Podcast Episode Transcript: Medicaid: The backbone of U.S. health care

With L. Gordon Moore, MD

Gordon Moore: Welcome to the Inside Angle Podcast. This is your host, Dr. Gordon Moore, and with me today is Matt Salo. He is the executive director of the National Association of Medicaid Directors. Started with him in February of 2011, which I believe may actually be when the organization came together, although we’re going to ask more about that. Today, we’re going to talk about: Where is Medicaid going? Welcome, Matt. 

Matt Salo: Thanks so much, Gordon. Great to be here.

Gordon: Thanks. Tell me a little bit about “NAMDi” and how it came about and what it’s up to now.

Matt: Sure. So we actually prefer N-A-M-D.

Gordon: Oh—thank you.

Matt: That’s quite all right. I have to tell that to my members every now and then as well. So, the organization really has only been around for about nine years, which gives people some second thoughts: “Wait a minute. Why so young?” And not surprisingly, the Medicaid directors have been around as long as the Medicaid program, which is, essentially, 1965. But prior to about nine years ago, the Medicaid directors existed in a kind of large umbrella group that represented not just the state Medicaid directors, but the whole spectrum of state human services or welfare agencies. So: Food Stamps (now SNAP), TANF, Child Support, Child Welfare, etcetera. And it existed that way for decades.

And quite frankly, the Medicaid directors never liked that arrangement, never felt that they were sufficiently well supported or staffed or resourced. And so about ten years ago, they all got together and kind of had a midnight palace coup and voted unanimously to pull out of that group to reincorporate as a separate stand-alone entity devoted entirely to the issues, the needs, of the Medicaid directors. And one of the first things they did was hire me. So we’ve been on this ride for about nine years, and it’s been really exciting.

Gordon: I can imagine them getting together and wanting to focus more on their portfolio, because it’s significant—it’s huge. It’s like 18 percent of the economy or some massive number. Medicaid is massive in every single state and territory.

Matt: It is. I mean, Medicaid itself is three percent of the nation’s GDP. And it’s 20, 25, 30 percent of pretty much every state budget. So it’s big. And yeah—it’s big, it’s growing, and it’s significantly different from both a budget—but also just a philosophical—standpoint from all of those other type agencies. It is health care. It is insurance. It is politically relevant in ways that those other programs just aren’t. So it was a long time coming for them to make that decision.

And interestingly, the straw that broke the camel’s back, as they explained to me, was the debate around the creation of the Affordable Care Act—where arguably this was one of the biggest public policy changes in a generation and, clearly, the biggest legislative change to Medicaid since 1965. And the Medicaid directors kind of looked around and said, “Where was our voice in the debate around this law?” And the answer was: It wasn’t really there. And that, to them, sparked “Something’s got to change; we’ve got to be more relevant, and we’ve got to do something to change this dynamic.” And so that’s what we’ve done.

Gordon: So it’s been up now since 2011. There’s lots been happening. Medicaid has gone through expansions in many states. There’s a lot of concern about the impact on budgets. And I’m wondering: Where’s it going?

Matt: Yeah. Well, Medicaid is relevant in a political and fiscal and philosophical way more so than I think it ever has been in the program’s history. It has become such a bedrock, as I mentioned—not just of state budgets, not just of GDP—but the healthcare system itself. Medicaid is the largest health insurance program in the country. We cover more than 70 million Americans. We cover about 50 percent of all the births in the country in any given year. We’re also, by far, the largest provider of long-term services and supports—which is a real shock to most people who think, “Oh, long-term care, nursing homes—that’s Medicare, right?” And the answer is absolutely not—no, it is Medicaid. That’s one of the quiet secrets—not so quiet, not so secret anymore.

But Medicaid’s also the largest provider of mental health services, the largest provider of HIV/AIDS treatments—it is big and it is relevant and it is such a significant backbone of the U.S. health care system that despite attempts to repeal and replace, it is here, it is here to stay, and we now have to figure out: Where is it going? And the short answer to “where is it going?” is: As I look around at the 56 states and territories—and if you help me name how we got to 56, there’s a civics bonus point in there for you—but if I look around at all of my members and say, “What is the common theme? What is the thread that binds together states as diverse as New York and Texas, California, Nebraska, Alaska, and everything in between?”

It’s really the sense that they’re trying to use Medicaid to essentially transform the underlying health care system in this country. And the bedrock principles of how health care is both delivered and paid for in this country for decades is really kind of dysfunctional. The short term we use for the historic way that things have been done is fee-for-service. And that’s been a philosophy that’s guided a lot of health care, a lot of Medicaid, a lot of Medicare, a lot of commercial insurance for a very, very long time. And it’s essentially this sense of: A provider delivers a service, and a provider gets paid for that service. Full stop.

