How the Pandemic Continues to Shape Medicaid Priorities: Results from an Annual Medicaid Budget Survey for State Fiscal Years 2022 and 2023

Health Equity


The COVID-19 pandemic has highlighted and exacerbated longstanding racial and ethnic disparities in health and health care. Prior to the pandemic, people of color fared worse than White people across many measures of health and health care, reflecting inequities within the health care system as well as across broader social and economic factors that drive health (often referred to as social determinants of health or social drivers of health) that are rooted in racism and discrimination. As a major source of health coverage for people of color, Medicaid programs can help to address health disparities. Over the past few years, the federal government and many states have identified advancing health equity as an important priority for the Medicaid program. In November 2021, CMS published its strategic vision for Medicaid and CHIP which identified equity and reducing health disparities as key focus areas, emphasizing Section 1115 demonstration waivers can help foster improved quality and equity.

High-quality, comprehensive data are essential for identifying and addressing health disparities and measuring progress over time. For example, during the COVID-19 pandemic, disaggregated demographic data were crucial to identifying disparities and implementing policy solutions. Unfortunately, inadequate, incomplete, and inconsistent demographic data, particularly race and ethnicity data, is a longstanding challenge across many areas of health care, including in state Medicaid and CHIP programs. For example, a Medicaid and CHIP Payment and Access Commission (MACPAC) analysis of 2018 Medicaid administrative data found high rates of missing or unknown race and ethnicity data and conflicts with key benchmark data.

Federal Medicaid managed care regulations also require states that contract with managed care plans to develop and publicly post quality strategies that include plans to reduce health care disparities. To further these quality strategies, states develop access and quality standards within federal guidelines that MCOs are required to meet. Some state MCO contracts incorporate requirements to advance health equity, such as requiring MCOs to achieve the NCQA Distinction in Multicultural Health Care,1 and states may also tie MCO financial quality incentives (e.g., performance bonuses, withholds, or value-based state directed payments) to health equity-related performance goals. States must also require MCOs to implement performance improvement projects (PIPs) to examine access to and quality of care, and these projects often include analysis of health disparities.

This section provides information about:

  • Improving Medicaid race, ethnicity, and language (REL) data collection
  • Financial incentives (FFS and MCO) tied to health equity-related performance goals
  • Other MCO health equity requirements
  • Performance improvement projects (PIPs) focused on health disparities


Improving Medicaid Race, Ethnicity, and Language (REL) Data Collection

Although all Medicaid agencies ask applicants to self-report their race and ethnicity, it is not mandatory for applicants to do so. During Medicaid eligibility determinations (and redeterminations), race and ethnicity are not considered, and data not being used in Medicaid determinations must remain optional for applicants to report. While states must inform applicants that submitting race/ethnicity data is optional, this can lead to missing data, particularly if the instructions and rationale for providing race/ethnicity data are unclear, if the applicant has concerns or questions about how the data may be used, or if the applicant does not feel he or she fits into the options provided. Race and ethnicity categories on Medicaid applications vary considerably across states. An audit of state Medicaid enrollment applications conducted by the State Health Access Data Assistance Center (SHADAC) revealed substantial variation in the number and type of race/ethnicity categories used by states, ranging from 5 to 37 race categories and 2 to 8 ethnicity categories. States vary in the amount of race/ethnicity data they report as unknown or missing. A December 2021 analysis by CMS found that in 14 states, more than 20 percent of race/ethnicity data was missing. State Medicaid programs can implement a variety of strategies to enhance or improve REL data collection. On this year’s survey, we asked states whether specified strategies were in place (as of July 1, 2022) to improve the completeness of REL data.

Over half of the states that responded to this question (25 of 45) reported using at least one specified strategy to improve race, ethnicity, and language (REL) data completeness (Exhibit 2). Over one-third of responding states (16 of 45) reported requiring MCOs and other applicable contractors to collect REL data. About one-quarter of responding states (12 of 45) reported that eligibility, renewal materials, and/or applications explain how REL data will be used and/or why reporting these data are important. About the same number of responding states reported linking Medicaid enrollment data with public health department vital records data (9 of 45) and partnering with one or more health information exchanges (HIEs) to obtain additional REL data for Medicaid enrollees (8 of 45). Several states identified issues with data systems and lack of integration between systems as barriers.

