Buried in Michigan Gov. Gretchen Whitmer’s proposed 2020-21 executive budget proposal is $5 million funding request to create a five-employee office with a big mission: transforming how the state pays for health care through Medicaid.
The ultimate goal of the Medicaid transformation office in the Department of Heath and Human Services is to come up with a variety of new or enhanced “value-based” reimbursement systems for health plans, hospitals, physicians, nursing homes and home and community based providers, said Robert Gordon, MDHHS director, in a recent interview with Crain’s.
In other words, systems that seek to pay for quality.
Gordon said MDHHS needs more “bandwidth” and additional experts to help move Medicaid further away from what’s known as a “mixed-model” reimbursement system — that has nearly half of providers paid fees for services — and toward higher quality and lower costs. Medicaid health plans, which account for about half of the state’s Medicaid budget, currently are paid capitated, or per person per month, rates based on at-risk contracts.
If approved by the state Legislature, Gordon said the new Medicaid transformation office would evaluate best practices in other states, develop programs and offer recommendations to the governor, state policy officials and legislators.
The bottom line, Gordon said, is Medicaid must further modernize how it uses tax dollars to pay Medicaid providers by improving quality, reducing costs and address some of the factors that cause patients to do poorly in the health care delivery system.
“We don’t have a huge staff” to oversee nearly $16 billion in Medicaid spending, Gordon said. “We are dealing with (many other issues) that are on the books. We would like to create some resources to create a Medicaid transformation initiative. … Our staff can’t do that in their spare time.”
Over the past 20 years, the Medicaid program has increased state general fund spending for medical services from about $5.2 billion in 2000 to $15.9 billion for fiscal year 2020. During the same period, full-time equivalent employees rose to only 406 employees from 353. That is a 15 percent increase in staff compared with a three-fold increase in spending, Gordon said.
The $5 million cost for the office would come from $2.5 million in general fund budget, with the other half matched by the federal government. The funding would support development of innovative programs and payment mechanisms in Michigan’s physical health and behavioral health managed care programs, he said.
Besides looking at integrating physical and behavioral health, the office also is expected to take leadership responsibilities for creating new reimbursement systems for Medicaid health plans and nursing homes. It also would recommend changes in how doctors, hospitals and rehabilitation facilities are reimbursed under Medicaid and offer home and community and home-based alternatives to long-term care facilities for seniors.
“Our vision of the (transformation) initiative, at a high level, is to make sure we are spending every dollar effectively,” said Gordon, adding that Ohio is one state model Michigan is using.
Greg Moody, the former director of the Ohio Office of Health Transformation, said Ohio’s 10-year-old office received support from the state Legislature and health care industry groups. He said Ohio was able to improve care coordination, enhance quality and lower costs in virtually every health program.
Moody said it took the Ohio health transformation office about six months into Gov. John Kasich Jr.’s administration in 2011 to start making recommendations that were incorporated into the state budget.
“We started with a clear sense of purpose, took on a number of challenges, physical health, behavioral health, home and community-based services as an alternative to nursing homes,” said Moody, who now is Executive in Residence at the John Glenn College of Public Affairs at The Ohio State University.
“We modernized the eligibility systems and reorganized agencies to align incentives and eliminate disruption of care,” he said. “(From 2014 to 2018) we re-imagined every program with population health, value-based strategies and social determinants of health.”
The first step was to create the Ohio health transformation office to coordinate changes across multiple programs, Moody said. Over the next several years, the state rebid Medicaid managed care to add more quality incentives, increased home and community-based alternatives to nursing homes and began the process to integrate physical and behavioral health.
Some of the initial reforms were focused on setting a tiered reimbursement system to pay behavioral health providers a better rate and matching it with quality and expertise. More hospitals and physician practices then entered the behavioral health market, expanding access and quality, Moody said.
The state also identified the top 5 percent most expensive patients and matched them with appropriate providers. The change improved outcomes for patients with depression, he said.
Each year, Moody said, Ohio showed improvement in outcomes and lower costs.
For example, the state had a 12 percent decline in infant mortality rates in 2018 by directing more resources to ZIP codes with higher mortality rates. Another positive outcome was a 22 percent reduction in drug overdose deaths from 2017 to 2018, Moody said
“You don’t get benefits on day one, it’s down the road, but you start immediately,” he said.
Dominick Pallone, executive director of the Michigan Association of Health Plans in Lansing, said he supports the Medicaid initiative aimed at improving reimbursement systems, calling the new office a “very positive investment that will yield long-range benefits.”
Starting in 2016, Pallone said, Medicaid health plans were awarded new contracts that built in performance-based payments for improved health outcomes.
“Director Gordon is talking about finding ways to encourage more value-based reimbursement, and we are moving in that direction already,” Pallone said. “We are ready, willing and able to embrace value-based reimbursement.”
Gordon acknowledged that Medicaid HMOs in Michigan are doing a good job improving quality compared with other states.
“We want to help plans and advance alternative payment methods to make sure everyone has skin the in game,” Gordon said. “We want to build on successes and encourage plans to do even more.”
