Raising the Bar in Medicaid: Actuarial Driven Solutions to Support the Most Vulnerable
By Khurram Taufiq
In the Public Interest, January 2022
Editor’s note: This article is the winning submission for the Social Insurance & Public Finance Section Call for Essays.
Actuaries have the business acumen, problem-solving capabilities, and technical skills to develop innovative and data-driven solutions in the social insurance space. It is time we expand our scope and embrace an increased role in making a positive impact within the health care ecosystem. The primary focus of this paper is on social insurance programs dedicated to the most vulnerable population: Low-income families accessing care through Medicaid. While there are numerous challenges that require other subject matter experts to take the lead, this article highlights topics where actuaries can be key players in developing and implementing tangible solutions to improve the care for the most vulnerable. Issues and solutions in this paper focus on the following three areas:
- Access to appropriate care,
- continuity of care, and
- social determinants of health.
Issues
Access to Appropriate Care
Access to appropriate care is a common issue faced by Medicaid patients. Medicaid is viewed as a hassle to accept by many doctors, particularly by specialists, for two major reasons: Low reimbursement rates and administrative billing strain. While the low reimbursement issue is widely known, it could be argued that the administrative strain is just as significant of a barrier. Compared to Medicare and commercial insurance, Medicaid has significantly higher administrative hurdles. According to a recent study, physicians miss out on 17 percent of Medicaid revenue due to billing issues, drastically higher than Medicare (5 percent) and commercial insurance (3 percent).[1] Even if we consider that a portion of the denied Medicaid claims are due to inappropriate billing by providers, it is apparent that Medicaid health plans are lagging on the appropriate and timely payment of claims. These billing issues directly hinder a patient’s access to specialty care.
While access to primary care is not as prominent of an issue, the quality of care and time spent with primary care doctors is also negatively impacted by the major administrative strain put on doctors billing to Medicaid health plans. Primary care doctors are forced to put more time, effort, and resources into billing rather than spending quality time with patients that often have very complex medical and social needs. The patient-primary care doctor relationship is crucial to the appropriateness of care and restoring this relationship must be a focal point to improving the health and well-being of this population.
Continuity of Care
Medicaid members, particularly adults, tend to have a very high churn rate (coverage disruption/loss). Specifically, the non-elderly, non-disabled adult Medicaid beneficiaries are the most likely to have gaps in coverage, often due to income fluctuations that result in ineligibility. Studies show that lower income households have materially higher volatility in income, causing members to become temporarily ineligible, and requiring re-enrollment in coverage upon re-establishing eligibility.[2] Gaps in care result in less predictable expenses, pent-up demand, delayed care, and increased emergency room utilization. There are also substantial administrative costs associated with re-enrolling members and processing new applications for them. Lastly, even when these members transition to other plans (ACA individual market or employer-based), they are met with new networks and typically materially higher out-of-pocket costs (premiums and cost-sharing), serving as additional barriers to care. Continuity of care is a critical issue facing the Medicaid population that has shown to be detrimental to the health of its beneficiaries.
Social Determinants of Health
Social determinants of health (SDOH) is one of the most prevalent buzzwords in the health care industry over the past few years, and it absolutely should be. It has been well documented how SDOH massively contributes to the health status of individuals. This is magnified even further among the low-income population, where health care disparities are immense. COVID-19 further exposed these systemic inequities within the health care system and the need to tackle these inequities head on. While it is encouraging to see this topic gain traction in recent years, there has been minimal success in implementing solutions that drive measurable outcomes toward improving health and reducing cost of care.
Most states have yet to incorporate SDOH into the design of their Medicaid programs. Therefore, health plans and providers have little to no incentive to invest in the social care of their beneficiaries and states. The inaction within this space has a direct negative impact on members’ health outcomes, whether that be the unacceptable disproportionate rates of maternal mortality among Black mothers, asthma exacerbations among children due to housing conditions, or increased COPD and diabetes rates due to the lack of access to healthy foods. In addition to the impact on health outcomes, the inaction also results in increases in unnecessary and preventable utilization of health care services. Time is up. It is imperative we take this critical buzzword and turn it into measurable and attainable action.