And it leads to sort of a fragmentation of the care delivery system in that we have acute care providers and mental health providers and pharmacists and behavioral health providers and long-term care providers. And everybody else—none of them are coordinated, none of them are talking to one another, none of them are trying to look holistically at the patient to figure out what they need. And ultimately, that is because of—and perpetuates—a payment incentive in this country that we call paying for volume.

So, traditionally in the health care system, if a physician says, “Hey, we’re going to do one MRI,” then we pay for one MRI. And if the physician says, “Well, we’re going to do 50 MRIs,” we’re going to pay for 50. And that’s crazy. Because that has never had a real linkage to: “Well, why are we doing this? Is this making the patient healthy? What are the outcomes?”

And so, to kind of wrap that all in, where we’re trying to take Medicaid is to transform that underlying fee-for-service system into a better managed, better coordinated, more holistic system of care that is patient-centered. And ultimately, the payment system and payment incentives for everybody involved—nursing homes, hospitals, physicians, everybody in between—should be angled towards how we pay for value, not just paying for volume.

Gordon: And when I think about state programs, there’s been a big move towards engaging with managed care organizations. I think about the state of Iowa a few years ago—let’s have three or four MCOs step in to manage a budget for a segment of the Medicaid population in that state. Is that the means of transformation you’re talking about? Or is it more than that?

Matt: That’s a great example of it, although what I would say is that looking to managed care organizations, or MCOs, is an incredibly powerful tool to get a job done. It is a means to an end. It is not the end in and of itself. The end is a system where you’ve got better managed, better coordinated, more holistic care. And many states—Iowa is a great example, Texas, Tennessee, Arizona—Arizona’s been doing this for 35 years. Many states are looking to MCOs to kind of be the force multiplier for the state to carry out this vision of health care transformation.

But that’s not the only way you can do it. And in fact, what we’ve seen in many other states—I’ll use Massachusetts as an example. Massachusetts is a state that used to do big MCOs, and relatively recently, they kind of stepped back and said, “Well, what’s the value proposition for what we’ve been doing? Are we getting an ROI both on the dollar we’re spending as well as are we seeing significant or sufficient improvements in patient outcomes for what we’re spending?” And ultimately, they said, “We don’t think so.”

So they pivoted a little bit. They said, “Okay, as opposed to these MCOs, we’re going to try something a little different.” And so they kind of turned to accountable care organizations, or ACOs. And at some level, they’re not hugely different in terms of what they’re intended to do. They’re clearly intended to be a big umbrella entity that can better manage and coordinate care. It’s just that the structure of them is a little different. But that’s what made sense in Massachusetts. Again, it’s a slightly different vehicle, a slightly different tool to get to that end.

And then there are states on the other end of the spectrum, but I think this is no less important. States like Wyoming or Connecticut, where there’s no actual quote/unquote “MCOs” at all. Now, in Wyoming, it’s a big frontier state—hard for an MCO to really take purchase. And in Connecticut—they tried MCOs in years past, and really didn’t like the experience. And so, what both of those states have done—for different reasons, but they’ve gotten to the same end—they’ve essentially looked at the managed care industry and said, “How are you guys doing this? How are you changing the models of care? How are you engaging with providers and patients to improve the system?”

And rather than contract out with an MCO or an ACO or whatever, these states are kind of doing it in-house. And again, in Wyoming, that makes sense, because you’re not going to get big MCOs in a huge frontier state. And in Connecticut, they’re small enough, and they’re well-resourced enough—they can bring that kind of thing in-house. And so for me, it doesn’t matter, really, what the vehicle is. It’s: What is that goal? What is that endpoint? And that endpoint is the same for every state that we talk to. It’s improving the patient experience of care, improving health care outcomes, and trying to bend that cost curve.

Gordon: And I was going to go there, so thank you for the perfect segue. How do the states know that they’re successful in their interventions as they’re trying things—MCO or bringing it in-house? What are their markers of success?

Matt: So there are a lot of different markers. And I think it’s important, because if you think back 15, 20, 25 years ago—pre managed care, pre big health care reform transformation—we didn’t really have very many metrics at all. We had a lot of process metrics. And I remember there was a state, probably 20 years ago—and they had put together a new claims processing system. And they were proudly proclaiming that they could pay claims to providers—90 percent of them were going to get paid in 48 hours, and that that therefore made them the best Medicaid program in the country.

