In the two years since Iowa implemented privatized Medicaid managed care, the Iowa Hospital Association (IHA) has been researching and discussing how Medicaid can be improved and made more sustainable – no matter who controls the Legislature or occupies the governor’s office. That continuous work has led to an idea we call “the Third Way.”
A fundamental flaw of Iowa’s current Medicaid managed care arrangement is its failure to provide value that ensures high-quality care for the Iowans who depend on Medicaid and high efficiency for the taxpayers who pay for it. This is not a surprise. States across the nation have suffered with Medicaid managed care because, as we have seen in Iowa, private managed care organizations (MCOs) pursue their business goals ahead of everything – including the physical health of Medicaid patients and the fiscal health of our state.
After closely reviewing current research and examining effective Medicaid solutions from other states, Iowa’s hospitals believe there is a better way, a “Third Way” that puts Medicaid back under state control and evolves the program beyond the volume-based fee-for-service model – a way that creates and sustains value at a level that is simply impossible under the MCOs. We believe – and our research supports – that this approach could dramatically reduce the duplication and costs that now plague the Medicaid program. We believe it would ensure better medical outcomes and a clearer pathway toward a health care system that is truly value-driven.
The Third Way would offer a common set of interventions and outcome goals that would enable Iowa Medicaid providers to wisely invest in clinical innovation. Providers now struggle to align how they evolve their practices to better serve the Medicaid population with a long and ever-changing list of MCO metrics and goals. Under the Third Way, one Administrative Services Organization (ASO) would replace the MCOs and work with providers and other stakeholders to identify a single set of high-value interventions and outcome measures as well as a menu of value-based payment options. In this leaner environment, providers could dedicate their limited resources to deeper and more meaningful change that benefits both patients and taxpayers.
Importantly, the Third Way recognizes that Medicaid patients are disproportionately a high-need, high-cost population and are more likely to experience social and economic challenges – such as homelessness, food insecurity or geographic or social isolation – that negatively impact health and its cost. Medicaid patients are also more likely to “churn” in and out of coverage, which disrupts patient care plans and makes it more difficult to manage care and costs over time.
An effective value-based payment plan must recognize these limitations with creative solutions, including providing non-financial incentives and seeking to address social determinants in both the design of payment terms and in the range of interventions available to meet patient needs. To best address those needs, it may be necessary to exempt from managed care a relatively small group of Medicaid patients who face extraordinary health care issues – the so-called long-term services and supports population – so that value-based innovations can be focused on the majority of Medicaid recipients who would most benefit from our model.
Is the Third Way “the answer” for Medicaid? No – no one has that. But other states are lowering their Medicaid administrative costs, improving care and raising patient satisfaction using these approaches. And Iowa’s hospitals firmly believe this model offers a starting point and a pathway toward improved health for Iowa’s Medicaid population and greater efficiency in their care. In other words, it holds the potential to deliver real value for all Iowans.
For more information about the Third Way and the research that went into it, go to www.ihaonline.org/thirdway.