Solutions
Billing Payment Quality Scores
A reduction in administrative hassle should result in an increase in access to care. States should require Medicaid managed care health plans to submit detailed claims data showing the back and forth between providers and payers. Then, actuaries, quite familiar with the intricacies of claims data, should be utilized to compute billing payment quality scores for health plans—a score assessing how efficient and effective health plans are at accurately paying billed claims. Scores below a certain threshold could result in a penalty to be paid by the health plan. Scores would be accessible by providers, allowing them to quickly see which health plans are the best at effectively paying claims. This model would incentivize health plans to streamline bill paying practices, resulting in a more efficient payment of claims and increased willingness for providers to accept Medicaid patients from the highest scoring health plans.
Streamlining billing payment practices would be a process improvement that should make billing more efficient for providers and have a net positive impact on their costs, allowing them to dedicate more time and resources to the patients themselves. This would also help health plans become more effective payers, allowing them to spend less manual time reviewing/denying/re-reviewing claims. This reduction in administrative costs for the state/health plans could be used to increase reimbursement rates to physicians. A reduction in administrative hassle and improvement in financials should yield an increase in access to care for members.
Direct Primary Care
Direct primary care (DPC) is a model that has gained significant traction in recent years. Primary care doctors can remove the hassle of administrative billing issues around insurance, develop set monthly fees and add-ons, and re-focus on what they most enjoy—spending quality time with patients and coordinating their care. Early indications of this model show reductions in health care cost and utilization, increased patient satisfaction, and increased doctor satisfaction.[3] This model could be piloted to the Medicaid population as well. States could contract directly with these direct primary care clinics and pay the fees for the patients, bypassing managed care health plans for this portion of care. This would significantly reduce costs and allow patients to get the access to care that they need. Actuaries could assist with this model in a couple of ways: Setting appropriate capitation rates with the direct primary care clinics based on the services provided and evaluating the program to assess success and improvements. Because direct primary care models are meant to handle a significantly lower caseload of patients, it may not be something that could be scaled immediately to the entire population. Therefore, actuaries could also assist with identifying the cohorts of the population that would most benefit from this model and start with that subset of the population.
Texas is one state currently where a bill has been proposed to pilot a DPC model for the Medicaid population. Managed care health plans have argued that carving out these services to a direct primary care model would only increase fragmentation in the already unintegrated health care landscape. Thinking through appropriate coordination of care and patient education will be a challenge in making this model effective in the Medicaid space; but if done appropriately, the outcomes could be significant: Lower costs, better care, happy doctors, and improved health for members.
Medicaid COBRA/Buy-In
The Consolidated Omnibus Budget Reconciliation Act (COBRA) allows employees and their dependents the opportunity to keep their employer coverage for a period of time after leaving their employer. This continuity of coverage allows these individuals to continue to have the same access to care (albeit for a hefty price) while transitioning to another plan. Why not offer that same opportunity for our most vulnerable population who become ineligible for Medicaid coverage due to just barely surpassing the Federal Poverty Level (FPL) threshold (potentially only temporarily)? This transition period would allow members to stay on their Medicaid plan for a period of time with no change, followed by a period of time where partial premiums would be required to stay on the plan depending on FPL level (similar to ACA premium subsidies). This would encourage low-income individuals and families to strive toward increasing their financial security while not being penalized for it by losing access to quality low-cost care. For those that do drop back below the FPL threshold during this transition period, instead of the state incurring the administrative costs of re-enrolling these members, they would remain in the plan and be removed from the transition stage with no gaps in coverage.
States could begin with a demonstration pilot program, and actuaries would be helpful in understanding the financial ramifications of this program, the impacts to the ACA, and how some of the ACA federal funds could be shifted to this purpose potentially through the use of a Section 1332 waiver. If implemented successfully, this could be extended to other Medicaid members who become ineligible for coverage, such as new mothers who often lose access to care shortly after delivery.
