Issue Update: State Medicaid Reform Strategies: Improving Quality and Reducing Costs

Issue Update: State Medicaid Reform Strategies: Improving Quality and Reducing Costs To view the full report as a PDF, click here.

State governments are facing mounting budgetary  pressures to cut Medicaid costs. Reducing eligibility or cutting covered services is the obvious, but short-sighted, cost-cutting strategy. Such cuts will leave already ill people more ill,  shift treatment costs to other payers (including small businesses, individual insurance policyholders, and medical providers), and forego significant federal funding that frequently exceeds any state budget savings.
As important, eligibility and service cuts fail to achieve systemic change that can reduce health care costs over the long run. Further, such cuts increase the ranks of the uninsured just as major federal reforms through the Affordable Care Act seek to expand access both through Medicaid and the private marketplace.

States should resist such short-term strategies, and instead implement real Medicaid reform using health care delivery and payment models focusing on prevention and accountability—approaches that really work. The good news is that states throughout the country have already modeled alternative reform strategies. Not only are these practical measures with proven effectiveness, but funding opportunities and policy changes in the Affordable Care Act (ACA) make this a particularly propitious time for other states to follow their lead. The ACA has a strong focus on preventive healthcare, mandating coverage in insurance policies without out-of-pocket payments for evidence-based preventive services, funding pilot programs, encouraging prevention-based Medicaid waivers, and promoting new ways of delivering healthcare through the Center for Medicare & Medicaid Innovation.
This paper outlines several reform strategies that were presented at Progressive States Network’s health policy workshop in November 2011, supported by the Commonwealth Fund. We provide a menu of Medicaid and other health care delivery and payment reform policies for state legislators. Recognizing that not every state is ready to implement system-wide change, we provide a range of options, some of which can be incorporated into state implementation of the health benefits exchanges under the ACA:

  • Reaching new populations and enhancing prevention by coordinating outreach and eligibility
  • Improving quality and reducing costs by coordinating care through case management, medical home, and chronic disease management
  • Promoting health delivery efficiencies and quality through payment reform
  • Modernizing insurance rate review to incentivize carriers to make quality and efficiency a priority

While recognizing that state legislators will need to tailor these ideas to fit within their existing state infrastructure  we provide links to statutes and policies that can serve as models for adaptation, as well as studies evaluating the different approaches. We also detail ACA policies and funding opportunities that may help pay for start-up costs or ameliorate provider impacts. Finally, because no model policy is of use without the public and political support to see it enacted and implemented, we offer ways to communicate about these policies that will help gain support from policymakers and the public alike.