The Medicaid managed care landscape is catching up with leading payers and providers in the shift from fee-for-service to value-based payment (VBP), according to a Guidehouse analysis. The findings show that more states are requiring the use of VBP or alternative payment models in contracts between Medicaid managed care organizations (MCOs) and providers. However, the required approaches to these models vary across states. For example:
Guidehouse analyzed the most recent publicly available managed care contracts between states and their MCOs, as well as current or recently released state requests for proposals (RFPs) from all states with Medicaid managed care programs. All contracts spanned from 2017 to 2022, with the majority being agreements executed in 2020 or more recently. Identified contracts/RFPs were evaluated for sections on quality management/improvement, provider incentives, and/or provider payments, to ascertain and catalog the existence of any VBP requirements.
For the purposes of this analysis, VBP is defined as the full continuum of evolving payment arrangements outlined in the HCPLAN framework, including pay for performance, bundled payments, shared savings, and capitation. Additionally, many states operate multiple Medicaid managed care programs. This analysis focused on Medicaid managed care programs that serve the Temporary Assistance for Needy Families (TANF) populations.
State Requirements for MCOs to Implement VBP Contracts with Providers
The analysis of the states that have Medicaid managed care (39 states and Washington, DC) shows:
Analyzing States with VBP Requirements
Among the 29 states that require VBP between their MCOs and network providers, 26 states define parameters for those arrangements. However, the level of specificity and sophistication of the requirements vary.
17 states specifically mention the HCPLAN Framework for defining VBP arrangements. These include: Arizona, California, Hawaii, Louisiana, Mississippi, Nevada, New Hampshire, New York, North Carolina, Ohio, Oregon, Rhode Island, South Carolina, Tennessee, Texas, Virginia, and Washington.
19 states specify saturation targets (e.g., a percentage of total payments or enrollees that must be in a VBP arrangement). These include: Arizona, Delaware, Iowa, Massachusetts, Michigan, New Hampshire, New Mexico, New York, North Carolina, Ohio, Oregon, Pennsylvania, Rhode Island, South Carolina, Texas, Virginia, Washington, and West Virginia.
11 states require a glidepath or timeline for meeting saturation targets for VBP implementation. These include: Arizona, Delaware, Louisiana, Massachusetts, New Mexico, New York, Ohio, Oregon, Rhode Island, Texas, and Washington.
3 states require VBP arrangements between Medicaid MCOs and providers but do not provide specific requirements or parameters. These include: Georgia, Illinois, and Kentucky.
In general, the majority of states in the analysis rely upon widely used frameworks, such as HCPLAN, to define allowable VBP arrangements. However, some states, such as New York, have developed and use their own definitions.
17 states specifically mention the HCPLAN Framework for defining VBP arrangements.
The HCPLAN framework is the product of a public-private partnership aimed at spurring payment innovation in the healthcare system and provides a ready-to-use framework for VBP arrangements of varying risk. Of these 17 states, 10 specify the categories the MCO should use for its VBP program, usually HCPLAN Category 2C or higher.
While not every state that defines acceptable VBP arrangements for their MCO explicitly uses HCPLAN, most of the other states use definitions that align with or overlap across HCPLAN categories. For example, Michigan’s Medicaid managed care contract, while not directing MCOs to use HCPLAN, defines value-based models as including bundled payments and total/limited capitation models, which correlate to HCPLAN categories 3 and 4, respectively.
19 states have set required minimum saturation targets for VBP implementation.
These states define minimum targets in one of two ways:
11 states require a glidepath or timeline for meeting saturation targets for VBP implementation.
Glidepaths are typically based on saturation targets for the percentage of payments or enrollees that must be in VBP arrangements and usually increase over time. The glidepaths are structured around the contract length and can span three to five years.
Critical Implications for States, MCOs, and Providers
The trend toward VBP in Medicaid managed care has critical implications for states, MCO, and providers.
With nearly 70% of state Medicaid enrollees under MCOs, and the continued trend toward risk-based payment and whole-person care, it’s important for MCOs, providers, and states to understand the implications of these models and learn from each other for future success.
To learn more, download the full analysis.
Hanford Lin, Eric Meinkow, Claire Wynne