Hidden in Plain Sight
Opportunities for Emerging Technologies in Medicaid
If Medicaid were a market in the private sector, chances are we’d hear a lot more about it in Silicon Valley. Countless entrepreneurs, courted by a slew of niche investment funds, accelerators, and tech blogs, would be vying for a share of its substantial annual spending. And yet, Medicaid, which covers one in five Americans, has been largely overlooked by entrepreneurs and investors. If we want better, more accessible health care for millions, that needs to change.
That’s why the California Health Care Foundation’s Health Innovation Fund has launched a new collection of resources focused on the opportunities for innovation within the Medicaid market. Melissa Buckley directs the Innovation Fund, which invests in health care technology and service companies with the potential to significantly improve the accessibility, quality, and value of health care for low-income Californians. I recently sat down with Melissa to learn more about the program. Our interview has been condensed and lightly edited for clarity.
Q: Many investors and entrepreneurs have misconceptions about Medicaid and often overlook its myriad opportunities for innovation. What would you want them to know about this market?
A: While the debate over repealing the Affordable Care Act (ACA) has raised awareness of Medicaid’s significant role in the US health care system, many people still don’t appreciate its sheer scale. Medicaid is the country’s largest health insurer, with about one in five Americans enrolled at any given time. In California, our Medicaid program, known as Medi-Cal, covers one in three people. All told, state and federal governments spent more than $550 billion on Medicaid in 2016.
Q: How is Medicaid different?
A: In contrast to many other payers, state Medicaid programs have shifted nearly 80% of their beneficiaries into managed care plans. Unlike traditional fee-for-service plans, which receive money for each service they provide, managed care plans are paid a fixed sum to take care of each patient, which makes them highly motivated to deliver better care and to do so more efficiently. While these different incentives make Medicaid ripe for innovation, they can be confusing for entrepreneurs, who may need to alter their business models.
For example, compared to commercial market patients, Medicaid patients tend to have much less discretionary income for tools like fitness monitors. But, because Medicaid managed care plans are motivated to prevent costly illnesses, they may be willing to pay for innovative preventive solutions that can help manage patients’ health. Plenty of customers do exist in Medicaid — they just may not be the ones entrepreneurs typically target.
It is also important to remember that each state operates its own Medicaid program, resulting in what is essentially 50 different markets. Each market may look different, but most provide at least some incentives for innovations that stretch state budgets further by providing better, more efficient care. California’s set of pilot initiatives (PDF) is one of the most expansive. It includes billions in funding for innovations that improve the value of care provided to Medicaid patients.
Q: Is there a culture clash between entrepreneurialism and the work of Medicaid?
A: People are often cynical about entrepreneurs and their focus on making money. The reality is that entrepreneurs and their investors shouldn’t be the only ones asking, “How can I get the maximum return on my investment?” Taxpayers and policymakers should be asking the same question of Medicaid. As investors in this public system, we should expect it to deliver the highest quality, most accessible health care possible. Entrepreneurs will only succeed in Medicaid if their innovations deliver the same things that payers, providers, and patients all want: better outcomes at lower costs. That’s not a conflict — it’s a classic win-win opportunity.
Q: What’s one big Medicaid challenge crying out for new approaches?
A: The growth of managed care has created a huge need for solutions that enable plans and providers to track outcomes on a population level. Why? Because managed care plans are responsible for caring for a set number of beneficiaries for a flat amount. To spend that limited money wisely, they need to have a clear picture of the health needs of their entire pool of beneficiaries. Once they know who’s sick and who’s well, they can target resources more efficiently.
That requires an entirely new set of capabilities. Clinics need to collect and track more data, and they need to be able to effectively act on it. For example, they need to know who hasn’t gotten the flu shot or the diabetes foot exam, and then reach out to those patients and get them into care. And organizations must start cooperating. Sometimes a patient might get a flu shot at Walgreens or sometimes at a hospital or a clinic. If even one stakeholder fails to share information, that population health picture can quickly become inaccurate.
