Early Experiences with Accountable Care in Medicaid: Special Challenges, Big Opportunities

S. Lawrence Kocot,
S. Lawrence Kocot Former Brookings Expert, Principal and National Leader, Center for Healthcare Regulatory Insight - KPMG
Christine Dang-Vu, Ross White, and
Ross White Senior Project Manager
Mark B. McClellan
Mark B. McClellan Former Brookings Expert, Director, Margolis Center for Health Policy - Duke University

October 1, 2013

Accountable care organizations (ACOs) and the more general movement toward accountable care, in which
payments are aligned directly with improvements in quality and cost, are intended to increase the incentives and
support for higher value in health care. As of mid-2013, there are over 4 million beneficiaries covered by
Medicare ACOs, and large private payers continue to enter new ACO arrangements with providers in all parts
of the country. An increasing number of states have approved and are implementing accountable care models
for their Medicaid programs. A review of some of these early state adopters demonstrates how the features of
Medicaid populations, Medicaid providers, and Medicaid financing create some distinct issues for implementing
ACOs in Medicaid. Many states that have relied on Medicaid managed care plans are moving to accountable
care through these private plans. Some states also are implementing accountable care reforms through direct
reforms in their payments to Medicaid providers, both through specific providers and regionally-based contracts.
Others are implementing a mixture of private plan and public management approaches. States are
moving toward more comprehensive accountable care payments through patient-centered medical homes,
episode-based payments, and patient-level accountable care payment reforms; these payment reforms can be
sequential and synergistic. Accountable care in Medicaid involves some distinct considerations such as performance
measures, additional complications in shared savings related to the federal-state Medicaid funding
structure, and potential antitrust issues in cases where states are pursuing reforms with implications for most or
all providers in a geographic area. The evidence on the impact of the various early approaches to accountable
care in Medicaid is just beginning to emerge, and it is likely that the best course for states will continue to depend
on the distinctive institutional features of their Medicaid programs and health care delivery systems. As in other
parts of the health care system, accountable care in Medicaid is likely to continue to expand and to evolve.