Medicaid alternative payment models

Driving system-wide change

​Many states have been experimenting with Medicaid alternative payment models (APMs) to try to control spending, improve care, and increase accountability within Medicaid and across the health care system. But have any of these models worked? And how might Medicaid initiatives align with the Medicare Quality Payment Program (QPP) established by the Medicare Access and CHIP Reauthorization Act (MACRA) to reinforce value-based care initiatives and drive system-wide change?

The Deloitte Center for Health Solutions has reviewed research and other literature and conducted interviews with industry experts and stakeholders to learn more about Medicaid APMs, their effectiveness, and how they might need to evolve to maximize their impact.

Our key findings include:

• Many states are taking advantage of Medicaid program flexibility and federal financing to implement APMs in a variety of ways.
• Although many state initiatives are underway, relatively few have been evaluated for their impact on total cost of care of health outcomes.
• The potential impact of Medicaid alternative payment models on care delivery can depend considerably on how much of a provider's revenue comes from Medicaid.
• Medicaid models may need to evolve to incorporate more financial risk and increase participants' meaningful use of electronic health records (EHRs) to qualify as advanced APMs under MACRA.

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Incentives for Medicaid clinicians who also treat Medicare patients

​MACRA—bipartisan legislation enacted in 2015—overhauls the way that Medicare pays clinicians under the Part B Physician Fee Schedule. It also has the potential to transform the health care payment landscape beyond Medicare.

MACRA established the QPP, which offers financial incentives for Medicare Part B providers to participate in risk-bearing APM arrangements. Under MACRA, qualifying APM participants (QPs) who earn a minimum percentage of their payments through advanced alternative payment models or see a minimum percentage of patients through advanced APMs are exempted from merit-based incentive payment system (MIPS) reporting requirements and can earn a five percent Medicare payment bonus from 2019-2024. Beginning in 2026, QPs will receive a higher annual Medicare fee schedule adjustment than non-QPs. In addition, eligible clinicians who participate in certain APMs but don’t meet the QP requirements may still receive more favorable scoring under MIPS.

For the first two years of the QPP, only participation in Medicare advanced APMs will count toward meeting the QP threshold. Beginning in performance year 2019, clinicians who don’t meet the minimum Medicare thresholds can also count their participation in APM arrangements with other payers—including Medicaid—so long as the arrangements meet the other payer advanced APM criteria. Other payer advanced APMs must require participating clinicians to use certified EHRs; base payments on quality measures that are evidence-based, reliable, and valid; and bear more than nominal financial risk.

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What might the future hold for Medicaid APMs?

​Despite limited evidence, APMs continue to spread, and federal and state policies are increasing pressure on providers and insurers to participate. Aligning Medicaid AMPs' design, reporting requirements, and financial incentives with other payers could potentially increase their impact and likelihood of success. This could be particularly true for specialists or other providers who treat a low volume of Medicaid patients.

To learn more about how Medicaid alternative payment models can drive value-based care efforts, download the full report.

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