Q: How much interest are entrepreneurs showing in Medicaid?
A: Some people have shied away from the market due to uncertainty in Washington, but even if Medicaid funding or regulation undergo major changes, the larger trends that the ACA set in motion — such as value-based care and managed care — will flourish. The opportunities to create and invest in technologies and services that helps payers and providers adapt to those trends will remain too.
CHCF’s Innovation Fund recently sponsored an innovation challenge to meet needs laid out by the Association of Community Affiliated Plans, which includes Medicaid plans nationwide. Key challenges they identified included increasing access to treatment for opioid use disorder, leveraging data from social service agencies to improve care, and reducing lapses in coverage among Medicaid beneficiaries. More than 70 companies presented impressive, market-ready solutions to those problems and others. The winner will be announced very soon!
CHCF also invests directly in companies with potential to improve access to care in Medi-Cal, so we are continually meeting interested entrepreneurs. As an example, we recently funded Landmark Health, which enables health plans to provide high-touch, coordinated care for members who have both complex medical and behavioral health conditions. Their approach centers on the needs of the patient rather than the provider by delivering care to patients at home or wherever it is most convenient to them.
When we met Landmark, they were working in other parts of the country with Medicare beneficiaries. Our investment helped them adapt their approach to Medicaid enrollees, who often are harder to reach and are much more likely to have behavioral health conditions associated with medical conditions. Our partnership provided low-risk capital, financial incentives, and connections to key customers to make it easier for Landmark to succeed in the Medicaid market.
Q: How is the Landmark Health project doing?
A: So far, they have enrolled thousands of Medicaid patients and are providing 24/7 at-home care. Patient satisfaction is in the 90% range, and preliminary data suggest fewer people are making unnecessary trips to the hospital.
Q: When companies come to the CHCF Health Innovation Fund, what general advice do you give them?
A: Although Medicaid can be a challenging market to enter, it is also where people are most in need and where resource constraints allow for the greatest innovation. If you deliver the right value in the right format, the potential for scale and impact is unparalleled.
When companies are hesitant about committing to the Medicaid market, we explain that the increasing consolidation across the health care industry has created demand for more comprehensive solutions. As hospitals and plans serve an increasingly diverse spectrum of payer types, they need flexible solutions that work for that entire spectrum. For example, a patient engagement tool should work just as well for the tech-savvy commercial patient as for the Medicaid patient who speaks little English and changes addresses frequently. When a company can prove to payers that its product works seamlessly for both commercial and safety-net delivery systems, it gains a significant competitive advantage.
Q: Which opportunities within Medicaid are of greatest interest to the Innovation Fund?
A: We are actively looking for platforms that collect and use data across systems. Plans and providers need high-quality information about people to deliver high-quality care. Patient data tends to be siloed across the delivery system, especially in Medicaid, whose beneficiaries tend to have more behavioral health conditions and more social service needs. If these data can be integrated, providers can start to truly understand and care for a patient’s health and well-being.
We are also seeking to improve care coordination among providers. Even if data do become more integrated, they won’t be useful if they cannot be leveraged efficiently. How can referrals to social service agencies or behavioral health providers be streamlined? How can providers easily track the outcomes of such referrals? These are key challenges.
Finally, there has always been a mismatch between the community’s needs and the kinds of providers available to provide care, including the ability to speak the same language as the patient population. That gap will grow as more health professionals retire and there aren’t enough trainees in the pipeline to replace them. There are opportunities to use artificial intelligence, telehealth, and decision-support tools to leverage this limited capacity and deliver affordable, accessible care at scale.
The Innovation Fund will focus on all of these areas in the coming year. If you know of a company working on solving any of these problems, we would love to hear from you.
Learn more about CHCF’s Health Innovation Fund and learn more about the opportunities for innovation in the Medicaid market.