Medicaid is a health insurance program that is jointly financed by the federal and state government and managed by the Centers for Medicare & Medicaid Services (CMS). The program helps cover the cost of health care and long-term services and supports (LTSS) for individuals with low-income and limited resources. People who receive Supplemental Security Income (SSI) because they are aged, blind, or disabled with a low income automatically qualify for Medicaid. While there are certain mandatory services that Medicaid covers, each state may choose additional coverage options. Therefore, services vary by state.

The Role of State Medicaid Agencies

Every state and the District of Columbia has a government division or agency that oversees the Medicaid program. State Medicaid Agencies set eligibility standards, determine the scope of services, establish payment rates, and manage the implementation of Medicaid.

State Medicaid Agencies are looking for ways to improve the quality of care, achieve better health outcomes for the individuals they serve, and control costs. Toward this end, a variety of innovative approaches are being implemented, including removing barriers to care and offering evidence-based programs. According to the Centers for Disease Control and Prevention (CDC), chronic diseases — such as arthritis, cancer, diabetes, heart disease, stroke, and obesity — account for 86% of health care costs in the U.S. Evidence-based chronic disease self-management education (CDSME) programs have been demonstrated to improve health and lower costs associated with chronic diseases. When made widely available to people who are covered by Medicaid, these programs can help State Medicaid Agencies achieve their cost containment and quality assurance goals, while also providing a much-needed and valuable service to individuals. CDSME programs have been shown to enhance the health care experience of individuals and help them learn how to manage their health so that they can live longer, healthier lives in their own homes and communities.

State Medicaid Agencies have the option to make changes to the operational approach or payment methodology, changes to the Medicaid program (adding or deleting programs), or transition to a managed care model by submitting a State Plan Amendment (SPA) to CMS. State agencies can choose to deliver care to consumers through different delivery models, including traditional fee-for-service payment models using contracted Medicaid providers, managed care models, or integrated care models. Some states have elected to utilize the managed care model, which means that they deliver Medicaid services through contracts with managed care organizations (MCOs). Under a managed care model, the state contracts with two or more MCOs that are paid on a per-member-per-month (PMPM) basis to manage the delivery of health care services to the members that they serve.

When a state intends to issue an SPA to CMS, the state must obtain input from stakeholders. State and community-based organizations providing CDSME programs have an opportunity to provide input by encouraging their State Medicaid Agency to cover CDSME as a benefit.

Joint Federal and State Funding

As a jointly funded program, both the federal government and states contribute financially to Medicaid. States must provide match funding for Medicaid costs covered by the federal government. The state match is calculated using the Federal Medical Assistance Percentage (FMAP) formula, which is updated every three years. The FMAP is the percentage of Medicaid expenses that are covered by the federal government. The remaining percentage of the costs must be paid for by the state. The current average state FMAP is 57% and ranges between 50% and 75%. Using the average FMAP as an example, the state would be required to cover 57% of the total cost of Medicaid for covered beneficiaries. The rest of the costs would be covered by the federal government.

States must include Medicaid costs in their state budget and be adequately prepared for increased Medicaid expenditures, including acute care and LTSS. State Medicaid Agencies have the authority to set payment rates for Medicaid services. However, these payment rates must be in compliance with federal guidelines enforced by CMS. When a state contracts with managed care organizations (MCOs) to manage a Medicaid population, the contracted rates are negotiated between the organizations providing the health care services (acute and LTSS) and the MCO. The State Medicaid Agency does not regulate the provider contract rates for MCOs.

What Is Medicaid Managed Care?

According to a Kaiser 2015 report, 39 states have implemented managed care models to deliver Medicaid services. Through Medicaid Managed Care, the State Medicaid Agency establishes contracts with managed care organizations (MCOs) that are responsible for the overall costs and quality of care for a specific group of Medicaid beneficiaries. Under a Medicaid Managed Care model, the MCO operates as a health insurance plan and contracts with a diverse provider network to provide direct services. The provider submits claims to the MCO for the services that are rendered to the designated population.

