Implementing Coverage and Payment Initiatives: Results from a 50-State Medicaid Budget Survey for State Fiscal Years 2016 and 2017

Administrative Challenges, Priorities, and Conclusion

Administrative Challenges

States noted a number of administrative challenges related to implementing the ACA, major delivery system reforms, new federal regulations, and new systems. While Medicaid directors noted that these were all high priorities, limited staff and resources in terms of staff and funding for administration make balancing across sometimes competing priorities a challenge. More specifically, some states are still implementing eligibility and enrollment systems related to the ACA while others are implementing complex ACA Medicaid expansion waivers. Around delivery system reforms, states noted challenges with data and systems and provider capacity as well as obtaining buy-in from advocates and other stakeholders, achieving multi-payer alignment, incentivizing MCOs to maintain improvement, and receiving timely approvals from CMS. States expressed concerns about the capacity to implement and comply with the magnitude of federal regulations in number and scope, most notably the final managed care regulations issued in May 2016 in addition to other major regulations. The cumulative effect of simultaneously implementing multiple regulations was more of a concern than any one specific regulation, and different regulations also have varying implications across individual states. In addition to implementing the ACA, delivery system reforms, and new regulations, many Medicaid directors also mentioned significant systems initiatives, including Medicaid Management Information Systems (MMIS).

Challenges and Priorities in FY 2017 and Beyond Reported by Medicaid Directors

As noted above, Medicaid directors note several administrative challenges.

“Staffing…the sheer difficulty of retaining staff with program expertise and recruiting staff with the skill sets to meet current demands. This is particularly true for managed care but also for systems.”

“Our most significant administrative challenge is to keep pace with implementing multiple payment reform initiatives concurrently with sharpening fiscal and staffing restraints and increasing Federal regulatory and oversight activity.”

Despite the administrative and fiscal challenges, Medicaid directors listed an array of priorities for FY 2017 and beyond. While the ACA has fundamentally changed Medicaid programs since 2014, the main priority looking ahead was not focused on the ACA but more on cost control, payment and delivery system reforms, and infrastructure development.

Controlling Medicaid costs. Controlling costs is a perennial priority for Medicaid. Even in relatively good economic times, the cost of Medicaid in state budgets is so significant that the program is under constant pressure to control spending and to achieve greater value for every dollar in its budget. Medicaid administrators and policy makers traditionally have focused on the components of Medicaid spending, including provider payment rates and the amounts paid for specific services, limits on covered benefits, eligibility policies, prior authorization, and other controls on the utilization of services. For FY 2017, cost control and cost containment was specifically mentioned as one of the top three priorities by a large share of states, either specifically as a budget control issue or as part of a value based purchasing strategy. In some cases, this refers to specific measures, such as those to control spending of prescription drugs. However, the major focus of cost control has shifted to delivery system and payment reforms that incentivize high quality care, better outcomes, and lower costs.

In the process of this transformation, Medicaid programs have become national leaders in delivery system and payment reforms that are now becoming operational. In many cases, the new systems build on managed care systems; recent Medicaid MCO procurements illustrate the trend, with selection of health plans and MCO payments now commonly based on the quality of care delivered and the achievement of specific quality metrics. A few recent MCO procurements have specifically required MCOs to address social determinants of health and to undertake population health strategies.

Payment and delivery system reform initiatives. Medicaid programs are developing and implementing significant initiatives that restructure delivery systems and payment structures with the goal of improving the quality of care and patient outcomes. Over half of states mentioned these initiatives as a top priority for FY 2017, including “value-based purchasing” approaches and other strategies, described by one state as “changes to the delivery system to improve efficiency and care outcomes,” in other states as “integration of physical and behavioral health,” “continuing to transform the system through managed care,” and in others as “system transformation, clinical management, and population health.”

Significantly, a number of the delivery and payment reform initiatives go beyond traditional medical care delivery, addressing goals related to social determinants of health and population health. One state described their priority for 2017 to be “coordination between the Department and Housing Division to develop housing opportunities for individuals with severe mental illness.” Another state said a priority for this year was to “get beyond health care to quality of life, employment, and community inclusion.” A third state said “use our leverage as a payer to support prevention efforts that address the social determinants of health and population health activities.”

Medicaid infrastructure development. Medicaid programs universally have undertaken major system development projects in recent years, most notably for new eligibility systems and for new MMIS systems. Several states listed the development and operationalization of these projects as a major priority in FY 2017, either as a priority in themselves or as necessary for the success of other initiatives. These Medicaid infrastructure initiatives are critically important for the success of the major delivery system and payment reforms that are often being implemented concurrently. Medicaid programs also need the systems capability to implement quality improvement, provider and MCO monitoring, data analytics, and cost control strategies. A major Medicaid issue and priority is the staffing and other resources for systems and IT development, and the infrastructure necessary for Medicaid to implement its major initiatives.

Priorities for FY 2017, in the words of the Medicaid Directors, include:

“To take health system transformation to the next level, continue to bend the cost curve, and increase the focus on behavioral health and social determinants of health.”

“Maintaining budget control, integrating physical and behavioral health in a way that achieves goals of cost, quality and effectiveness, and managing concurrent high-risk IT projects – eligibility system and MMIS replacements.”

Medicaid Directors also were able to reflect on key areas of success:

“Our MCO initiative, getting people in a managed care system that improves care and reduces costs. We are no longer just a payer of claims. We are a leader in improving health and health care in this state.”

“Growing the program in a responsible manner – leading the state towards new value based purchasing models and patient centered medical homes, modernizing and improving the program, and coming in under budget 5 years in a row.”


This report has described Medicaid policy changes in eligibility, payment rates, benefits and pharmacy, long-term services and supports, managed care, and payment and delivery system initiatives. Medicaid programs now play a significant leadership role in the health care systems in every state. Consistent with this role, state Medicaid officials and policy makers now focus on innovative delivery system and payment initiatives designed to improve health care and health outcomes, resulting in better health status and lower costs. It is an approach that incorporates value based payments and purchasing, and includes strategies to address the social determinants of health and improve overall population health. The impact of Medicaid’s role is seen not only in the lives of those who are served by the program, but in a higher functioning health system that benefits all citizens in each state.

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