When State Medicaid Leaders Talk, We Need to Listen

Dec. 10, 2017
The discussion that took place at the Sloan School of Management at MIT last month was highly relevant to a host of issues around not only Medicaid program reform, but overall health system reform across the U.S. healthcare system

Last week, Associate Editor Heather Landi reported on an important panel discussion that had taken place on November 29 at a conference at the Sloan School of Management at MIT (the Massachusetts Institute of Technology). The Sloan School’s Initiative for Health Systems Innovation (HSI) had sponsored the “Innovating Health Systems: Digital Health Transformations” conference at its Cambridge, Mass.-based campus, with a focus on how state government leaders are rethinking healthcare delivery to their covered populations, and the potential for digital innovations to transform care delivery.

As Landi reported last week, “During that panel discussion, three senior leaders representing state Medicaid programs for New York, California and Massachusetts provided overviews of their states’ progress to transition from fee-for-service to value-based payment models to transform population health, as well as the challenges that still exist in their work to reform healthcare payment and healthcare delivery.” The three state leaders—Michael Wilkening, undersecretary of the California Health and Human Services Agency; Jason Helgerson, Medicaid director at the State of New York Department of Health; and Daniel Tsai, assistant secretary, MassHealth, and the Medicaid director for the commonwealth of Massachusetts—are all working along slightly different lines in their innovations; and yet the overall context of their work is one filled with commonalities, in terms of the straitened budgets of state governments, the need to cover large (and usually, growing) populations with chronic illnesses, and the need to achieve patient/plan member engagement.

And what all three states are doing is important. Helgerson noted that said that New York state is about halfway into its five-year initiative to restructure the healthcare delivery system through its Delivery System Reform Incentive Payment (DSRIP) Program, which received $6.42 billion in funding. New York’s Medicaid program serves 6.6 million people with an annual budget of $68 billion, the second largest program in the country; and, Helgerson reported to the audience at the Sloan School, “We’ve seen some positive results as far as reductions in avoidable hospital use in the ER and admissions and readmissions, but there is still quite a bit of work to get this large and complex sector of our economy to work together in a collaborative way.”

Helgerson noted that “The challenge with healthcare is it’s the least customer-friendly sector in our economy. Much of the onus is on the patient to go and get care, regardless of how complex sick or disabled they may be, and the services are offered at the convenience of the provider, not at the convenience of patients or members. At the end of day,” he said, “if we’re going to be successful in making this thing we call healthcare affordable, effective and meeting the needs of an aging population, we have to make it more responsive and centered around the individual than it is around the provider.”

Meanwhile, in Massachusetts, Tsai is helping to lead an initiative to help convert MassHealth’s provider contracts to at-risk ones. As of March 1, 80 percent of lives in that state’s Medicaid program will be in fully capitated models with 17 accountable care organizations (ACOs) across the state. And Wilkening detailed the California Health and Human Services Agency’s work to transition more of the 14 million MediCal (the name for Medicaid in California) beneficiaries, who represent one-third of the state’s population, into a managed care environment, leveraging a federal waiver that has allowed that state to implement a “Whole Person Care” pilot program that helps to drive incentive payments toward designated public hospitals to focus on better coordinating care management to improve the health and wellbeing of high-risk individuals, avoiding duplication of services and reducing inappropriate utilization of hospital emergency rooms and inpatient services—a program that Landi had covered in greater depth in an earlier report.

What strikes me about all of these initiatives is two things, which initially feel paradoxical: their inevitability, and their difficulty. Let’s talk about the difficulty first: while it’s one thing to say that we need to shift Medicaid programs into managed care models, the very nature of the populations involved, and the history of the various state Medicaid programs, both work against any quick shift.  As Helgerson noted, Medicaid programs have tended to be bureaucratic and very poorly (if at all) integrated; meanwhile, they are managing care delivery for populations whose transcience and social instability pose inherent challenges.

And if New York, Massachusetts, and California, three states known for progressive approaches to the management and direction of social-service programs, are struggling, it’s not surprising that states like North Carolina have only begun even to plan for a shift to Medicaid managed care. This work is hard and it’s very complex, with many moving parts.

That having been said, it’s also true that there is inevitability to all of this as well. Two elements of that inevitability come from the larger society, and from the current policy-political environment. With regard to the larger society, we really are approaching a terrible cost cliff now. Overall U.S. healthcare spending was $3.3 trillion in 2016, according to the latest estimates; but is expected to rise to $5.548 trillion by 2025—a 70-percent increase within less than a decade. And that increase will be driven by the aging of the U.S. population, and by an explosion in chronic illness.

Now, in terms of the policy-political environment, absolutely everything is forcing innovation forward. The reality is that there will almost inevitably be major cuts to Medicare on the federal level, while virtually every state government is financially distressed, meaning that Medicaid cuts are a perpetual danger. And, given how lean Medicaid programs are already, that inevitably means that any cuts will impact the availability delivery of healthcare to many millions in need.

So the burning platform for state Medicaid leaders to transform their programs into managed care plans is a wildfire at this point. And that at least adds to the forward-moving energy.

“How do we get care to be integrated?” Tsai asked during the panel discussion at the Sloan School. “Just changing to an at-risk payment model doesn’t solve that. In Massachusetts, the ACO model we rolled out had a bunch of carrots and sticks with it. We defined three at-risk models; almost of all the ACOs are going into a fully capitated model that we pay on a per-member, per-month risk-adjusted number. And, with all the new dollars, as we negotiated with the federal government for $1.8 billion in funding over five years, the way we rebalance the hospital and primary care calculus is that we said the new funding follows lives in primary care practice,” Tsai said. “We have a lot of requirements in the contracts to get funding; you have to have different parts of the health system coming together. The point there is, you can design the perfect risk-adjusted payment model and change the way cash flow moves across the system, but still have nothing that actually helps to improve the way folks experience care.”

So there is clearly a huge burning platform for change in the Medicaid world; and state leaders can learn from each other, as the more advanced Medicaid programs pioneer new approaches to care delivery, care management, and operations. And IT strategy will clearly be a strong element in all of this, as it must be. In that area, too, Medicaid leaders can learn from one another, and must.

What’s more—and this is very important—I believe that leaders across the U.S. healthcare system can learn from the innovations percolating up through the diverse state Medicaid programs, around care delivery, care management, and more efficient and cost-effective operations. Ultimately, leaders across the U.S. healthcare system will need to become hyper-efficient and hyper-effective, as Medicaid program leaders will need to be, to survive the shifts that are already emerging.

So we can, and should, learn so much from these innovations in Medicaid care delivery. And anyone who wants to feel on top of the most important developments in U.S. healthcare needs to keep up with Medicaid innovations—now, and into the future.

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