As a nation, we underinvest in primary care. Only about six percent of total health care expenditures in the U.S. are for primary care activities, compared to peer countries that average 14 percent. This underinvestment leads to poor and inequitable health outcomes. The National Academies of Sciences, Engineering, and Medicine recently put it best: “high-quality primary care requires committing to pay primary care more and differently given its capacity to improve population health and health equity.” And policymakers across the country are beginning to agree, as shown by efforts in 13 states to measure and increase investment in primary care in Medicaid. While there is urgency to advance this work, states need to think carefully about how to structure primary care investments, including how to ensure that spending reaches patients with the highest needs and improves care delivery.

State Strategies for Investing in Advanced Primary Care

Following are four promising approaches that states are using to invest in primary care more effectively for their Medicaid populations.

1. Prioritize Multi-Payer Efforts

Requiring alignment across payers for primary care spending, mechanisms to deliver additional funding, and standards for care delivery can broaden the impact of state efforts while decreasing burden on payers and providers. For example, Oregon tracks primary care spending for all payers in the state and requires payers to allocate at least 12 percent of total health care spending to primary care by 2023; they have already seen Medicaid payers increase primary care spending from 13.1 percent in 2014 to 16.2 percent in 2019. Washington State is also working across payers through the development of a multi-payer primary care payment model that seeks to increase investment in primary care, move away from fee-for-service (FFS) payments and toward flexible capitated payments, and promote integrated, whole-person care for commercial, public employee, and Medicaid payers.

2. Give Medicaid a Seat at the Table

Most state efforts to measure and increase spending in primary care focus on commercial payers — in fact, many statutes explicitly carve Medicaid out. The focus on commercial payers is understandable since commercial costs are high and primary care is cost-effective. However, investment in primary care is not just about how much is spent. It’s also about how those dollars are used to improve health.

By design, Medicaid provides health coverage to people who have disabilities, complex health needs, and low incomes. Medicaid also disproportionately covers Black and Latino people, who face health inequities, including barriers to accessing primary care, due to structural racism and interpersonal bias. Access to high-quality primary care has been shown to improve overall health outcomes and mitigate health disparities, and improving access should be a priority within state efforts to improve primary care. West Virginia legislation, for example, is funding a Medicaid Primary Care Support program that provides technical assistance to community-based primary care facilities, a grant program for federally qualified health centers, and an annual report to track Medicaid primary care spending.

3. Change How Primary Care Providers are Paid

Capitated or partially capitated primary care APMs use upfront payment to provide financial stability to primary care providers and allow the development of new capabilities to provide advanced primary care. These APMs shift away from FFS payments that encourage increased volume of care, and instead tie payment to care delivery standards and quality outcomes that encourage higher-value care. States can funnel increased primary care funding through APMs that require strong advanced primary care standards and a focus on health equity. Directing funding in this way, rather than simply increasing rates under FFS, can help ensure that investments lead to better care, not just more or more expensive care. In Oregon, more than half of Medicaid primary care expenditures now come from non-claims-based spending intended to improve the quality of care, including payments through capitated APMs.

4. Set Standards for How Investment is Used

Many state Medicaid agencies working to increase primary care investment have standards for how this funding should be used. Delaware and Rhode Island both encourage increased primary care funding to invest in infrastructure, capacity building, and performance-based incentive payments, rather than raising FFS rates. States can also set standards that place health equity front and center, such as California’s 2022 Medicaid managed care RFP, which requires managed care organizations to report primary care spending stratified by age and race/ethnicity as a way to work toward equity. Additionally, states can explore payment parity for primary care between Medicaid and other payers to help address longstanding inequities in access to care for people enrolled in Medicaid.

Opportunities to Learn More

States seeking to reduce health care expenditures on downstream acute and specialty care can move the needle by investing in preventive primary care. These states can increase the impact of primary care investment by aligning efforts across multiple payers, ensuring that Medicaid is part of policy reforms, leveraging APMs to move from volume to value, and setting investment standards that promote high-quality, equitable care.

To further explore Medicaid investment and other policy levers that can support advanced primary care, see CHCS’ Advancing Primary Care Innovation in Medicaid Managed Care Toolkit, as well as a recent CHCS webinar that explored how states across the country are working to increase investment in primary care, including a focus on Oregon.