Innovation by necessity: Medicaid emerges as aggressive laboratory for delivery-system reform

Two years ago, leaders of the Buckeye Community Health Plan decided to take action after noting an increasing number of babies in Ohio being born with symptoms that included seizures, rapid breathing and vomiting. They were suffering from neonatal abstinence syndrome (NAS), caused by their mothers' abuse of narcotics such as heroin, codeine and oxycodone during pregnancy.

The annual NAS hospitalization rate among infants born in Ohio grew sixfold from 14 per 10,000 live births in 2004 to 88 in 2011, and hospital costs totaled nearly $70 million, an elevenfold increase from 2004, according to the Ohio Department of Health. Medicaid was the primary payer.

“It got to the point where you could no longer look at those numbers and say it isn't our responsibility,” said Dr. Brad Lucas, chief medical officer at Buckeye, a subsidiary of Centene Corp., a Medicaid managed-care company.

In 2013, Buckeye launched the Pregnancy Specialty Care Management Program, which identifies pregnant plan members with current or previous alcohol or substance-abuse problems and engages them in education and treatment programs. Since the program was started, the average length of stay in special-care and intensive-care nurseries for the Buckeye babies diagnosed with NAS has dropped steadily, from 13 days to seven and a half over two years.

This is one of many examples across the country of state Medicaid programs and their contracting managed-care plans serving as incubators for innovative solutions addressing healthcare cost, quality and access issues. The innovations include integration of primary care and behavioral health, telemedicine, accountable care, patient-centered medical homes and coordination of medical services with long-term-care services and supports.

Several states, including California, New Jersey, New York and Texas, also have delivery system reform incentive payment (DSRIP) programs, which are federally approved waiver programs in which federal Medicaid funding is used to create financial incentives for providers to pursue delivery-system reforms. Those reforms involve infrastructure development, system redesign and clinical-outcome and population-focused improvements.

While value-based payment and delivery innovations by Medicare and commercial insurers have gotten more media attention, some experts say Medicaid programs have proven more fertile ground for unfettered innovation. “There is a great deal of political pressure to constrain the cost of the programs, and this has encouraged efforts to implement managed care and other innovative programs designed to reduce spending,” said Michael Gusmano, co-director of the Yale-Hastings Program at the Hastings Center, a bioethics research institute.

Medicaid's federalist structure has given states lots of room to experiment with new approaches. The Medicaid patient population has less political power than Medicare's senior population to resist changes such as mandatory managed-care enrollment, said Brad Wright, assistant professor of health management and policy at the University of Iowa. Also, beneficiaries and advocacy groups tend to see these programs as potential improvements in quality and access, given that Medicaid patients long have struggled to find providers willing to accept the program's low payments.

“We're talking about a population of very vulnerable people with few, if any, other options for being able to access healthcare,” Wright said. “When the state decides to experiment, the beneficiaries aren't likely to be well-informed of these changes, to fully appreciate the implications of the changes for them personally, or to be well-organized enough to resist these changes politically.”

The need for developing cost-effective new approaches is growing as the Affordable Care Act has added millions of beneficiaries. Thirty states and the District of Columbia have agreed to expand Medicaid to lower-income adults under the healthcare reform law. States that will begin picking up a portion of the costs for that expansion population in 2017 are looking for ways to limit those costs without cutting eligibility or benefits.

Many governors and legislators also are brainstorming ways to take advantage of the ACA's Section 1332 State Innovation Waiver provision, which allows states to provide health coverage for their residents in alternate ways as long as the coverage is at least equal to standard ACA coverage. In theory, states could use the waivers to implement targeted expansions of Medicaid instead of providing coverage to all adults up to 138 % of the federal poverty level, said Nicole Huberfeld, a research professor at the University of Kentucky College of Law.

States have pursued Medicaid innovations for cost savings and quality improvement largely through contracting with private Medicaid managed-care companies. By year's end, it's estimated that 73% of beneficiaries will receive services through managed-care plans, according to Avalere Health. Currently, 37 states and the District of Columbia contract with Medicaid plans, according to Medicaid Health Plans of America.

