This post was originally published by the Center for Health Care Strategies.

Originally conceived in the shadows of Medicare, Medicaid is now the largest health insurer in the nation, providing coverage for nearly 70 million people. Although Medicaid has achieved many successes and grown exponentially since 1965, myths about the program still abound — among them that it is only for the nonworking or welfare-dependent poor, is focused solely on medical care, and is broken.

Not the case. Medicaid covers many working adults. It also provides comprehensive and increasingly coordinated medical, behavioral health, dental, and supportive services for children and adults with disabilities as well as older Americans coping with the frailties associated with aging. Finally, it is, by necessity, cost-efficient, spending much less on administration than commercial insurance and costing roughly $3,200 per year to cover an adult, compared to private insurance at around $5,500 annually. Through the Affordable Care Act (ACA), 31 states have expanded Medicaid coverage to nearly 8 million people who were previously uninsured, with additional states continuing to ponder the merits of future expansion.

Opportunities to Drive Innovation

In addition to coverage expansion, the ACA has promoted states’ capacity to drive key reforms of the nation’s health care delivery and payment system. Long recognized as laboratories of innovation, states have been called upon to lead health system transformation under a variety of vehicles including the State Innovation Model (SIM) grants, the Medicare-Medicaid Financial Alignment Demonstration, Medicaid health homes, and the Delivery System Reform Incentive Payment (DSRIP) program with initiatives now underway in California, New York, Texas, and elsewhere. Building on these efforts, we see several particularly rich areas of opportunity in the years ahead:
1. Advance value-based purchasing through managed care contracting and accountable payment arrangements.

Medicaid has moved from largely fee-for-service to capitated payments to health plans, but there remain tremendous opportunities for states to use their purchasing power to drive value over volume with providers both directly and through their health plans. This might start most easily with medical care, but should apply as well to behavioral health and long-term services and supports (LTSS) providers. States are adopting new value-based payment strategies such as shared savings/risk, global budgets, and bundled payments that drive more and more performance-based payment and accountability down to the provider level. They are doing so through accountable care organizations (ACOs), DSRIP and other waiver programs, medical homes, and other emerging innovations. Multipayer strategies being fostered through SIM efforts are also aligning public and private payments to spread value-based models across statewide delivery systems. States with significant provider uptake of value-based payments from Medicare and commercial payers are particularly well-positioned to get traction among their Medicaid providers when efforts are well aligned.

2. Integrate preventive care, physical health, behavioral health, LTSS, and social services into care systems for high-need, high-cost populations.

Health care by itself accounts for a relatively small percentage of individual health status as compared to other behavioral, environmental, and social factors, particularly for complex, high-need, high-cost patients and those on the pathway to becoming so. Integrating supports beyond medical services into care approaches can both improve health and control costs for Medicaid — and Medicare — as well as other state and local social programs, including criminal justice and housing.

3. Build the capacity of state health care officials through leadership training and peer-to-peer learning.

State Medicaid agencies need to continue building capacity in all of the core facets of running a major health insurance enterprise, from data mining and utilization management to strategic vision and leadership. Although Medicaid is often the largest health insurer in each state, the public sector is generally not making the kinds of investments in leadership development and management capacity that even a midsize health insurance company would make in its midlevel executives. Additional vehicles for peer-to-peer exchange on innovative approaches to care are also needed. With enhanced leadership and management skills, state agencies will be better able to capitalize on their purchasing power to address the issues outlined above and to deliver on their full potential for transforming the overall health care delivery system.

Moving Forward

At Medicaid’s recent 50th anniversary, stakeholders across the country joined the Centers for Medicare & Medicaid Services (CMS) in celebrating the program’s achievements, and others have taken the opportunity to reflect on what’s next for this vital national program. From where we sit, there are states from Arkansas to Oregon and from Arizona to New York with many in between driving major innovations in value-based purchasing and creating new avenues of integration across services. Two states — California and New Jersey — have embarked upon efforts to broaden and deepen the capacity of their management teams through the DHCS Academy for their mid-level managers. It is truly an exciting time to be working with all of them, with other states, and with our policy and funding partners across the country.

Stephen Somers

Stephen A. Somers is the president and CEO of the Center for Health Care Strategies (CHCS), which he founded in 1995. He is responsible for the organization’s growth into a nationally recognized center on improving care for beneficiaries, particularly those with chronic illnesses and disabilities, of publicly financed health care programs. Previously, he was an associate vice president at the Robert Wood Johnson Foundation, a professional staff member for the Senate Special Committee on Aging, and legislative assistant to Senator John Heinz of Pennsylvania.