If deemed effective, it could even become a long-term “Medicaid Buy-in” option (separate from the existing program specific to disabled adults) where individuals could pay a premium and keep their Medicaid coverage for as long as they want. Eligibility could be based on whether they are eligible for ACA subsides (or a subset of this population). Actuaries would be crucial to identify the best way to make this model financially viable. Models like this are currently being explored in some states such as Nevada and New Mexico. While there is no doubt this program would increase the funds needed to support the Medicaid program, it would also reduce administrative costs, lessen the uninsured rates, make health care expenditures more predictable, and improve the care provided to these members.
Actuarially-sound SDOH Initiatives
State Medicaid programs should strategically break out SDOH projects into two buckets: Long-term (greater than one year to see outcomes) and short-term (less than one year). One of the major issues of these initiatives thus far has been that the outcomes are often long-term, and therefore health plans/providers who put in the initial investment may not see the reward due to the high churn of this population. The responsibility of long-term projects should be managed by the state, whereas short-term projects can be implemented at the health plan/provider level. Many of the same frameworks and analytics that actuaries deploy to measure disease management program success could be translated into this space. Leading indicators could be leveraged to identify whether programs are effective after a set amount of time, and either continued/discontinued based on these results.
Examples of long-term initiatives that actuaries could assist states with include:
- Utilizing advanced analytics to identify determinants with the most prevalence in specific areas and identifying key metrics that could be used to measure these determinants.
- Developing standardized tools, dashboards, and ROI calculators to assist health plans with making sound investments in the space. North Carolina’s state Medicaid program has shown significant strides in this area.
- Identifying the appropriate partnerships that offer the most strategic and optimal opportunity for success. Partnerships are crucial to appropriately tackling social issues and well-developed data-driven models could be one of the key tools to decide on which organizations to partner with.
Short-term initiatives actuaries could assist with include:
- Risk adjustment: While this model would be managed and developed by the state, risk scores are short-term in the sense that they are typically developed for a set rating period, and capitated rates are adjusted for health plans accordingly. Tying SDOH factors into risk adjustment would normalize payments so that health plans are paid out on a more equitable basis. As an example, Massachusetts has developed a “neighborhood stress score” that is now factored into risk adjustment.
- Value-based care models: Incorporating elements of SDOH that could be measured would be a valuable addition to these models. These models are currently being deployed in some states such as New York. Actuaries would need to identify which metrics make more sense as bonus payments versus capitation/shared savings. For example, providers completing a social needs checklist for a percentage of their attributed members or engaging a percentage of diabetic members in cooking classes or fitness programs could be part of a bonus payout structure. Metrics that would be anticipated to affect cost outcomes could include things such as: Reduced preventable emergency room utilization and decreased A1C levels. Cost of care reductions could be paid out in shared savings, but there could be a condition for a portion of those savings to be reinvested into these SDOH related programs.
There are numerous federal funding opportunities to assist states financially with these initiatives such as CMS 1115 and 1915 waivers. Another option for funding could be to incorporate reinvestment into these programs as part of the risk corridor program that states have in place. For example, investments into SDOH initiatives could count toward medical expense, incentivizing health plans do so. Excessive profits returned to the state could also be dedicated toward these initiatives. It is true that cost savings/ROI examples from SDOH interventions are currently few and far between, but through dedicated funding, resources, and data-driven decision making, there is a real business and moral case to be made within this space, and actuaries should have a critical seat at the table.
Closing Thoughts
Social insurance programs serve a pivotal role in society but have gaps and limitations that must be undertaken. The issues explained in this article are not intended to be all-inclusive; however, they are major concerns within the Medicaid space today, and ultimately have a negative effect on the health of the population it serves. The innovative and actuarial driven solutions presented in this essay are significant steps toward tackling these complex challenges and raising the bar for Medicaid, with the improvement of outcomes for the most vulnerable as the core goal. Actuaries can and must be leading voices and drivers for the successful implementation of these initiatives.
Statements of fact and opinions expressed herein are those of the individual authors and are not necessarily those of the Society of Actuaries, the newsletter editors, or the respective authors’ employers.
Khurram Taufiq, FSA, MAAA, is the director of Actuarial Services at Parkland Community Health Plan, based in Dallas, Texas. He can be contacted at khurram.taufiq@phhs.org.