Millions of people face the prospect of lost or compromised Medicaid coverage as pandemic-driven temporary funding comes to an end. This compounds the danger for America’s most vulnerable citizens, who already have been disproportionately affected by the COVID-19 pandemic. The need for better state-based coverage is urgent. State leaders have a once-in-a-generation opportunity to transform their Medicaid programs in ways that will accelerate progress on cost, quality, access, and equity.

In recent years, innovative Medicaid pilots across the US have delivered promising results, but they have tended to focus on specific populations or segments of the care continuum, such as home-based supports. To significantly improve health outcomes, close health disparities, and improve the sustainability of the Medicaid program, we must seize this moment to create a broader, patient-centric transformation of the system as a whole.

To transform Medicaid, state leaders must understand patients’ diverse needs (those being met as well as those currently unmet), analyze usage patterns, and develop forward-thinking, patient-centric care models that can deliver the best outcomes for different population segments. New patient-centric models must be supported by three core enablers: understanding and integrating broader social determinants of health; leveraging data and analytics; and building capabilities in value-based payments.

Medicaid agencies that take the next step and become effective orchestrators of the health ecosystem—by putting patients at the center—have the potential to dramatically improve outcomes, transform member experience, and reduce growth in total cost of care.

What Does It Mean to Put the Patient at the Center?

Historically, Medicaid agencies have achieved incremental cost savings and health care improvements by focusing on basic utilization management—analyzing radiological imaging and finding ways to decrease volumes, for example—or reducing managed care organization (MCO) rates by renegotiating contracts periodically to cut costs.

This approach on its own is insufficient. We need to build a system that puts patients at the center.

Medicaid agencies have unique access to incredibly rich data on their “customers.” Other industries with this kind of powerful data, such as credit card companies or streaming services, use that information to generate insights that drive targeted decisions and interventions. Medicaid agencies need to do the same to identify which patients are driving the biggest costs, and more importantly, to identify areas where they can improve member health.

By looking at care through the lens of the patient journey, agencies can see how patients interact with the health system and identify barriers that get in the way of accessing care or staying in care. Using that information, agencies can make decisions about which population health measures to put in place, such as care interventions, care navigation, prevention, and social support systems.

Why Now?

The Medicaid system is entering a difficult transition period. Since the start of the pandemic in 2020, nonelderly Medicaid enrollment jumped by 17 million nationwide, owing to widespread job losses and the federal prohibitions on redeterminations and other eligibility checks. When the federally-declared public health emergency (PHE) expires, the federal share of Medicaid payments will drop—impacting state budgets significantly. And while Medicaid enrollment will also drop over time once eligibility checks restart, it is likely that Medicaid agencies will be covering a core group of adults, children, and elders with more serious and urgent health care needs.

In addition, delayed care and behavioral health challenges worsened during the pandemic. Over the past two years, up to 40% of US adults delayed non-COVID-19 health care. At the same time, the behavioral health impacts of COVID-19 are just beginning and will only compound the physical health challenges.

The pandemic also exacerbated stark racial and social inequalities in health care. Disproportionate numbers of Black and Hispanic people in the US have been infected with and died from COVID-19. People living and working in dense neighborhoods, crowded dwellings, or congregate facilities (such as long-term care facilities and group homes) have been hit especially hard. The pandemic also highlighted how critical it is to develop more effective models of care for the 70% of Americans projected to need long-term care after age 65.

These pandemic-related issues have the potential to place added burden on patients to understand their underlying health needs, access the required care, and navigate complex provider and payer systems. Without adequate support for patients, the compounding factors of delayed care, spikes in behavioral health challenges, and ongoing racial and social inequities may worsen health outcomes and ultimately drive up costs.

The challenges are significant, but we have the tools to overcome them. The key is to create a system built around the patient rather than models focused on the state or the provider.

Four Actions to Transform Medicaid Organizations

State Medicaid agencies are facing a complex set of challenges that demand they transform their strategies and roles. As orchestrators of the health system, Medicaid agencies have an opportunity to drive toward more patient-centric, equitable, and accountable programs. To make sustained progress, state health leaders must take action in the following four areas.

Design a patient-centric model. The first step is to design a holistic, patient-centric model of care. States should partner with MCOs, providers, and patient advocates to target patient-centered outcomes—in areas such as vaccination rates, engagement with primary care, and health screenings—for multiple population segments. This approach to system design and MCO contracting puts patients and long-term financial stability at the core.

When approaching the question of carveouts, for example, leaders should put the patient at the center of every decision. How, for example, will the patient (not just the state) benefit from a fee-for-service carve-out or a specialty MCO plan? How will the state or MCO work across sectors to build a network and support the whole patient? How will the state hold a specialist MCO accountable for clear, patient-centered outcomes? This type of strategic thinking ensures that new initiatives and contractual relationships with MCOs, providers, and their partners are set up for long-term improvements in health outcomes and cost savings.

Medicaid agencies should set the expectation that MCOs will implement innovative value-based care models that incentivize whole-person care, and states should provide the contract and regulatory flexibility to facilitate this type of innovation. Commercial players have been successful in using real-time, interactive analytics to map patient journeys, build prediction models, and target interventions to improve care and save costs. Medicaid agencies and MCOs should consider a similar patient-centric approach.

