Magazine article Policy & Practice

How You're Driving Down Costs-And Improving Lives

Magazine article Policy & Practice

How You're Driving Down Costs-And Improving Lives

Article excerpt

Health and human services--and particularly health care--eat up a large portion of state and local budgets. The cost of Medicaid, which largely serves low-income individuals, is shared between states and the federal government and accounts for the biggest portion of those expenses. More than one-quarter of all state expenditures and over 15 percent of state-funded expenditures are Medicaid related--and those costs are rising (see table to the right). This section shows how governments are decreasing costs in their Medicaid and other HHS programs.


Medicaid has traditionally reimbursed providers based only on the services delivered, but that is changing. Increasingly, states are incenting health care providers to meet performance measures. This practice, known as paying for performance, focuses on producing better health outcomes for citizens, or put another way, on quality rather than quantity of services rendered. In fiscal year 2014-2015, 34 states implemented quality improvement initiatives such as adding or enhancing pay-for-performance arrangements to their managed care contracts. (12)

What You're Doing:


New York

In the wake of the recession, New York State's Medicaid program was unsustainable, with significant cost increases as state revenues were declining. A Medicaid Redesign Team helped get costs under control, and now the state is using outcome-based payments to lock in those improvements.

Funded with a $7.3 billion grant from CMS, the Delivery System Reform Incentive Payment Program (DSRIP) provides incentives for hospitals and safety net providers to collaborate and form networks that promote integrated and holistic care. Approximately 90,000 providers--including hospitals, practitioners, clinics and behavioral health organizations--are split Into 25 networks that have committed to reforms that link payments to the health outcomes of network members. By the end of 2019, 80 percent of provider payments will be value based.

Combining outcome-based payments and a shared-savings model for providers creates Incentives for efficient, patient-centered care, says New York State Medicaid Director Jason Helgerson. He uses the example of children suffering from asthma: "If 35 percent of the cost of treating them is the result of preventable complications that cost $100 million per year, and we cut those complications by half, the provider networks share the savings. It's a win-win for patients and providers."

The initial results are encouraging. New York's Medicaid expenditures are no longer the highest in the country, and the state's average cost per beneficiary is declining. (13)


2016   $589 billion 5.2% ANNUAL INCREASE
2017   $627 billion 6.5% ANNUAL INCREASE
2018   $662 billion 5.7% ANNUAL INCREASE

Source: Centers for Medicare and Medicaid Services

Note: Table made from bar graph.


One thing government HHS programs are not lacking is data. The challenge has always been in accessing, sharing and analyzing data to produce better outcomes. Once data is tapped, however, the results can be transformative. A lack of funding for systems investment has largely left HHS behind the curve when it comes to the use of sophisticated analytics, but that is beginning to change. CMS launched the Medicaid Innovation Accelerator Program (IAP) in July 2014 with the goal of improving health and health care for Medicaid beneficiaries by supporting states' efforts to accelerate new payment and service delivery reforms, including the use of analytics. (14)

What You Told Us:

We asked respondents to the CDG/Governing Institute 2016 HHS survey if their agency consistently embraces data in new and innovative ways to improve program outcomes.

SOMEWHAT AGREED               40%
STRONGLY AGREED               18%
DISAGREED                      6%

What You're Doing:



Data analytics has been integral to Colorado's Medicaid reform initiative, the Accountable Care Collaborative, which uses coordinated care efforts to produce better outcomes for beneficiaries, improve population health and reduce costs. …

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