And it was like, “Oh, well, that’s certainly an interesting metric. But barring any other real metrics—okay, we’ll go with that.” But what we’ve really come to learn over the years is that process metrics is not what’s important. So what states have taken to doing, and what states are doing in partnership with the MCOs or partnership with the ACOs or on their own, is thinking very, very seriously about things like HEDIS scores or CAHPS measures or other types of patient-experience metrics to be a much better indicator of: “Hey, is what we’re doing working?”

And one of the really important takeaways that we saw is that this is really changing how state government works. And to use that example of that state 20 years ago—20 years ago, state Medicaid programs were essentially passive bill payers. And again, a provider sends in a claim: “Hey, we did this to a patient. Pay for it.” And that’s what we did. We paid it. We were passive, we paid bills, that’s kind of what we did. But over the last 15, 20 years, Medicaid has really transformed into an active purchaser of health. And again, whether that’s through managed care or other types of techniques, it’s changing the dynamic of how state government works.

And so what we’re seeing all over the country is states having to transform their workforce. So, you no longer need a Medicaid agency staffing level that has hundreds of claims processors. Those are kind of redundant. The managed care plan will have that, so those things aren’t really that important. Rather, states are now having to figure out what tools we need in order to make this public-private partnership work. How are we going to staff up or reconfigure our staffing plan so that we have a very, very different skill set of state government employees? Rather than hundreds of claims processors, we’re going to want people who are pharmacists and who are expert on prescription drug and gene therapy issues as those start to dominate the conversations.

You’re going to want medical experts. You’re going to want a very robust set of data analytics and a way to capture the data and analyze and figure out: What are we going to do with that now that we’ve got this data? And then, really, the big thing that is so, so important is: If you’re Iowa or if you’re any of these other states that are signing billion-dollar contracts with an MCO, you really have to make sure that you are staffed up with people who are experts in contracting, procurement—again, the data analytics—to be able to set up these dashboards that will show you in real time how these plans are performing in rural, urban, suburban parts of the state. To see if there’s a red flag that’s starting to pop up. Is there a trend or a theme that’s starting to emerge?

Is it an access issue? Is it a quality issue? What is it? And how do we, then, mobilize to fix that in real time? And that’s a very, very different skill set than Medicaid has traditionally had, and that’s what we’re really embarking on these days.

Gordon: Yeah. I was thinking as you were saying that—if I’m a state Medicaid agency, and I’m going to contract with a Molina or a Centene or some group like that and there’s a group of people that are going to sign up with them, I have to know what’s a reasonable budget for that and then see how they’re performing against that. And then look for the relationship between the HEDIS scores, if there is one—we want to make sure and maintain high quality, but also the experience of care, as you mentioned, with the CAHPS surveys. Then at the end of the day, if you’re blowing the budget, that’s just not going to work. So how’s that all going to work? And having the ability to risk adjust and do a lot of stuff—that’s pretty complicated. So I imagine that’s a big piece.

And in that context—tell me what does DSRIP stand for and what your members are thinking about this thing, if it’s something that’s going to keep going on?

Matt: Yes. So DSRIP, one of the many very complicated acronyms that we use in the Medicaid program, actually stands for Delivery System Reform Incentive Payment. And it’s basically a shorthand for a transformation approach that a number of states—big ones like New York and Texas and California and a bunch in between—have gotten approval to do, approval from the federal government, mostly in the last administration, in the Obama administration.

And the concept really was to say, “Hey, because we are transforming health care—we’re making this move to managed care,” sort of as a shorthand. But just hiring a bunch of MCOs doesn’t mean you’ve checked that box and we’ve transformed health care. Health care, like politics, is very local. So for real health care transformation to succeed and be sustainable, it’s got to really infuse the practice of health care at a very, very local level. So, from small mom-and-pop physicians all the way up to federally qualified health centers and everything else.

The concept behind these particular waivers was: If the health care system is going to transform its business model away from fee-for-service, away from paying and getting paid for in volume, into a more holistic system with a different business model—paying for value, value-based purchasing—if we’re going to require the health care system to do this in a real and sustainable way, we’re going to have to make investments. Investments in coaching providers on how to do this transformation. A 55-year-old family care physician isn’t just going to be able to snap his fingers and say, “Hey, we’re now value-based purchasing. Look at us.” It takes work.

And so a lot of these big waivers—is what they’re called—attempted to put a lot of money up front into helping transform the actual delivery of care. And the hope is that over a five-year period, those up-front investments that you made are going to pay off and essentially be budget-neutral to the federal government over that five-year period. And like I said, there have been a number of states who have done that.

