Better Care Coordination Can Cut Medicaid Spending and Improve Health Outcomes

Medicaid critics often claim that the program lacks sufficient flexibility to implement strategies that would help states lower Medicaid spending and improve beneficiaries’ health.   But that’s not true.  As we explained in a recent paper, states do have that flexibility. 

One approach states can take is to connect Medicaid beneficiaries with a medical home.  In a medical home, a primary care provider takes the lead in coordinating an individual’s care.  This can include coordinating with other physicians and support services that address not just health but other needs that affect health, such as nutrition and housing. 

North Carolina has used this strategy.  About 80 percent of the state’s Medicaid population is enrolled in a medical home.  In its first year, North Carolina’s program cut the number of emergency room (ER) visits for children enrolled in Medicaid who have asthma by 8 percent and the number of inpatient hospitalizations among the same group by 34 percent.  The state projects that the program will help it save about $160 million each year. 

States can also improve care coordination by focusing their efforts on people who use a lot of health care.  In Medicaid, these are usually people with one or more chronic conditions, such as asthma, diabetes, and congestive heart failure.  While this group is only about 1 percent of total Medicaid beneficiaries, it accounts for 25 percent of Medicaid spending.

States can target beneficiaries with chronic conditions in several ways, but one opportunity that health reform made possible is the implementation of health homes.  Different than medical homes, health homes specifically target individuals with chronic conditions and coordinate, through an interdisciplinary team of health care providers, all primary, acute, and behavioral health and home care services.  An added benefit to health homes is the availability of enhanced federal matching funds for states — they receive a 90 percent match for health home expenditures for the first two years of a state’s health homes initiative. 

Over the first two years of Missouri’s health homes initiative, the average blood pressure and bad cholesterol levels of the Medicaid beneficiaries enrolled in the state’s health homes fell by six points and 10 percent, respectively.  For those enrolled in Missouri’s Community Mental Health Center (CMHC) health home, hospitalizations dropped from 33.7 percent in 2011 to 24.6 percent in 2012.  The CMHC health home also saved Missouri $15.7 million in its first 18 months of operation.

Perhaps the easiest approach for states is to provide individuals with chronic conditions additional services to better coordinate their care.  For example, Vermont provides Medicaid beneficiaries with one or more chronic conditions with additional support, such as developing a care plan, helping them understand their medications, and assisting them as they transition back to their homes after an inpatient admission or ER visit.  Since the state implemented the program in 2011, program participants have stayed on their care regimens more than individuals who don’t participate, gone to the ER less, and had fewer inpatient hospital admissions.