Investing in Medicaid IT

As the nation’s largest public insurance program, Medicaid provides health insurance to 1 out of every 5 Americans. The program supports individuals from birth to end-of-life, paying for approximately 45 percent of births nationwide and more than 50 percent of long-term care services and support, including nursing home care and home and community based services.

Given its dominance of the payer market, Medicaid can and does serve as an important catalyst for large-scale healthcare delivery system reform. This includes greater use of managed care, support of accountable care and patient-centered medical home models, improved focus on care management, and, increasingly, focus on improving state-wide population health through multi-payer reform initiatives and linkages to social services.

Indeed, as a joint Federal-State program, Medicaid enables each state to innovate and experiment to meet the needs of its own unique beneficiary and provider populations.

A solid foundation

True reform is not possible without a strong underlying foundation of health information technology (IT) that can link beneficiaries, providers, and state and Federal agencies, and allow them to share data that is crucial to care coordination, care management, quality improvement efforts, alternative payment methodologies, and program planning and evaluation. However, because Medicaid Management Information Systems (MMIS) were originally constructed in the 1970s, they rarely have the functionality to support modern Medicaid programs’ needs for managed care program oversight, automated beneficiary enrollment, and real-time data reporting. Nor can these legacy systems support sophisticated program integrity solutions that accommodate the move to alternative payment and delivery systems.

Traditional approaches to redevelopment of Medicaid enterprise systems (MES), which include MMIS, typically required a costly and time-consuming wholesale replacement of the system, often resulting in systems that were not flexible enough to adjust to rapid changes that occur in the Medicaid program. To support the current pace and scope of health system reform while making good use of taxpayer funding, states need a faster and more cost-effective approach to IT improvements.

It is a problem recognized and addressed by the Centers for Medicare and Medicaid Services (CMS), which funds a major share of state MES development and operations. In December 2015, CMS issued the Mechanized Claims Processing and Information Retrieval Systems (90/10) Final Rule (CMS 2392-F), which overhauled Federal funding for state MES development and operations in part by:

• Instituting a modular certification process for MES development to encourage states to approach system replacement in modules that are focused on meeting specific Medicaid agency business needs;
• Incentivizing the use of commercial off-the-shelf and software-as-a-service products through enhanced Federal funding match rates;
• Permanently increasing the level of Federal support from 50 percent to 90 percent for development of eligibility and enrollment systems;
• Increasing the Federal matching rate for maintenance and operations of eligibility systems from 50 percent to 75 percent; and
• Refining the penalties CMS can impose on states for not delivering on their IT projects.

Making room for innovation

The new rule is designed to push states to break MES replacements into smaller, more attainable “modules,” and to encourage states to use technology for those modules that is available commercially and has already been proven in the market or pre-certified by CMS. States will not be allowed to access Federal funding for MES development projects unless they adopt this modular approach.

CMS intends these incentives to encourage new market entrants into the Medicaid MES space, and these new vendors to offer innovative health IT solutions that can lower costs across states while allowing for the flexible IT foundation states need to support rapid health system reform. Under 90/10, vendors can propose modules for pre-certification by CMS, which will help new players demonstrate the readiness of their solutions, thereby reducing states’ risk of using them.

Making it work

Issuance of the final rule was a critical first step toward enabling states to embrace a modular approach to MMIS. CMS wisely left states with significant flexibility to design requirements for modules that meet both their specific business needs and CMS objectives. As states move into procurements for modules, they should carefully consider their RFP process.

RFPs should set the business stage and clearly express how the selected system will achieve the state’s Medicaid goals and objectives by serving specific business needs. For example, is the state seeking to improve managed care oversight, adopt alternative payment models, increase beneficiary access to quality care, or improve identification of fraud and abuse?

The state should shift the RPF’s focus away from scoping out specific, defined requirements. Instead, the RFP should specify basic features and functionalities, and focus on how the chosen system and/or modules meet the stated business goal and enhance the experience of all stakeholders, including providers, beneficiaries, managed care plans, and other state agencies – all while meeting CMS’s expectations for performance.

A sense of urgency

States are feeling a growing sense of urgency when it comes to reforming their healthcare systems to improve care outcomes and reduce costs. Achieving the vision of these efforts requires a radical change in their approach to MES development. It is a transformation for which CMS has paved the way by encouraging states to deploy modular systems while simultaneously stimulating competition among vendors to supply system components.

States and vendors need to work together to finish the task by implementing innovative systems that are capable of meeting the business objectives of the Medicaid programs of today and the future.