Medicaid’s Value Problem

Missouri’s Medicaid program is getting a poor return on each taxpayer dollar, and that is a serious problem. A report commissioned by Missouri’s Department of Social Services concluded as much, stating: “Dollars spent in the program are not well aligned with value received from the delivery system.” As Medicaid costs are expected to rise again in the coming fiscal year, it is imperative that Missouri’s policymakers reckon with the audit’s conclusions and ensure each tax dollar devoted toward the program is being spent wisely.

What’s driving Missouri’s Medicaid value problem? To answer that, it’s helpful to start with the basics and look at who the program is covering and how the cost of care is being paid for. Missouri’s Medicaid program is responsible for the health care costs of more than 850,000 of the state’s most vulnerable residents. The way in which those health care services are provided is called the delivery system. In Missouri, the two primary methods are fee-for-service and managed care delivery systems.

When a Missourian enrolls in Medicaid, their eligibility criterion largely determines which delivery system will be used for their coverage. Individuals classified as aged, blind, or disabled are covered under fee-for-service, while everyone else is enrolled in managed care.

The fee-for-service system works the way it sounds; each time an eligible recipient receives a Medicaid-covered service, the provider of that service is reimbursed by the state at a previously agreed upon rate. Managed care works differently; instead of paying for each individual service, the state pays contracted health insurance companies a monthly rate, and the insurance company then negotiates a rate with providers to reimburse for each service its enrollees receive.

The division of recipients may play an integral role in explaining the existing systemic failure. The current arrangement puts the relatively healthier populations into plans that require monthly payments whether care is provided or not. And the populations with the most complex medical needs  are placed into a system where the state is left deciding rates and reimbursing for each expense.

There’s little evidence to suggest this is the best possible division, or that either of the current systems can increase the value received for each tax dollar spent. Another conclusion from the report mentioned above stated: “. . . methods to pay providers lack incentives to contain costs or enhance quality.” This is another way of saying that reining in Medicaid’s costs or improving the program’s efficiency is unlikely unless policymakers consider reforming the state’s delivery systems.

In other words, the current system is failing in important ways, and that failure cannot be reversed without substantial changes in the way the system is run. In future blogs I’ll expand on the problem and suggest solutions. For now, I’ll ask this question: When will there be a real concentration of effort in Jefferson City to address this problem? Will it receive the attention it deserves in the 2020 legislative session—or will the can be kicked down the road yet another year?