Eighteen states reported “other” strategies to improve Medicaid REL data.2 For example:

  • Multiple states (Alaska, Colorado, Minnesota, Ohio, and Oregon) reported using data from alternate sources, such as administrative records from other agencies or third-party databases, to populate missing REL values. Washington state reported developing a new eligibility infrastructure that would integrate data across systems to improve data quality.
  • Several states mentioned changes made to the Medicaid application to improve REL data including translating the application into other languages (Oklahoma), adding disability questions and gender identity and modality questions (Oregon), changing the phrasing of REL data questions (South Carolina), allowing applicants to provide more detailed race and ethnicity information (Wisconsin), and implementing, or planning to implement, “opt-out” options for race and ethnicity questions (Maryland and Louisiana).
  • Two states (Arizona and Connecticut) reported that health equity-related committees or task forces within their state governments were developing recommendations related to REL data collection and disaggregation.
  • Massachusetts, through its approved MassHealth Section 1115 demonstration waiver, will financially incentivize ACOs and ACO-participating hospitals to provide complete data on race, ethnicity, language, disability, sexual orientation and gender identity (RELD SOGI) starting in FY 2023. The state is working to update enrollment platforms to clarify and add questions related to RELD SOGI and modify downstream systems accordingly.
  • South Carolina reported using training to emphasize the value of REL data collection with its eligibility staff.
Financial Incentives Tied to Health Equity-Related Performance Goals

States use an array of financial incentives to improve quality including linking performance bonuses or penalties, capitation withholds, or value-based state-directed payments to quality measures. States implement financial incentives across delivery systems (fee-for-service and managed care). On this year’s survey, we asked states if they had an MCO financial quality incentive or FFS financial incentive for providers tied to a health equity-related performance goal (e.g., reducing disparities by race/ethnicity, gender, disability status, etc.) in place in FY 2022 or planned for FY 2023.

About one-quarter of responding states (12 of 44) reported at least one financial incentive tied to health equity in place in FY 2022 (Exhibit 3). The vast majority of these incentives were in place in managed care arrangements (11 of 13). Only two states (Connecticut and Minnesota), reported a FFS financial incentive in FY 2022. Five additional states report plans to implement financial incentives linked to health equity in FY 2023. Within managed care arrangements, states most commonly reported linking (or planning to link) capitation withholds, pay for performance incentives, and/or state-directed provider payments to health equity-related quality measures. Three states (Ohio, Oregon, and Wisconsin) reported implementing MCO incentive funding focused on reducing disparities in COVID-19 vaccination rates. Two states with FFS incentives (in place or planned) (Massachusetts and Minnesota) reported health equity incentives for ACOs.

Other notable state examples include:

  • California’s Quality Incentive Pool (QIP) program is a managed care directed payment program for California’s public health care systems (i.e., designated public hospitals and district/municipal public hospitals) that ties payments to performance on designated quality measures. The QIP program explicitly incorporates two Improving Health Equity (IHE) metrics, one of which is required for the larger public hospitals. The IHE measure allows hospitals to report a disparity-sensitive measure on a priority population selected by each hospital. Hospitals are also required to stratify by race/ethnicity for up to five designated measures on an informational basis.3 Additionally, in 2023, the state plans to adjust base capitation rates in counties with more than one plan based on plan performance on select quality measures. Performance on health equity will be incorporated once race and ethnicity stratifications are available.
  • Connecticut has had an obstetrics pay for performance program in place for six years that targets birthing people at risk for adverse outcomes, including Black and birthing people of color. In FY 2023, the state plans to launch a maternity payment bundle where financial incentives will be tied to health equity outcomes. The state will include doulas and breastfeeding supports to remedy disparities in maternal and birth outcomes for historically marginalized groups including Black and birthing people of color and those with substance use disorders.
  • In Massachusetts, one of the key goals for MassHealth’s next Section 1115 demonstration period is to advance health equity, with a focus on initiatives addressing health-related social needs and specific disparities. MassHealth intends to implement health equity incentives for ACOs and acute care hospitals to improve social risk factor data collection, increase reporting of quality metrics stratified by social risk factors to identify disparities, and then actually close gaps in the identified disparities.
  • In both FY 2022 and FY 2023, a portion of Michigan’s MCO capitation withhold pay for performance payments (P4P) is based on health equity Healthcare Effectiveness Data and Information Set (HEDIS) measure performance (30%) and performance on shared metrics that address health equity in the care management that MCOs provide in coordination with behavioral health prepaid inpatient health plans (PIHPs) (15%). In FY 2022, there are 10 HEDIS measures that are part of the health equity measures (comparing people of color to the White population).
  • New Jersey reported implementing a perinatal episode of care three-year pilot to test a new alternative payment model for prenatal, labor, and postpartum services statewide. The pilot requires participating providers to complete a Health Equity Action Plan and includes reporting of a provider’s quality metrics broken down by the member’s race/ethnicity.
  • Pennsylvania’s MCO P4P program incentivizes reductions in racial disparities for specific quality measures, including rates of hypertension, diabetes, and prenatal care.
Other MCO Health Equity Requirements

In addition to implementing financial incentives tied to health equity-related performance goals, states can leverage managed care contracts in other ways to promote health equity-related goals. For example, states can require MCOs to achieve national standards for culturally competent care, conduct staff training on health equity and/or implicit bias, develop new positions related to health equity, report racial disparities data, incorporate enrollee feedback, among other requirements. On this year’s survey, we asked states that contract with MCOs about whether certain MCO contract requirements related to health equity were in place in FY 2022 or planned for implementation in FY 2023.