If state Medicaid agencies are serious about putting the patient at the center—and guiding their MCOs, providers, and social sector partners to develop new models—they must build capabilities in addressing social determinants of health (SDOH), prioritizing data and analytics, and investing in value-based payment models.

Integrate equity and SDOH into care models and contracts. To be truly patient-centric, agencies must understand the social needs of the population being served and show how unmet social needs drive up costs. While most Medicaid programs address SDOH informally, a growing number of states are requiring Medicaid MCOs to address SDOH as part of their contractual agreements. By aligning agency strategy, spending, and operating models around whole-person care—and incorporating SDOH into payment models—Medicaid can ensure that members are getting their holistic needs met.

MCOs can play an important role in ensuring patients get the social services they need to stay healthy—but they also need the right incentives. There is precedent in driving access to care. During the pandemic, for example, Medicaid agencies directed payments to MCOs for vaccine outreach and shared vaccination data to enable MCOs to arrange transportation for their unvaccinated members.

BCG worked with a Medicaid agency to embed SDOH into its statewide population health strategy. This included the selection of a standard screening tool MCOs could use to assess their members’ access to SDOH and a roadmap to build financial incentives into MCO contracts to improve SDOH and overall health.

SDOH initiatives can also be targeted at individuals who will reap disproportionate benefits from an intervention. In North Carolina, for example, MCOs participate in “Healthy Opportunities” pilots. The program targets enrollees with at least one physical or behavioral health risk factor and at least one social risk factor. Using evidence-based enhanced case management, the program addresses needs related to housing, food, transportation, and interpersonal safety for high-risk members. This type of program also highlights the value that can be derived from investing in platforms that connect providers, payers, and social service organizations.

Prioritize data transparency and analytics. Even the most well-thought-out models will fall short if they aren’t backed by strong data and analytics that deliver insights into patients’ met and unmet needs, usage patterns, risk factors, and variations in outcomes. With access to timely and accurate data, organizations can track and share outcomes, identify which care models lead to the best outcomes, and create data-driven policy decisions.

Unfortunately, many Medicaid agencies face barriers accessing timely data from claims systems, MCOs, and providers. This hampers their ability to track health outcomes, adapt policies and programs, benchmark costs of Medicaid members, hold contractors accountable, spot gaps in access and quality, make operational decisions, and make the case for further investment.

At a minimum, programs need to understand the characteristics of the 20% of patients that drive 80% of their costs. In the same way that banks, airlines, and other private sector companies use their customer data and touchpoints to target microsegments and deliver targeted, personalized, end-to-end experiences that their customers want, health care organizations can leverage data to deliver much more targeted interventions. Payers have had success when deploying machine learning to understand patient needs and evaluate the efficacy of interventions.

Beyond current limitations with claims data, states often don’t have adequate insight into coordinated care across agencies. For example, a Medicaid member with both physical health and social services needs may receive assistance from multiple programs, such as the Supplemental Nutrition Assistance Program and Temporary Assistance for Needy Families.

To capitalize on data and analytics, Medicaid agencies should work to integrate claims data with social needs data; write data-sharing into MCO contracts with penalties for noncompliance; develop contract management dashboards for MCOs; develop an in-house ability or gain access to data on health outcomes, utilization, price, and workforce supply; and publish public reports on systemwide access to clinicians, hospital beds, and home care.

Some states have already reaped the rewards of data and analytics when implementing innovative reforms. Rhode Island, led by the state’s Executive Office of Health and Human Services, developed a powerful cross-agency data system to better address complex social problems. Instead of storing Medicaid data in a silo, it pulls in data from the child welfare system, the unemployment system, the integrated eligibility system, and the homeless management information system, among others. By adding SDOH, the agency has a much broader view of what’s going on with an individual or family—and the analytics needed to drive better outcomes and make the case for new Medicaid investments in social supports.

Invest in internal capabilities in value-based care. To further support patient-centric care models, states must shift away from fee-for-service payment structures that reward volume over outcomes. But many Medicaid agencies don’t yet have the capabilities required to develop and manage effective value-based payment contracts.

To advance value-based plans, state leaders need answers to fundamental questions: What is the most effective attribution model for an accountable care program? Which procedures would benefit most from implementing bundled payments? How can a state move from pay-for-performance arrangements to more mature value-based payment models that don’t use fee-for-service as their underpinnings? Answering these questions requires sophisticated expertise in data analytics and contracting.

Importantly, states must also understand how to create incentives (or even requirements) around care management and coordination, which is especially important for complex populations trying to navigate a complex, fragmented system. MCOs and providers may be reluctant to take on the risk of value-based payment initiatives, but states can build in incentives that mitigate these risks. To successfully negotiate these types of contracts, however, states must build their expertise in contract development and strategic vendor management. Medicaid agencies might want to focus on recruiting individuals with experience building value-based contracts at a commercial payer or provider organization.

The future of Medicaid is in our hands. While Medicaid agencies and their colleagues in health and human services are under intense pressure, now is not the time to go back to old status quo. State health leaders must act boldly and strategically to make the right investments, build on lessons from the pandemic, and create a Medicaid program that is truly designed for the future.