Medicaid health plans are moving ahead with the shift to alternate payment methodologies (APM) at a relatively rapid rate. Twenty-two states require health plans to move to value-based reimbursement and eleven states use Medicaid accountable care organizations (see Success Today, Success Tomorrow – Strategy Issues in The Changing California Behavioral Health Market).

The question our team is asking – is Medicaid financing—for physical health, behavioral health, and pharmacy—properly aligned for value-based reimbursement (VBR)? If integrated care coordination and VBR are going to have a meaningful impact on “bending the cost curve”, financial alignment is important. The more fragmented the financing, the less impact care coordination can have on consumer resource use.

Over the course of the year, we’ve written a series of reports on how individual Medicaid services are financed (see State Medicaid Mental Health & General Pharmacy Carve-Outs: An OPEN MINDS Market Intelligence Report and State Medicaid Behavioral Health Carve-Outs: The OPEN MINDS 2019 Annual Update). Our latest analysis, Alignment Of Medicaid Financing For Behavioral Health, Physical Health & Pharmacy, takes the ‘big picture view’ of financial alignment within Medicaid systems.

Of the 49 states with a fee-for-service (FFS) system, 39 align all services – physical health, behavioral health, and pharmacy. In those FFS systems, 10 align physical health and pharmacy services, but not behavioral health services.

Of the 41 states with Medicaid managed care, financial alignment is less uniform. In 26 states, the Medicaid health plans are financially responsible for all services – physical health, behavioral health, and pharmacy. In the other states with Medicaid health plans, two states align physical and behavioral health, but not pharmacy; seven align physical health and pharmacy only, two align behavioral health and pharmacy, and two have no alignment of any services. Additionally, there were two states (Hawaii and Maryland) that align physical health and physical health pharmacy and then separately finance, but align behavioral health and behavioral health pharmacy.

Why financial alignment matters is clear. Care coordination and incentives based on ‘total cost of care’ are possible where financial risk is aligned. Setting targets for reduction of total spend is not possible if those funding streams aren’t aligned. In states where behavioral health is not in same financial pool as physical health, it is not possible to incentive behavioral health provider organizations on medical cost-offset as a ‘value measure’.

Overall, Medicaid plans are increasingly eliminating ‘carve outs’ of behavioral health and pharmacy benefits and relying on health plans to make integrated care coordination models work. Going forward, it is health plan policies and initiatives that are going to determine the incentives in pay-for-value arrangements. Whether those models work is a subject for a different analysis. (For a current snapshot of health plan practices, see 2019 Trends In Behavioral Health: A Population Health Manager’s Reference Guide On The U.S. Behavioral Health Financing & Delivery System, 2nd Edition.)

For a look at the alignment of financing on a state-by-state basis, check out our new report, Alignment Of Medicaid Financing For Behavioral Health, Physical Health & Pharmacy. And for even more, join us at The 2020 OPEN MINDS Performance Management Institute in Clearwater, Florida on February 12 for, “The OPEN MINDS Integration Summit: New Models For Primary Care, Behavioral Health & Social Service Integration” featuring Donald Parker, LCSW, President, Hackensack Meridian Health Carrier Clinic and Tine Hansen-Turton, President & Chief Executive Officer, Woods Services, Inc.

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The Alignment Of Medicaid Benefits – The Health Plans Have It – OPEN MINDS