise Labs.

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