Cinderella story: Medicaid at 50

Medicaid turns 50 this month. From its humble beginnings as a state-federal welfare medicine program for the poorest women and children, it has grown into a $450-billion behemoth that covers 70 million Americans. It brings care to the elderly, disabled, and mentally ill as well as steadily increasing numbers of low-income families, even with many states opting out of expansions authorized by the 2010 Affordable Care Act (ACA).

This growth, and the drama of the ACA expansions, is understandably the dominant story line in the program’s history. But with rising pressure to restrain spending growth and improve quality in the nation’s health system, a less conspicuous but equally significant theme is emerging. No longer just a last resort for the most vulnerable, Medicaid has turned out to be a leader in the difficult business of steering an outmoded care delivery system toward more productive and efficient performance.

{mosads}Progress has been incremental. While Medicare and private insurance were reeling from the managed care backlash in the 1990s and reverting to expensive, free-choice-of-provider coverage, Medicaid made a pragmatic adaptation. The program never had unlimited provider choice, because its low reimbursement rates caused many doctors and hospitals to shun its beneficiaries. Although the process was painful, most states gradually learned that they could safeguard service quality and beneficiary access with judicious managed care contracting. Given the program’s shoestring budgets, it could not afford the luxury of unlimited choice that was available in Medicare and private insurance.

Medicaid programs around the country have spearheaded experimentation with patient-centered medical homes, emphasizing team care and management of chronic conditions. Payment incentives to promote quality and efficiency gained widespread interest among both public and private payers beginning in the 1990s. But a multiplicity of incentive systems tended to dilute the effectiveness of these programs. In response, Medicaid has anchored a number of multi-payer initiatives to align standards and metrics used in these programs. In a number of states, Medicaid agencies have sponsored support networks for small, under-resourced physician practices in rural and other underserved areas to improve access to staff training, specialty services, and health information technology. A fuller, but still rudimentary, discussion of these developments appears in the July issue of the policy journal Health Affairs.

Much remains to be done. But this record of achievement demonstrates the power of a supple and resilient federalism that melds federal standards with the states’ ability to tailor programs to their unique needs and capabilities. By supporting primary care at the grass roots, Medicaid has helped lay a foundation for the ambitious reforms in the Affordable Care Act that seek to build coordinated care networks capable of scalable improvements in quality and efficiency. This isn’t your grandmother’s Medicaid.

For all its virtues, federalism is a two-edged sword. With 50 years of experience, state programs can tailor services based on intimate knowledge of their unique provider and beneficiary communities, if they have the energy and initiative to do so. Conversely, in states where policymakers are indifferent to the needs of their Medicaid populations, eligibility is tightly limited and the opportunity to expand created by the Affordable Care Act has been rejected. These states generally don’t participate in innovative improvements in care delivery or in building support networks for small primary care practices that serve low-income communities.

A similar duality can be seen in states’ choices about whether or not to establish subsidized marketplaces for individuals above the poverty line who don’t have access to employer-sponsored insurance. States that create their own marketplaces benefit from familiarity with their insurance markets, health plans, and providers to achieve optimal design. Others choose to leave the job to a distant federal government.

But there is little ambiguity about the need to promote and support improvements in the organization, delivery, and financing of care. The most ambitious goal of the ACA is the development of “accountable care organizations” – ACOs – that coordinate services among primary and specialty care physicians, hospitals, nursing homes, home health agencies, and other care providers. Medicaid, marketplaces, and ACOs all depend on a robust primary care infrastructure that is built from the ground up. If only elite hospitals and large physician organizations join the movement for delivery system transformation, the accomplishments of reform will be hollow.

The steps Medicaid has taken in recent decades to support improved care in the humblest settings are the foundation for making realization of visionary reform goals possible.

Cunningham is consulting editor at Health Affairs.