In order to establish a managed care program, the State Medicaid Agency has to obtain approval from CMS through the SPA process. Then, the state issues a request for proposals (RFP) for private health insurance companies to assume the financial risk for managing the Medicaid benefits for a defined segment of the Medicaid population. Most states begin with contracting with an MCO to deliver direct health care services. LTSS are a separate level of coverage and usually require a separate contract between the State Medicaid Agency and the MCO.

The health insurance company (vendor) that is chosen through the RFP process will receive a contract for managing the Medicaid benefits for a specific population. The health plan is then responsible for managing all of the health care costs for the population using a capitated per member per month payment (PMPM) from Medicaid. Cost overages are the responsibility of the vendor. The vendor has an opportunity to increase their profit in the contract by reducing the overall cost of care for the population. The state benefits by having a consistent expenditure for the Medicaid program and extends the risk of the program to the vendor. 

What Does "Dual Eligible" Mean?

“Dual Eligibles” are individuals who qualify for both Medicare and Medicaid benefits. The dual eligible population includes low-income older adults and younger people with disabilities. Medicare is the primary payer for the acute care needs of a Dual Eligible, and Medicaid is the supplemental policy for that individual’s acute care costs. Medicare provides only limited coverage of LTSS. In contrast, Medicaid covers many LTSS, including home and community-based services and inpatient long-term care. Services vary by state because states have flexibility to design their own programs as long as they comply with the federal guidelines.

The older adult population is and will continue to be a key growth sector for Medicaid Dual Eligibles, and states will need the expertise of organizations that serve this population to improve health outcomes, provide better health care, and lower costs. Therefore, it is important that state and community-based organizations offering CDSME programs and other health-related services work with their State Medicaid Agency to provide input into the state Medicaid plan. The Medicaid state amendment process provides an opportunity for stakeholder input that can influence the state’s covered services.

The Benefits of Partnering with State Medicaid Agencies

Medicaid serves 4.6 million low-income older adults and 3.7 million people with disabilities.¹ Many older adults and people with disabilities have chronic health conditions that can place a burden on the acute care and LTSS systems.

Self-management practices can mitigate the progression of chronic illnesses and thereby reduce the burden on the health care system.

Evidence-based CDSME programs show great promise in supporting Medicaid’s efforts to reduce acute care and LTSS expenditures, while improving quality of care and health outcomes. Developing partnerships between community-based organizations (CBOs) that are delivering CDSME programs and Medicaid state agencies can be mutually beneficial.

The Medicaid state agency benefits by working with a service provider that is experienced in engaging a population that heavily utilizes Medicaid and can readily deliver CDSME programs. The organization delivering CDSME programs benefits from receiving a reliable source of referrals and an established payment mechanism for their CDSME programming.

Health Reform Positions State Medicaid Agencies to Adopt CDSME 

Under the Affordable Care Act, CMS developed the value-based payment program, which reimburses Medicare health care providers for achieving improvements in health outcomes and reducing costs, rather than for the number of services provided to Medicare beneficiaries. States that wish to shift to a Medicaid Managed Care model have the unique opportunity to align Medicaid payment incentives with Medicare value-based payment models for the population of Dual Eligibles (individuals who are eligible for both Medicare and Medicaid).Evidence-based CDSME programs have been shown to activate patients so that they are more involved in their health, have increased self-efficacy, practice healthy lifestyle behaviors more often, and report feeling better. The programs have been demonstrated to improve a number of quality measures related to health status, health care, and costs.² 

Because CDSME programs are peer-led, provide a supportive environment to facilitate change, and empower participants to take charge of their health, they are well suited for helping to improve the health status of older adults and people with disabilities. These programs can be useful in helping Medicaid improve the health of Dual Eligibles, who are disproportionately affected by chronic diseases.

Sources

1. Medicaid.gov. Seniors & Medicare and Medicaid Enrollees. Found on the Internet at https://www.medicaid.gov/medicaid-chip-program-information/by-topics/eligibility/seniors-and-medicare-and-medicaid-enrollees.html. Accessed August 4, 2016

2. Ory, M.G., Ahn, S., Jiang L., Smith, M.L., Ritter, P., Whitelaw, N., & Lorig, K. (2013). Successes of a National Study of the Chronic Disease Self-Management Program: Meeting the Triple Aim of Health Care Reform. Medical Care, 51(11), 992-998.