Strategies to Reduce Medicaid Spending: Findings from a Literature Review

Wiener J, Romaire M, Thach N, Collins A, Kim K, Pan H, Giuseppina C, Sommers A, Haber S, Musumeci M, Paradise J
Publication Year: 2017
Patient Need Addressed: Care Coordination/Management, Long-term services and supports
Population Focus: Medicaid beneficiaries
Demographic Group: Adult
Intervention Type: Service redesign
Study Design: Review
Type of Literature: Grey
link: https://www.kff.org/medicaid/issue-brief/strategies-to-reduce-medicaid-spending-findings-from-a-literature-review/view/footnotes/
Abstract

This issue brief considers the feasibility of realizing substantial Medicaid cost savings through strategies aimed at improving delivery system and administrative efficiency. We review the literature about the potential for Medicaid cost savings from four strategies related to acute care services: (1) premiums, cost-sharing, and enrollee wellness incentives, (2) complex care management, (3) patient-centered medical homes, and (4) alternative payment models, and another four strategies related to long-term services and supports: (5) tightening financial eligibility rules for long-term care services, (6) promoting private long-term care insurance, (7) expanding home and community-based services (HCBS), and (8) increasing use of managed long-term services and supports. We conclude that, while there may be other reasons to pursue these policies, such as improved health outcomes or increased enrollee satisfaction, the literature does not provide strong evidence for achieving large Medicaid savings through adoption of these policies.

Insights Results

Overview of article

  • This issue brief considers the feasibility of realizing substantial Medicaid cost savings through strategies aimed at improving delivery system and administrative efficiency

Methods of article

  • The authors reviewed literature about potential for Medicaid cost savings from 4 strategies for improving delivery system and administrative efficiency: 1) Premiums, cost sharing, and enrollee wellness incentives; 2) Complex care management; 3) Patient-centered medical homes, and 4) Alternative payment models
  • The literature does not provide strong evidence for achieving large Medicaid savings through potential strategies to realize Medicaid cost savings. Strategies fall into 2 categories with 4 specific strategies each: 1) Acute care (i.e., premiums, cost sharing, and enrollee wellness incentives, complex care management, patient-centered medical homes, and alternative payment models); and 2) Long-term care services (i.e., tightening financial eligibility rules for long-term care services, promoting private long-term care insurance, expanding home and community-based services, and increasing use of managed long-term services and supports)

Results

  • Strategy with the largest evidence base was premium requirements, which showed lower program enrollment and thus Medicaid savings. However, this is inconsistent with Medicaid’s goal of promoting health coverage and access
  • Premiums in Medicaid increase the likelihood of disenrollment, fewer new enrollments and shorter period of coverage, causing less potential for generation of savings. The few studies that assess impact of cost sharing on Medicaid spending show essentially no impact or higher spending. There is insufficient data to determine the impact of wellness incentives
  • Research on impact of complex care management, targeted as super-utilizers is limited and mixed. Cost reduction can also depend on which populations are offered CCM services and thus cost savings generated depend on targeting resources to specific populations
  • The impact of Medicaid health homes on Medicaid spending is unestablished since the federal 5-year evaluation has not concluded, however, evaluation of patient-centered medical homes in the broader healthcare ecosystem is informative, yet mixed
  • Research on alternative payment models (e.g., accountable care organizations, episode-based payments) and their effectiveness is limited as the development and implementation of these models are relatively still in infancy

Key takeaways/implications

  • Strategies implemented that tighten financial eligibility rules for long-term care services would be small and would marginally offset additional administrative expenses
  • Studies on the potential impact of private long-term insurance on Medicaid spending find little to no effect on long-term Medicaid spending. Any savings would be offset by subsidy costs
  • Cost savings from home- and community-based services are mixed, however, more recent findings are favorable
  • Studies assessing increased use of managed long-term services and support yield mixed results on overall cost savings
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