Nearly one-half of responding MCO states (16 of 37) reported at least one specified health equity MCO requirement in place in FY 2022 (Figure 5). In FY 2022, similar numbers of states (about one-quarter) reported requiring MCOs to have a health equity plan in place (10 of 37), meet health equity reporting requirements (10 of 37), and train staff on health equity and/or implicit bias (9 of 37). Fewer states reported requiring MCOs to seek beneficiary input or feedback to inform health equity initiatives (6 of 37), have a health equity officer (5 of 37), and achieve NCQA’s Distinction in Multicultural Health Care (MHC) (3 of 37).4 Among states with at least one requirement in place in FY 2022, half (8 of 16) reported requiring three or more specified initiatives in place (data not shown). The number of MCO states with at least one specified health equity MCO requirement in place is expected to grow significantly in FY 2023, from 16 to 25 states. A few other states reported that though equity-related requirements for MCOs are not planned for FY 2023, they are actively considering or planning to adopt these requirements in the future.

Although states were not asked to describe MCO requirements related to health equity (in place or planned), several states provided additional details including:

  • Michigan requires MCOs to implement diversity, equity, and inclusion (DEI) assessment and training programs that are evidence-based and comprehensive. The programs must assess all organizational personnel, policies, and practices and include at least one implicit bias training workshop in 2022 for all personnel. MCOs must also report certain HEDIS measures by race and this data is used by the Department of Health and Human Services in its annual Medicaid Health Equity Project.
  • Nevada encourages, but does not require, NCQA MHC distinction as a way of building a strong cultural competency program. Health equity is a component of the required MCO Population Health Program, which must address racial and ethnic disparities, and the required Population Health Program Manager position includes health equity responsibilities. As part of population health program reporting, MCOs must submit an annual population health strategy.
  • Oregon requires MCOs to develop a health equity plan and provide updates and progress reports every year. In addition, MCOs must develop a yearly organization-wide training plan on health equity fundamentals which may include training offerings for provider networks. MCOs are also asked to report on training plan progress every year.
Performance Improvement Projects (PIPs) Focused on Health Disparities

For contracts starting on or after July 1, 2017, federal regulations mandate that states require each MCO or limited benefit prepaid health plan (PHP) to establish and implement an ongoing comprehensive quality assessment and performance improvement (QAPI) program for Medicaid services that includes Performance Improvement Projects (PIPs). PIPs may be designated by CMS, by states, or developed by health plans, but must be designed to achieve significant, sustainable improvement in health outcomes and enrollee satisfaction. On this year’s survey, we asked states if they required MCOs to participate in PIPs focused on health disparities in FY 2022 or planned to in FY 2023.

About half of responding states that contract with MCOs (17 of 37) reported requiring MCOs to participate in PIPs focused on health disparities in FY 2022 (Figure 6). States reported a range of state-mandated PIP focus areas which include an emphasis on reducing disparities / improving health equity including related to:

  • Maternal and child health (Illinois, Michigan, Minnesota, Nevada, and Texas)
  • Social determinants of health assessment, referral, and follow up (Kentucky)
  • Diabetes education and management (Ohio)
  • Substance use disorder (SUD) (Pennsylvania)
  • Access to culturally and linguistically appropriate services (Wisconsin)
  • Lead screening in children (Rhode Island)

Three states (Arizona, Louisiana, and Massachusetts) reported all PIPs must include a health equity component or equity and disparities analysis; two states (California and New Jersey) reported requirements for MCOs to engage in at least one PIP focused on health disparities, and one state (Washington) requires MCOs to collaborate with other MCOs and the state on a statewide PIP addressing health equity. One state (West Virginia) did not specifically describe its health equity-related PIP requirement. One state (Maryland) reported plans to require MCO participation in PIPs focused on prenatal and postpartum care health disparities in FY 2023. While not within the survey period, Mississippi reported that its new MCO contracts, which will become operational in FY 2024, will require MCOs to collaborate with each other and with the state on joint PIPs addressing health disparities identified by the state.

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