Health care disparities persist across the United States, despite growing awareness of the issue. Black mothers are two to three times more likely to die of common pregnancy complications than white women. Minority patients, especially those with Medicaid coverage, are more likely to be diagnosed with cancer at later disease stages and experience worse survival rates compared to other patients.

Health equity is particularly salient to Medicaid programs, which are responsible for addressing the needs of diverse populations. State Medicaid agencies are well positioned to advance health equity across several categories, including: race or ethnicity, gender, sexual identity, age, disability, behavioral health diagnosis, socioeconomic status, and geographic location. Using Medicaid payment reform as a lever to promote health equity holds particular promise.

Payment Reform Levers to Address Health Equity

Many state Medicaid programs already use value-based payment (VBP) to encourage health care providers to improve health outcomes, while also providing better, more efficient care. Unlike fee-for-service payments, VBP can also give providers the incentive to invest in delivery system improvements that reduce health disparities. By taking a more purposeful approach to VBP — one that explicitly embeds mechanisms for improving health equity — states, health plans, and providers can create more strategic VBP arrangements that may reduce health disparities.

Advancing Health Equity: Leading Care, Payment, and Systems Transformation, a national program supported by the Robert Wood Johnson Foundation, is designed to identify and test effective ways to reduce and eliminate disparities in health and health care through a variety of approaches, including innovative Medicaid payment and contracting models. Under the initiative, the Center for Health Care Strategies (CHCS) is collaborating with the University of Chicago and the Institute for Medicaid Innovation (IMI) to bring together key stakeholders — state Medicaid directors, Medicaid managed care organizations (MCOs), and clinical partners — to pursue payment innovations that support health equity.

Emerging State Medicaid Innovations

Three promising approaches that states are taking to advance health equity via VBP include: (1) targeting health disparities when measuring quality performance; (2) enabling fairer comparisons among providers; and (3) soliciting community and beneficiary input into VBP design.

1. Target Health Disparities When Measuring Quality Performance

Every VBP approach includes quality performance measures linked to financial rewards. To incentivize providers to address health disparities, states and other entities designing VBP arrangements are taking two approaches: (a) stratify quality measures by race or ethnicity and (b) select specific measures that are “disparity-sensitive” or otherwise capable of capturing improvements in health equity or the impact of interventions.

States, payers, and providers are measuring the reduction of health care disparities in various ways. For example, Louisiana will require MCOs to stratify performance measures across different populations with attention to geography, ethnicity, race, and disability status. Oregon has one incentive measure for its coordinated care organizations (CCOs) that it identifies as a “disparity measure” — emergency department utilization among members with mental illness. Minnesota requires its Medicaid Integrated Health Partnerships to propose a health equity measure “tied to interventions that are intended to reduce health disparities” among patients, such as tracking the number of people referred to and receiving food assistance. MCOs in Michigan must describe how the plan’s VBP strategy impacted performance on plan-specific health equity measures, and can earn bonus funds for reporting on the impact of three targeted projects relating to social determinants of health (SDOH) and health equity, including one targeted initiative on low birth weight. In addition, MCOs must measure and report on the effectiveness of evidence-based interventions to reduce health disparities by considering measures such as: the number of enrollees experiencing a disparate level of social needs (e.g.,  transportation, housing, food access); the number of enrollees participating in additional in-person support services (e.g., community health worker or health promotion and prevention programs provided by community-based organizations); and changes in enrollee biometrics and self-reported health status.

2. Enable Fairer Comparisons Among Providers

Some VBP models may have unintended consequences. Medicare’s Value-Based Payment Modifier (VM) program, for example, failed to improve care on average and may have actually exacerbated disparities. States and payers may deploy payment strategies to avoid penalizing providers serving patients who face a more complex set of life circumstances and social needs.

For example, instead of holding providers to a static quality benchmark — say, 75th percentile in a particular HEDIS measure — states may reward improvement on particular measures, as compared to the provider’s prior performance. Colorado’s Primary Care Alternative Payment Model rewards primary care providers based on demonstrated improvement on selected performance measures relative to their own historical baseline rather than against performance of other primary care providers during the same period.

To avoid penalizing providers who treat patients with greater social needs, states and payers can also risk adjust quality measures and stratify performance scores for social risk factors. Massachusetts Medicaid, in collaboration with the University of Massachusetts, for example, developed its risk adjustment methodology, which incorporates social risk data.

3. Incorporate Community and Beneficiary Input in VBP Design

The reasons for health disparities are diffuse, from health providers’ implicit biases to SDOH, such as poor housing conditions. Engaging individuals most affected by health disparities can help ensure that resources are deployed in line with community needs. For example, Oregon requires CCOs to establish a community advisory council (CAC) that includes Medicaid beneficiaries. The CAC oversees Community Health Assessments (CHAs) and Community Health Improvement Plans (CHPs), which serve as a strategic plan for addressing health disparities and meeting health needs for the communities in a service area. In future iterations of the CCO program, CCOs will work with other health care entities in the service area, including hospitals, to develop a shared CHA and shared CHP priorities and strategies, and use these identified priorities to target investments in SDOH. In another example, Washington State collects information and stories from individuals with diverse perspectives across the state to inform development of health system transformation efforts, including VBP. Similarly, physicians from Johns Hopkins Hospital recently solicited community feedback to determine how to allocate health care resources during a disaster situation and used that information to inform recommendations to state policymakers. State policymakers can use a similar process to develop a VBP strategy targeting health equity in local communities. State Medicaid programs can take innovative approaches to not only engage diverse consumer voices up front in VBP program design, but also embed meaningful consumer engagement mechanisms into provider program requirements.

Looking Ahead

Medicaid stakeholders interested in leveraging payment reform to advance health equity have an opportunity to participate in the Advancing Health Equity learning collaborative. Under the initiative, CHCS, IMI, and the University of Chicago will support stakeholder teams in up to nine states in designing or refining VBP models that incentivize health care delivery transformation to reduce and eliminate disparities in health and health care. Each team will consist of representatives from the state Medicaid agency, a Medicaid MCO operating in the state, and one or more provider organizations or systems contracted by the MCO. The collaborative activities will develop, test, and implement integrated payment and delivery system changes, as well as the challenges and barriers that prevent adoption.

The authors acknowledge Marlise Pierre-Wright, former program associate at CHCS, for her contributions to this blog post.