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States Can Use Medicaid Flexibility to Boost Health and Cut Costs

Update, April 9: We have made a correction to this post.

States can help improve Medicaid beneficiaries’ health and cut costs by promoting personal responsibility and work and ensuring appropriate use of health care.  As our new paper explains, however, the most successful strategies don’t include premiums, cost-sharing charges, and work requirements that some states have sought to implement.

In fact, a robust body of research shows that imposing premiums and cost-sharing charges on people with low incomes doesn’t ensure appropriate use of health care, but instead keeps people from enrolling in coverage or from getting necessary care.  And work requirements aren’t appropriate for Medicaid, a program intended to provide health care services to people who couldn’t otherwise get the care they need.  Most adult Medicaid beneficiaries are already working,  and many of those who aren’t could benefit from the access to health services that Medicaid provides, which in some cases may help them get or keep a job.

States can use Medicaid’s flexibility to ensure appropriate use of health care services and encourage work without creating barriers to coverage and care.  Many of these approaches have improved health outcomes for beneficiaries and lowered spending, research shows.

Among the strategies states have employed:

Reducing Emergency Room (ER) use without excessive co-pays.  A relatively small number of Medicaid beneficiaries’ ER visits are for non-emergencies; most ER visits are for serious problems, the evidence shows.  Recent efforts in states including Georgia, Indiana, Minnesota, New Mexico, Washington, and Wisconsin show, however, that states can reduce ER use by expanding access to primary care services and targeting interventions to populations that frequently use the ER.

Coordinating care for individuals with chronic conditions.  States can lower Medicaid spending by improving the care and health outcomes for individuals with chronic conditions who use a lot of health care services.  About 1 percent of Medicaid beneficiaries account for 25 percent of total Medicaid expenditures.  Within this group, 83 percent have at least three chronic conditions, and more than 60 percent have five or more.  Several states, including Missouri, North Carolina, and Vermont, have lowered their Medicaid spending by improving health care service use (and beneficiary health outcomes) through models that help coordinate care for these patients.

Encouraging work through supportive employment services.  Many Medicaid beneficiaries who aren’t working have some underlying reason, such as a disability or a chronic condition, that makes it difficult for them to find and keep a job.  The unemployment rate in 2012 for individuals with mental illness was 17.8 percent.  States can offer supportive employment services to individuals with mental illness through Medicaid.  In 2007, Iowa became the first state to receive approval to amend its Medicaid state plan to include a supportive employment program.  Under Iowa’s program, the state receives federal Medicaid dollars to help such individuals find and maintain employment.  Other states have followed Iowa’s lead, including California, Delaware, Mississippi, and Wisconsin.

Click here to read the full paper.