State Medicaid programs are beginning to adopt value-based payment (VBP) models to reward value — or high quality, cost-effective care — for the long-term services and supports (LTSS) they provide to beneficiaries. Medicaid managed long-term services and supports (MLTSS) programs — which operate in more than 20 states — are a promising platform to test these models because they seek to: (1) rebalance care toward home- and community-based services (HCBS); (2) provide incentives for high quality care; and (3) control cost growth.

Unique Considerations for Developing a VBP Model for HCBS

Most states’ Medicaid VBP strategies focus on primary and acute care services. Only a few include LTSS, despite the fact that LTSS comprises one-third of Medicaid budgets. Most of the current LTSS VBP models involve nursing facilities rather than HCBS providers. This is likely due to nursing facilities’ greater financial capacity, better data and reporting systems, and more defined populations for quality measurement. But the majority of people receiving LTSS use HCBS, so it is important to extend VBP models to community-based providers.  Several unique characteristics of HCBS require states and health plans to be innovative to adopt VBP models for these services, including:

• Limited consensus on performance metrics. Unlike Medicaid core quality measure sets for adults and children, there is little consensus on commonly accepted measures of HCBS quality. To add to the complexity, they span multiple domains: physical health outcomes; maintenance of functional status or slowing the pace of decline; transitions across settings; rebalancing targets and levels of community integration; and quality of life, satisfaction and person-centeredness. Consequently, states need to decide which measures to link to financial incentives.
• Ability to collect and report performance data. HCBS providers often have more limited capacity to collect and report data than acute and primary care providers or even nursing facilities. Many HCBS providers do not maintain electronic assessment, care planning, and service delivery records that can be easily transmitted to health plans and states. Also, self-reported data on quality of life, choice, and control may be subjective and thus more difficult to link to payment.
• Cost saving targets. Although HCBS efficiencies may be achieved by reducing service hours in some cases, it is critical to protect beneficiaries from cuts in services driven solely by the need to reduce costs. MLTSS programs may need to increase personal care services — hands-on help with activities of daily living — to reduce nursing facility use. In some cases, slowing cost growth may be a more realistic goal.
• Financial and workforce capacity to participate in alternative payment models (APMs). Many APM arrangements described in the most commonly used framework by payers, the Health Care Payment Learning and Action Network, have downside risk components, but HCBS providers may have less capital and reserves to manage financial risk than large health systems. Payment rates for direct care workers who provide HCBS are usually very low, and these providers and organizations may not be able to sustain cuts to their revenue associated with missing performance benchmarks. HCBS provider agencies have not yet developed other capacities important for success in APMs, including technology for reporting, information sharing and data analysis, service pricing, and experience with managed care.
• Source of potential savings. More than half of Medicaid LTSS users are dually eligible beneficiaries whose acute care services like hospitalizations and emergency department visits are paid for by Medicare. Savings from improving the quality of Medicaid-covered HCBS tend to accrue to Medicare. Without some sort of integration mechanism, there is limited opportunity for state Medicaid-only programs to access shared savings.

VBP Approaches Used in State MLTSS Programs                            

In collaboration with the West Health Policy Center and in partnership with Mathematica Policy Research and Airam Actuarial Consulting, CHCS’ Advancing Value in Medicaid Managed Long-Term Services and Supports initiative works with five leading MLTSS states — Minnesota, New York, Tennessee, Texas and Virginia. These states are designing or implementing VBP models in their MLTSS programs:

• Tennessee’s Quality Improvement in Long Term Services and Supports initiative, which began with a focus on nursing facilities, is extending its quality-based payment model to home-and-community-based services delivered to older adults and adults with physical, intellectual and development disabilities.
• New York is implementing a statewide initiative to move most of its Medicaid plans’ payments to VBP arrangements including Managed Long Term Care  plans, and integrated Medicare-Medicaid Plans, that contract with LTSS providers.
• Texas’ Quality Incentive Payment Program links nursing facility payments to performance on specific quality measures, and provisions in its MLTSS STAR+PLUS program will require plans to adopt VBP arrangements for a set percentage of provider payments.
• Minnesota requires plans serving older adults and individuals with disabilities to enter into value-based contracts with LTSS providers, among others, through the Integrated Care System Partnership.
• Virginia launched an MTLSS program in late 2017, and is actively working to develop VBP models for that program, including incentives to transition individuals out of institutional care to the community.

What are States Learning?

Early VBP efforts already have generated several insights for designing and implementing VBP models in MLTSS programs:

• Set clear goals. Clearly define the policy goal that a VBP model can help to achieve, such as reduction in nursing facility use, reduction in avoidable hospitalizations, or a broader state quality strategy. VBP is a tool to achieve a goal and not a goal itself. Consequently, the performance measures used in VBP arrangements should directly support the state policy goals.
• Use an integrated platform. Consider launching a VBP model within a Medicare-Medicaid integrated program to allow health plans to capture savings on the medical side from investments in HCBS. States that have financial alignment demonstrations and/or MLTSS programs that are aligned with Medicare Advantage Dual Eligible Special Needs Plans have potential to develop VBP models that yield overall savings, even if more is spent on HCBS.
• Incorporate both accountability and flexibility. State oversight and management approaches vary but as long as health plans are accountable for meeting the goals of state VBP LTSS programs, states should give health plans the flexibility to be innovative with the type of APMs used to pay providers. States can include questions in a Request-for-Proposals to collect innovative ideas about how plans can promote VBP models for HCBS providers. However, contract requirements should set consistent, measurable targets that plans must meet to ensure the APMs support state policy goals (e.g., requirements for investments in HCBS workforce to drive LTSS quality) and reduce provider burdens.
• Invest to support provider capacity. States often need to help build providers’ capacity to engage successfully in VBP arrangements with MLTSS plans. Depending on state and providers’ needs and priorities, this may entail investment in technology or systems to support data collection and reporting; technical assistance to educate providers or health plans; or direct grants to providers to build business acumen and infrastructure. States may also develop training programs that support career advancement, improve workforce retention, and pay higher wages to individuals who participate in these programs. States can also build incentives into health plan payment rates to help fund this support. 
• Conduct robust stakeholder engagement. Success depends on early and frequent engagement of health plans, providers, beneficiaries, and other stakeholders during VBP program design, launch, and ongoing operations. Establishing solid relationships, ensuring transparency during all key points of program development, and achieving buy-in for VBP models from all parties with a stake in the outcome can be labor intensive, but experienced states say it essential.

What Is Next?

In the next few months, CHCS, project partners, and the West Health Policy Center will release a guide for states describing common themes and lessons state leaders have learned from efforts to improve the value of HCBS delivered through MLTSS programs. It will also address related challenges and explore how states, health plans, and providers can advance VBP efforts for HCBS.