Medicaid Alternative Payment Models: Could MACRA Be a Catalyst for States’ Value-Based Care Efforts?

Phelps A, Thomas S
Publication Year: 2017
Population Focus: Medicaid beneficiaries
Intervention Type: Service redesign
Study Design: Other Study Design
Type of Literature: Grey

Many states have been experimenting with Medicaid alternative payment models (APMs) to try to control spending, improve care, and increase accountability within Medicaid and across the healthcare system. Have any of these models worked? How might Medicaid
initiatives align with the Medicare Quality Payment Program (QPP) established by the Medicare Access and CHIP Reauthorization Act (MACRA) to reinforce value based care incentives and drive system-wide change? The Deloitte Center for Health Solutions has reviewed research and other literature, and conducted interviews with industry experts and stakeholders to learn more about Medicaid APMs, their effectiveness, and how they might need to evolve to maximize their impact.

Insights Results

Overview of article

  • This article explores the effectiveness of Medicaid alternative payment models (APMs) and how they might need to evolve to maximize their impact
  • Medical home models, including patient-centered medical homes (PCMH) and Medicaid Health Homes, are the most prevalent type of Medicaid APM with ACOs and episode-of-cost (EOC) payments less common. There are many reports that showcase how state and federal initiatives have helped primary care practices meet process milestones associated with PCMHs (e.g., hiring/training care managers), however, it is not yet clear whether PCMHs are operationally successful and will lead to improved health outcomes or reduced costs for patients. Many have limited measurable impact
  • Qualitative evaluations of early State Innovation Model initiative award recipients and DSRIP waivers indicate that the resources made available through these programs have been integral in facilitating provider participation in state APMs. So, states that have not implemented APMs or are considering expansion of efforts will likely need to consider financing availability

Methods of article

  • Researchers scanned publicly available information sources, including state and federal websites, government-sponsored and independent research publications, peer-reviewed journals, and other grey literature to identify Medicaid program evaluations, excluding initiatives focused solely on dually eligible Medicare-Medicaid beneficiaries or Federally Qualified Health Centers, published or updated within the past 4 years. They reviewed 30 reports containing 78 program evaluations (27 PCMH, 22 Health Homes, 15 ACOs, four EOCs and 10 DSRIPs), which represent 45 unique programs operating in 28 states
  • Researchers also conducted interviews with industry experts and stakeholders to learn more about Medicaid APMs, their effectiveness and how they might need to evolve to maximize impact


  • Through the literature review, the study found that evidence on Medicaid APMs is scarce and findings are often limited. Evaluations are often limited to measuring operational success, and it can be difficult to quantify savings
  • There are 2 PCMH models that have measured impact sufficiently: 1) Vermont’s Blueprint for Health found the program saved about $482 per participant, primarily from reduction in hospital inpatient utilization and expenditure. However they found no significant differences in quality, except for 1 diabetes measure; and 2) Community Care of North Carolina achieved annualized savings of $312 per Medicaid beneficiary , significantly reduced readmissions, but did not have a significant impact on emergency department use
  • The federal evaluation of the first 3 years of the Multi-payer Advanced Primary Care Practice (MAPCP) demonstration, CMS’s first multi-payer PCMH initiative, found limited and inconsistent evidence and impact on Medicaid outcomes (e.g., Michigan reduced all cause readmissions but increased the rate of specialist visits for child beneficiaries)
  • Qualitative data on Medicaid Health Home models indicate that these initiatives have led to improved care for enrolled members (e.g., improved care coordination, member engagement). Participating providers agreed that Health Homes were appropriate and feasible to provide targeted care for high-need populations. Missouri’s Health Home programs reduced both utilization and cost through decreased hospital admissions, decreased admission to specialty mental health programs and improvements in clinical outcomes (e.g., diabetes control). Ohio’s specialty Health Home program for persons with serious mental illness was associated with a overall increase for Medicaid program costs, but providers reported improvements in care coordination and satisfaction
  • Research indicates that Medicaid ACOs are maturing more slowly than anticipated so many focus on measuring progress towards implementation rather than evaluation of success. Colorado’s ACO program reduced Medicaid costs, however, savings varied greatly by geographic area and showed no significant impact on key performance, quality or access. Oregon’s ACO program was able to help reduce overall Medicaid spending

Key takeaways/implications

  • It is difficult to evaluate state PCMH initiatives because they can vary tremendously in design and implementation
  • Reasons for limited evidence are fourfold: 1) Robust evaluations can be expensive and time-consuming with many states lacking dedicating funding or resources (many evaluated state programs were funded through a federal initiative); 2) Legal barriers, market competition and evaluation costs can limit information-sharing; 3) Models may require more time before they can be expected to show meaningful impacts on cost and health outcomes; and 4) Concurrent initiatives can complicate evaluation design
  • In monitoring Medicaid Health Home models, it will be important to monitor the trend in absorbing such models into broader PCMH initiatives
  • Technology and data analytics can be fundamental to APM participation for payers and providers to access, aggregate and analyze data to target resources effectively and track quality and cost. Thus, technical challenges may inhibit APM participation and participation
  • Aligning Medicaid APM’s design, reporting requirements and financial incentives with other payers could potentially increase their impact and likelihood of success. The Medicare Access and CHIP Reauthorization Act (MACRA) may also help to incentivize for provider participation
  • When considering APM design and involvement, states should consider: 1) Capacity of providers and health plans to participate and their own ability to oversee these initiatives; 2) Technological capabilities; 3) Opportunity to align APMs to other payer initiatives to reduce burden, maximize program impact, and increase incentives for providers; 4) Determine if their is alignment in criteria for other-payer advanced APMs under MACRA; 5) Federal funding availability; and 6) Ability to assess effects of APMs on health of Medicaid beneficiaries, access to care, and overall program costs
  • When considering APM design and participation, health plans should consider: 1) Coordination with state Medicaid agencies; 2) Potential benefit of new business opportunities; 3) Ability to design their own Medicaid APM or influence the design of one; and 4) Potential benefit from monitoring changes to Medicaid MCO contract requirements as there may be a competitive advantage when bidding on state contracts. However, MCOs that lack the capacity to implement APMs may be at risk of losing Medicaid business
  • When considering APM design and participation, providers should consider: 1) Impact on revenue, relationships with other providers, patient engagement strategy, and competitive position; 2) Capacity to participate (e.g., technological infrastructure, readiness to accept financial risk); 3) Ability to leverage their market power to promote payer participation; 4) Whether or not they are subject to MIPS reporting or qualify for MACRA’s advanced APM track; and 5) Ability for the Payment Model Technical Advisory Committee to allow greater specialist participation