The NCSL Blog


By Richard Cauchi

Where are states playing a leading role in driving value into the health care system?

This spring The National Association of Medicaid Directors (NAMD) released a report on “The Role of State Medicaid Programs” that provides new insights and examples.  With about 72 million people covered by Medicaid—the nation’s largest insurer—legislative budget leaders and health committees have been hard at work this year tracking changes and comparing results across states.

The report reveals how Medicaid is designing and implementing value-based health care purchasing models. Nearly two-thirds of surveyed states have already implemented or are planning programs designed to change payments at the provider level.  According to the report,

“The overall goal for pursuing alternative payment models among most states is to improve the value of the health care delivery system, meaning to improve the quality of the care provided while at the same time, reducing the costs. Today, a number of states are using wide-scale alternative payment models as a way to further change the incentives from volume to value, and efforts range from statewide mandated payment changes to experimental pilot programs.”

The most commonly used alternative payment models in state Medicaid programs are:

  •  Additional payments that support delivery system reform, where providers receive a “per member per month” (PMPM) payment to be used for a wide variety of purposes, in exchange for meeting performance expectations. This strategy, which is typically employed with primary care providers (PCP), is a focus in at least 12 states.
  • Episode-based payments is an approach where one provider is held accountable for the costs and quality of a defined and discrete set of services for a specified period of time. Ohio, Arkansas and Tennessee are leading the way, with many others planning to implement it or exploring it.
  • Population-based payments is an approach where one or more providers are held accountable for spending targets that cover the vast majority of health care services to be delivered to a specific population. Some states that have tried this model include California, Colorado, Maine, Minnesota, Oklahoma, Oregon, Rhode Island and Vermont.

The Role of State Medicaid Budgets

State Medicaid budgets are under constant pressure, especially because they represent a significant portion of many states’ overall budgets. State budgets in 2016 are no different. Agency directors point out that “state budget shortfalls often result in cuts to Medicaid programs that potentially delay programmatic changes and stifle innovation.” In some states, payment reform is difficult to implement because providers express concern that any such efforts would further reduce already-low reimbursement rates, similar to some of the models Medicare has implemented.Value based medicaid map

The full report includes a dozen state case examples, and may be useful to legislators seeking to look at progress and challenges in other states.

NCSL has additional resources on health payment reforms and state Medicaid developments.

The Commonwealth Fund supports the independent editorial work at NCSL and National Association of Medicaid Directors. The fund also posts material on Medicaid and other health topics.

Richard Cauchi covers health insurance reforms for NCSL.

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About the NCSL Blog

This blog offers updates on the National Conference of State Legislatures' research and training, the latest on federalism and the state legislative institution, and posts about state legislators and legislative staff. The blog is edited by NCSL staff and written primarily by NCSL's experts on public policy and the state legislative institution.