Pallone said Medicaid health plans have been increasing the percent of payments to providers that are linked to quality improvement, or value-based contracts. In the 2015-2016 fiscal year, 14 percent of payments to providers included some value-based payments. Today, more than 24 percent is directly linked to quality, he said.
“The bigger the provider organization, it is naturally easier to work more with value-based payment arrangements,” he said. “(There must be) transparency and trust, which is the goal on the plan side.”
One problem, however, that many physician organizations have is that each Medicaid plan has a different payment incentive system. Because they are administratively different, physician organizations find value-based payment systems difficult to manage, Pallone said.
“We want to talk with (MDHHS) about it. We know (the state) wants to focus the (transformation) office to move on the value-based path. We need to take into account providers, but not stifle innovation,” he said.
Marianne Udow-Phillips, director of the Center for Healthcare Research & Transformation in Ann Arbor, said it is difficult to predict what improved outcomes could come from moving to a more value-based reimbursement system. She said the state’s transformation office could ultimately address a number of these issues.
However, there are already several clues in the governor’s budget request that could address key health areas. For example, Whitmer’s budget program includes funding for three programs that seek to improve quality: a program to reduce infant mortality, a program to offer a screening program to identify people affected by “social determinants of health” and a third program to seek alternatives for seniors other than nursing homes.
Healthy Moms and Babies is a $37.5 million program ($17.6 million general fund) intended to enhance maternal and child health services by increasing health coverage and access and expanding Michigan’s home visiting programs. Among other things, it would increase access to behavioral and reproductive health services for expecting and new mothers and create 1,000 new home-visiting slots targeted to at‐risk families.
“The Michigan Medicaid program now performs pretty well on cost side of equation, but where are those areas for improvement?” Udow-Phillips said. “We do not do well on infant mortality. It is good for the state to explore that.”
A second budget request is $20.3 million ($8.5 million general funds) to help seniors navigate long-term care with a network of independent counselors to help seniors and their families navigate the complicated array of long-term care support services.
“With long-term care, (MDHHS) doesn’t have enough resources to track how well they are doing with home and community-based services supports,” Udow-Phillips said. “This would help people qualify for” available programs to keep seniors out of nursing homes, she said.
At least half of people who reach age 65 will need some level of assistance with tasks of daily living as they age. Michigan has expanded its Program for All‐inclusive Care for the Elderly and its MI Choice supports program. In 2015, the state also launched MI Health Link in 2015, an integrated Medicare and Medicaid dual eligible program.
But Michigan ranks 40th nationally in the percent of state long-term services and support spending on home and community‐based services.
Another of Whitmer’s budget proposals calls for an $11.6 million program ($7.1 million general fund) to incorporate SDOH planning into state and local public health strategies.
“(Gordon) is looking at best practices in other states, other models of reimbursement to (gain) improvements in quality,” Udow-Phillips said. “He doesn’t have a detailed plan. They want to fund more social determinants of health and they could do it through” the existing five community health innovation regions in Michigan.
The five CHIRs are located in the counties of Genesee, Jackson, Livingston, Washtenaw and Muskegon. While five years of federal funding expired in January, Whitmer’s budget proposal calls for a one-time general fund expenditure of $3 million. So far, the CHIRS have cut unnecessary emergency department visits and created links between providers and community service organizations that have helped to coordinate care.
The funding would create an SDOH screening and referral tool, Gordon said. Michigan lacks a standardized system to identify health-related social needs and follow-up actions to connect people with community‐based resources, he said.
Many patients, studies have found, do poorly after hospitalization or other medical care because they lack access to transportation, healthy foods, medication, housing or they face other social and environmental barriers to recovery.
This barriers are called social determinants of health. When people lack basic services, they often wind up back in the hospital, potentially worsening their conditions and running up costs. Research has shown they play a major role in such chronic diseases as obesity, heart disease, diabetes and depression. They also can interfere with healing and recovery.
A recent study found that the health disparities resulting from social determinants of health cost Michigan $1.2 billion in excess medical costs and $1.9 billion in untapped productivity.
Hospitals, physician offices, health insurers and other health providers are grappling with ways to reduce the impact from social determinants of health. As payment for health care moves from fee-for-service to value-based payment models that reward quality and lower utilization, taking a holistic view of patients is increasingly seen by the health care industry as a way to reduce costs and drive value.
Gordon said one way to improve quality and address rising costs is to help people overcome social determinants of health.
“We would like to address (these issues) before people end up in doctors’ offices,” he said. “(We want to find a way to) incentivize that and fund that.”
Gordon said Michigan is looking at how other states have modified their Medicaid programs to encourage providers and health plans to address social determinants of health. They include North Carolina, Oregon and New York.
Pallone said health plans support SDOH screening. “They create healing communities and help to make sure we are referring people to the right clinical services,” he said.
Over the past five years, Pallone said health plans and the state have experienced positive return on investments by incorporating SDOH into their workforces. For example, most plans fund community case workers who contact Medicaid beneficiaries and offer them programs to help them with housing, food assistance and transportation.
“Let’s make more investments and get creative,” he said. “It doesn’t have an immediate ROI, but it can have long-term effects on people’s lives.”