What makes Medicaid important?

The U.S. healthcare system is undergoing a rapid transformation, the goal of which is to maximize value of the dollars spent on providing higher quality care with better outcomes to improve overall population health. While the trends associated with this transformation impact all payers and providers, it is Medicaid – the nation’s largest source of public health coverage – that is often taking the lead.

At $495.8 billion, Medicaid makes up 16 percent of total national healthcare expenditures and provides coverage for more than 70 million people. It is a primary source of funds for safety net facilities that serve low income communities, nursing homes and other long-term care organizations, and provides assistance to 10 million “dual-eligibles” who receive both Medicare and Medicaid benefits.

Medicaid’s continued expansion in services and beneficiaries has established the program as the engine driving payment and delivery system reform. As such, it is deeply embedded in a number of highly influential trends that are reshaping the U.S. healthcare system as a whole. These include the adoption of alternative payment models and the incorporation of quality incentive payments into both fee-for-service and managed care delivery systems – changes driven by the Centers for Medicare and Medicaid Services’ encouragement of states to establish value-based payment arrangements and expand covered services and beneficiaries.

For example, use of managed care plans to deliver Medicaid services is expanding, with at least 39 states now using the model for a portion of their Medicaid population. States are also more willing to provide complex services, such as behavioral health and substance abuse treatment and long-term care, through managed care. States are also working to extend Medicaid’s reach beyond its medical roots and into socioeconomic initiatives that can impact medical cost, including healthcare transition planning for individuals involved in the criminal justice system, and supportive housing for individuals with behavioral health needs who may otherwise be homeless.

To support the management of these large scale delivery system reform efforts, state Medicaid agencies are focused on enhancing health information interoperability to better facilitate care coordination, and on meeting demands for data transparency and information sharing with and by a diversity of stakeholders. States are also engaging in efforts to improve stakeholder experiences when interacting with programs and to protect program integrity through enhanced oversight and monitoring of plan and provider performance.

Success requires a wholesale modernization of Medicaid programs and program operations, which in turn requires corresponding modernization and revamping of the technology infrastructures that support and operate them. This is driving significant investments in information technology and a greater focus on IT governance.

Leveraging lessons learned from past Medicaid projects, states are now engaged in activities designed to ensure successful implementation of IT projects, starting with an emphasis on phased implementation of well-scoped, minimally viable solutions. They are incorporating more – and more agile – development methodologies into new and legacy system life cycles, and evolving IT architecture to adopt a business-oriented modular approach.

System integrators are being tapped to mature program management and quality assurance, and the focus has shifted to implementation of best-in-class user interfaces to deliver a positive user experience. Finally, standards are being adopted to ensure data integrity, and statewide interoperability and information sharing for improved care quality, outcomes and coordination.

With the evolution of Medicaid into the largest and, arguably, most important insurance program in the country, it is appropriate that it become the engine driving many of the most complex and significant reform efforts across the U.S. healthcare system. Medicaid’s ability to serve as a catalyst for change ensures that the program’s importance can no longer be underestimated.



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