The Medicaid program provides coverage for one in five Americans and has evolved significantly over the last decade. In 2016, 28 states adopted or expanded one or more initiatives that seek to reward quality of care and encourage integrated delivery of Medicaid benefits.1 A growing trend that began with three states in 2015 involves the use of Accountable Care Organizations (ACOs) to deliver Medicaid covered services to certain Medicaid beneficiaries. The number of states utilizing Medicaid ACOs doubled to six in 2016. ACOs are provider-led organizations that agree to be held accountable for the cost of health services attributed to their patients. Payments to Medicaid ACOs aim to reward value rather than volume.2

Although the result of the Presidential election is expected to cause significant shifts in federal health care policies, Medicaid ACOs could continue to grow and expand under the Trump administration. Previously published Republican health care proposals and the President-elect’s campaign platform support state flexibility in the operations of their Medicaid programs, which may indicate that a continued use of ACOs for providing care to Medicaid beneficiaries.

MassHealth ACO Restructuring

The Centers for Medicare and Medicaid Services (CMS) initially approved the Commonwealth of Massachusetts Medicaid program (MassHealth) in 1995 as a five-year demonstration project under Section 1115(a) of the Social Security Act, 42 U.S.C. § 1315(a). Most recently, on November 4, 2016, CMS approved a proposal to amend and extend MassHealth. CMS approval is effective through June 30, 2017, and the agency also extended the demonstration from July 1, 2017, through June 20, 2022.

In approving the $52.4 billion overhaul of MassHealth, CMS stated that the agency “is authorizing Massachusetts to contract with ACOs through [] three models and pay ACOs using upside and downside risk arrangements.” Accordingly, starting July 1, 2017, MassHealth will launch three integrated care options to deliver Medicaid services through ACOs.

Currently, most Medicaid beneficiaries in Massachusetts can elect to receive covered services either through the state-run Primary Care Clinician (PCC) Plan or from Managed Care Organizations (MCOs) that have contracted with the Commonwealth’s Executive Office of Health and Human Services (EOHHS). The PCC Plan will generally remain unaffected by the recently approved restructuring of MassHealth.

But, EOHHS will now also allow Medicaid beneficiaries to receive services through ACOs. Under the revamped MassHealth program, ACOs will be eligible to provide covered services to Medicaid beneficiaries under one of the following three models:

  • Model A: Under Model A or the “Partnership Plan,” an ACO partners with an MCO that serves as the member’s health plan and provider network. Each Partnership Plan has an exclusive group of primary care providers (PCPs) and all members enrolled in the Partnership Plan receive primary care from these PCPs. EOHHS pays the MCO prospective capitation rates. The MCO contracts with an ACO partner and holds it financially accountable to some degree for the MCO’s performance under the Model A contract with EOHHS.
  • Model B: Under Model B or the “Primary Care ACO Plan” (and also referred to as the “Direct to ACO Model”), ACOs contract directly with EOHHS to arrange care for enrolled MassHealth beneficiaries – without involvement by an intermediary or partnering MCO. A Primary Care ACO has an exclusive group of participating PCCs from whom all enrolled members will receive primary care. Members will receive non-behavioral health care from MassHealth’s fee-for-service network and behavioral health from MassHealth’s behavioral health carve-out vendor. The Model B ACO will share in both savings and losses with MassHealth based on the cost of the care of enrolled members and quality performance.
  • Model C: Under Model C or the “MCO Administered ACO Plan,” ACOs are part of the primary care network of one or more MassHealth MCOs. MassHealth beneficiaries will enroll in the MCO, which will serve as the member’s health plan and provider network. The ACOs share in savings and losses with the MCO based on the total cost of care attributed to the enrolled ACO members.

The CMS approval permits MassHealth to move from a fee-for-service reimbursement model that pays for volume to one that seeks to reward based on the value of services provided, and allows ACOs to take on upside and downside risk.

Regulatory Uncertainties for MassHealth Model B

MassHealth’s newly approved delivery models that permit Medicaid ACOs to take upside and downside risk presents several regulatory and legal uncertainties for stakeholders. For example:

  • Inapplicability of Federal Medicaid Managed Care Regulations to Model B ACOs: Federal Medicaid managed care regulations, which were finalized in May 2016 by the Obama administration, impose comprehensive requirements on Medicaid programs and their contracting managed care entities. For example, federal Medicaid managed care regulations expanded federal requirements in areas such as quality of care, patient protections, and capital and solvency, and subject the managed care entity to CMS review and oversight. These robust regulations contemplate delivery of Medicaid services through various structures, such as MCOs and Primary Care Case Management Plans. The federal rules, however, do not regulate the delivery of Medicaid services utilizing the direct-to-ACO models and, as CMS noted in the preamble “[S]tates contracting with ACOs under the Medicaid program are outside of the purview of this final rule and are not bound by 42 CFR part 438.” Accordingly, direct to ACO models, such as EOHHS’s Model B ACO option, are not subject to the federal Medicaid managed care regulation.
  • Potential Requirement to Obtain Insurance License: The Model B ACO contract requires the ACO to obtain a certificate or waiver under the Commonwealth’s Risk Based Provider Organization (RBPO) scheme. However, this requirement seems to be at odds with the RBPO statute, which only exempts provider organizations, such as ACOs, that contract with “carriers” from risk bearing licensure requirements of chapters 175, 176A-J of the Massachusetts General Laws.3 Thus, despite EOHHS procurements requirements for Model B ACOs, such an ACO could nevertheless be required to obtain an HMO or other risk bearing license from the Massachusetts Division of Insurance.

Future of Medicaid ACOs Under the Trump Administration

It is unclear whether the Trump administration will continue to support the transition away from paying Medicaid providers fee-for-service payments to value based compensation arrangements. But, both the President-elect and Speaker Paul Ryan (R-WI) appear to envision greater state flexibility in administering the Medicaid program. Thus, the delivery of covered services through the newly approved MassHealth ACO models may foreshadow at least one model for the future of Medicaid delivery around the country.