While Medicaid managed care plans are often eager to help states improve health outcomes through social interventions, the way their rates are set can discourage them from doing so.
However, a new analysis offered solutions that states can deploy to fix that problem.
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After reviewing existing literature, interviewing stakeholders and analyzing federal regulations, researchers at The Commonwealth Fund said states should employ some combination of the following strategies:
- Classify certain social services as covered Medicaid benefits. This option allows states to build the cost of services—such as housing, food and employment assistance—into Medicaid managed care rates in the same way more traditional services are covered. A catch: Because Medicaid rules generally require statewide coverage for all members, states wouldn’t be able to target social services to specific high-need populations.
- Harness the power of Section 1115 waivers. A concept that is top-of-mind lately as the idea of Medicaid work requirements gains steam, this option offers states “sweeping authority” to experiment with greater support for social interventions. A catch: Getting a waiver approved can be a long, complex process, and waivers are meant to test out new ideas, not be a long-term solution.
- Use value-based payment arrangements. This approach is on display in Arizona, where the state implemented policies that led plans to establish shared-savings arrangements with Medicaid providers that deliver “an array of medical and nonmedical services.” A catch: Health plans may find that future rates will be based on lower medical costs, without including the costs of social investments that helped achieve those lower medical costs.
- Leverage incentives and withholds. Made possible by policy changes in the 2016 managed care rule, this option involves either giving plans more than their capitated payment for meeting certain targets, or taking away part of that payment unless a plan meets its targets. A catch: It can be cost-prohibitive for some states, since it requires additional funding.
- Integrate social intervention efforts into quality improvement. Under this approach, states can incorporate the cost of social investments that are considered “quality improvement activities” into the non-benefit portion of their managed care rates. A catch: It’s not clear how much leeway the federal government will give states and plans when it comes to classifying social interventions as quality improvement activities.
- Reward plans with higher rates. With this strategy, states pay a higher profit and risk margin to plans that show their social intervention investments lowered costs. This way, states can cushion plans against the impact on their rates if the social interventions they employ end up driving down costs. A catch: From a political standpoint, it might be difficult to publicly justify a higher profit margin for selected Medicaid managed care plans.
The analysis comes at a time when managed care—rather than fee-for-service Medicaid—is becoming the rule rather than the exception. Over the past five years, an additional 20.9 million people were served by a managed care plan, according to PwC, resulting in 73% of Medicaid beneficiaries being covered by managed care in 2017.