As of March 2015, 46 states and D.C. have adopted policies and programs to advance patient-centered medical homes in their Medicaid and/or Children's Health Insurance Program, according to the National Academy for State Health Policy.

Some observers question whether the use of patient-centered medical homes and coordinated-care programs, particularly for the general Medicaid population, will improve quality or reduce costs. They say the evidence shows coordinated-care programs are most effective when they target high-cost adult patients with chronic conditions.

“Children already tend to be lower cost and don't need as much care coordination,” said Debra Lipson, a senior researcher at Mathematica Policy Research. “The initiatives that seem to be the most successful are those that improve care for people with some sort of chronic illness.”

Julia Paradise, associate director of the Kaiser Commission on Medicaid and the Uninsured, agreed that the focus should be on high utilizers. “If you can make a dent there among that population, you can make a substantial difference,” she said.

Medicaid plans have particularly set their sights on controlling costs for members with behavioral health issues. In 2011, nearly half of adult beneficiaries under age 65 who were eligible for Medicaid on the basis of disability and were not also eligible for Medicare had a behavioral health diagnosis, according to the Medicaid and CHIP Payment and Access Commission. That population accounted for two-thirds of total Medicaid spending.

In 2012, Cigna-HealthSpring, a Medicaid managed-care plan, launched its Behavioral Health Intensive Outpatient Program initiative in Texas. The plan uses data analysis and clinical case review to identify members with a history of behavioral health services who are the highest users of services.

The program deploys nurse care managers who reach out to patients and their various providers and coordinate care. The care managers actively seek out members in their homes, shelters or even in jail. They work to build a strong rapport with members and are able to offer other providers insights into the members' needs. The program eases pre-authorization rules for coverage of prescription drugs and other medical and behavioral services.

The program has seen notable results, according to Cigna-HealthSpring. One Medicaid member went from 26 hospital admissions in one year to two admissions. Another member, who has schizophrenia and lived under a bridge, was reunited with his family, became compliant with his medications, and saw his extremely high annual healthcare costs drop by nearly half.

Similarly, Anthem's affiliated Medicaid plans in Tennessee, Texas and Virginia are targeting beneficiaries with behavioral health issues through its Rising Star program. Members with three or more admissions over a six-month period for behavioral health disorders, or who had a lengthy behavioral health hospitalization, are assigned to a specific hospital and provider to encourage enhanced care quality. The goal is to enable providers to become more knowledgeable about patients and their conditions and get patients more involved in managing their own health.

Like Cigna's program, Anthem's initiative waives prior authorization requirements for certain drugs and services, which makes it attractive to physicians. “(The doctors) don't have to worry about having Anthem's medical director calling and asking, 'Why are you keeping a patient so long, or have you tried different medications?' ” said Dr. William Wood, behavioral health medical director for Anthem's government business division.

Anthem data show that a year after the program launched in Tennessee, there was a 46% reduction in hospital admissions among program participants, a 58% reduction in total inpatient days, a 22% reduction in average length of stay, a 56% reduction in hospital readmissions, and a 24% reduction in emergency department visits.

Other widely adopted Medicaid innovations are primary-care case management and patient-centered medical homes. Under the medical home model, a multidisciplinary team generally led by a primary-care physician manages the health of the enrolled Medicaid population. The team members make sure the members receive recommended preventive services, get care for their chronic conditions, have their medication dosages monitored and adjusted, and have access to social services and supports.

“This works because it addresses some of the non-financial barriers to care,” University of Iowa's Wright said. “It helps them coordinate their care in ways that provide a big return on investment. And it works because providers get paid a capitated amount to participate and provide these care-management activities.”

More than 20 state Medicaid programs have launched initiatives that provide training and coaching to physician practices seeking to become medical homes, according to a 2012 article in Health Affairs.

Greater Lawrence Family Health Center, in Lawrence, Mass., has been using the medical home model for about seven years, said

Dr. Joseph Gravel, the center's medical director. It has seen drops in unnecessary emergency department visits among Medicaid patients.

“This has definitely been beneficial from the patients' point of view,” Gravel said. “Now that we have a team taking care of them, and not a single person, all of their needs are getting met.”