Federal CMS Moves Medicaid Closer to Value-Based Approaches

The federal Centers for Medicare and Medicaid Services (CMS) sent a guidance letter to state Medicaid directors on September 15^th that encourages the use of value-based care (VBC) in Medicaid services.  Value-based service delivery balances the quality of the services provided with the cost of the services.  The value-based approach to services also incorporates non-medical drivers of care such as housing and food security because they can impact the outcome of service delivery.   According to CMS, in 2018, 90% of traditional Medicare services were already a part of a value-based arrangement.  CMS has also seen success in implementation of value-based payments in home health and skilled nursing facilities. 

There is not one right payment method under value-based care but payments can include the provider bearing some of the risk and receiving incentive payments when quality and cost measures are met.  In the letter to Medicaid directors, CMS leaders state that the accelerated use of value-based payments can assist with stabilizing providers when “unexpected challenges and disruption” occur like the recent pandemic. 

NC DHHS has already included value-based payment methods in the structure of Medicaid managed care by giving expected benchmarks for the percent of services provided under a value-based arrangement.  The new guidance gives states even more leeway to increase their use of value-based payments. 

Critical elements noted in the guidance include:

• Level and scope of financial risk that include payments ranging from total cost of care to episode of care. 
• Benchmarking that can compare provider-specific data as well as regional data. 
• Payment operations that relate to provider payment accountability for quality and cost.

While CMS gives each state flexibility to develop value-based contracting, they also encourage states to use the CMS Innovations Center and other states as models.  Further, they encourage the use of national outcome measures to create some standardization for providers.  The letter states, “To ease the adoption of VBC arrangements and promote multi-payer alignment, we encourage states and payers to pick established metrics to reduce provider burden, prioritizing those that are useful across payers and promote service integration across care settings.” 

Early this year, NC DHHS published concept papers on value-based care and one mechanism for alternative payment methods—the Accountable Care Organization.  The i2i Center summarized these papers in a February 2020 article.