Our challenge now is that this administration has said, “Well, we’re done with those. There will be no new ones, and anyone who currently has one should plan on it ending when your five-year cycle is up.” And they’ve been signaling that for quite some time, and I think even the Obama administration said, “Yeah, I think we’re kind of done handing these out.” So I think it’s really going to be incumbent on states who’ve had them to say, “Did this work? Were these investments meaningful? How do we transition off of them? And what are the lessons learned for other states who are no longer going to get this opportunity to get this bolus of federal money up front to help make this transition?”

Gordon: What do your members say about that? Is that a uniform assessment of success or failure of those programs?

Matt: I don’t know that there’s a uniform assessment on anything, really. I think, with Medicaid, 50-plus different states are doing things in a variety of very different ways—some with more success than less. And I think a lot of it really has to do with the very significant differences that you do have geographically, politically, demographically, culturally. And I think most of them would probably say, “Yes. These were successful.” But I think, as with most things, our members are very practical and pragmatic. They know that things don’t last forever. They know that changes in administration happen; they have consequences.

And so, as with many other things—as these particular types of investments are winding down, people are starting to think, “Okay. Well, what’s next? What’s on the horizon? What can we do in the absence of this?”

Gordon: And what do you think the next two to three years brings in terms of changes and shifts for your members?

Matt: One of the things that I think will stay consistent is a focus on this delivery system and payment reform. That’s going to have all sorts of different aspects, whether it’s thinking much more holistically about how you properly blend in behavioral health—whether that’s on the substance abuse side or the mental health side, or both—I think you’re going to see a renewed and continued interest and conversation around what we’re doing about the social determinants of health. Those things that aren’t medical in nature, that aren’t traditionally an insurance-based benefit—but things like housing, food security, transportation to and from medical appointments, or otherwise.

Things to address: social isolation and things that address adverse childhood events. This is a really important area where people are recognizing that for a lot of people who have not been well served by the health care system, it’s not medical interventions or even insurance coverage that are going to make the most meaningful difference in their health care improvement. It’s things like transportation and food and housing. And how do we deal with those gaps? Whose responsibility is it? Is it Medicaid’s responsibility to pay for housing for people who are homeless? Or is that a bridge too far? So we’re going to be struggling with how to do that in both a meaningful but also appropriate way.

 I think the last thing that I would say in terms of what we’re going to be looking at over the next couple of years—I would certainly note that this administration is talking a lot about and starting to signal its intentions with regulations and everything else on increasing transparency and accountability and program integrity—as they would put it—in terms of how the program is funded and how eligibility determinations are being made. And that could potentially pose some very, very big changes in how the program is funded—which is, to be fair, a very, very complicated system of federal dollars, state dollars, local dollars, and a lot of complexity around how states generate revenue.

But there are signals that changes are coming. And that could have very, very significant impacts in how the program is funded. And I think that will be coming at a time where our members are also starting to look above the clouds a little bit and say, “Hey, we spend most of our time in the day-to-day, but if we step back and take account of what’s going on economically in this country, we’ve been on an almost ten-year economic improvement ride, which has been great. And we’re due for an economic downturn.” Now, nobody knows when that’s coming. Is it tomorrow? Is it five years from now? Is it somewhere between? Nobody knows. Nobody knows how bad it will be. But it’s going to come. There will come a time. This is how economics work.

And so what our folks are really starting to think about is—we’ve taken to calling it strategic sustainability. And that brings a whole bunch of threads together of: Traditionally, historically, as this country has gone through economic downturns, Medicaid gets hit with this perfect storm of, “When the economy goes south, then not only do people lose jobs and therefore increase the rolls on public programs, Medicaid and others—but at the same time, because of that economic downturn, state revenues go down.”

And so, at the same time that the cost of providing benefits—because you’re serving more people—goes up, the ability of states to finance that goes down. And traditionally, what we’ve had to do is rather rudimentary efforts to balance the budget, because that’s also important. States have to balance their budget every single year, unlike our friends in the federal government. So, historically, what they’ve done is sort of this: “Well, can we cut eligibility? Can we cut benefits? Or can we cut provider reimbursements?” And none of those are popular; none of those are good things in the grand scheme of things. But what else are your choices?

What we’re really looking at now is—and DSRIP kind of works into this, and these other types of health transformations work into this by saying, “Hey, can we make these investments now when times are relatively good? So that when the economy goes south, we’re going to be better protected, better supported, and better able to roll with this changing tide without having to resort to bluntly cutting eligibility, cutting benefits, or dropping reimbursement rates too low. And I think part of the challenge will be: How does some of this administration’s efforts to squeeze down on Medicaid financing—how is that going to negatively impact some of those strategic sustainability efforts?

Gordon: Wow. Winter is coming. Well, Matt Salo, thank you so much for your time today.

Matt: My pleasure. This is a great conversation.

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