With the publication of the Medicare Shared Savings Program (MSSP) Final Rule on December 21, the Centers for Medicare & Medicaid Services (CMS) clearly signaled that the Trump administration is serious about holding accountable care organizations (ACOs) in Medicare more financially accountable for costs and quality. However, Medicare ACOs may not be the only ACOs affected by this change.

Medicaid tends to follow Medicare’s lead in many areas related to payment and delivery system reform, and ACOs are no exception. Many state-led Medicaid ACO payment models are based on an MSSP foundation, as states prefer to align closely with the Medicare model to encourage participation in the Medicaid models, reduce provider burden, and allow ACOs to create operational efficiencies across payers. Since there are now significant changes to the MSSP, it is worth exploring how these changes may affect Medicaid ACO models that are already in place, as well as those that are currently under development.

The MSSP Final Rule

The final rule made a number of significant changes to the MSSP model. Some of the more notable changes include:

  • Redefining the MSSP Tracks.  The final rule replaces the existing MSSP tracks (1, 1+, 2, and 3) with a BASIC Track and an ENHANCED Track. While the ENHANCED Track is very similar to Track 3, the BASIC Track has five separate “Levels” that create a glide path toward the ENHANCED Track.  An outline of these new tracks is available here.
  • Less Shared Savings Available for Upside-Only Models.  ACOs that are in BASIC levels without downside risk (A and B) will earn 10 percentage points less than the current upside-only Track 1 model. 
  • Accelerating the Transition to Downside Risk.  In previous years, MSSP ACOs could stay in an upside-only track for up to six years. The final rule curtails this amount of time, allowing existing Track 1 MSSP ACOs to spend only one additional year in an upside-only arrangement (Level A or B) before accepting some downside risk. New MSSP entrants will have two years before they are required to transition. New ACOs that qualify as “low-revenue” or “physician-led” can take three years. 
  • Choosing Attribution Method.  The final rule allows new flexibility for all MSSP ACOs to choose between a retrospective or prospective attribution methodology.  Previously, Tracks 1+ and 3 were prospectively attributed, and Tracks 1 and 2 had retrospective attribution. 
  • Beneficiary Incentives.  The final rule allows ACOs in a downside risk track to offer Medicare beneficiaries incentives (such as vouchers or in-kind services) for engaging in healthy behaviors. 

Implications for Medicaid ACO Programs

States with existing Medicaid ACO programs, and those currently developing such models, can respond to the changes in the MSSP program in many ways, including not changing a thing. However, since many states have chosen to align their Medicaid ACO programs closely with the MSSP, states and other interested stakeholders will likely consider a number of these questions:

  • Will states push Medicaid ACOs toward greater risk? Many Medicaid ACO programs do not currently require ACOs to accept downside risk or transition to accept risk over time. However, since many Medicaid ACOs are currently participating in the MSSP program and will likely have to move to downside risk in that program, states may use this opportunity to create greater accountability in their ACOs as well, either by requiring, further incentivizing, or otherwise hastening a transition.  Yet, since the Medicaid population has a greater proportion of patients with behavioral health and social needs than Medicare patients, and many of its ACO participants are “low-cost providers” (which the MSSP grants additional time to move to downside risk), states may also consider a longer transition period to downside risk than the MSSP allows. 
  • Will states take a greater share of savings from upside only tracks? While some states may be tempted to follow the MSSP’s lead in lowering the savings rate for upside-only rates in their programs, either to capture greater savings or push ACOs toward greater accountability, some caution should be taken. Participating in a Medicare ACO may have more appeal to providers than many of Medicaid ACO models. This is likely because of: (a) higher Medicare reimbursement rates; (b) the program’s relaxed referral and antitrust provisions; and (c) the need to satisfy MACRA Quality Payment Program requirements.
  • Will ACOs drop out of the MSSP? While the incentives (and disincentives) listed above are compelling for MSSP ACOs, some ACOs may still choose to drop out of the program. By doing so, these ACOs may have less incentive to manage total cost of care across other patient populations, including Medicaid, and consider dropping out of their Medicaid ACO program as well. 
  • Can FQHC-led ACOs take downside risk? Though not as prevalent in the MSSP, one of the types of safety-net provider organizations that participate in Medicaid ACOs are federally qualified health centers (FQHCs), which are paid through a prospective payment system (PPS). Under current federal regulations, FQHCs are not allowed to take downside risk below their PPS rates. Therefore, if a state does transition to requiring downside risk in its Medicaid ACO program, the participation of FQHC-led ACOs in such a model would need to be addressed. 
  • Will beneficiary incentives be increasingly utilized in Medicaid?  Currently, Medicaid ACO programs are limited in what incentives they can provide beneficiaries. While some programs include non-medical “flexible services” such as air conditioners and home asthma remediation, these services are not “rewards” for healthy behaviors. Some Medicaid ACO programs may consider pursuing similar programs either through a CMS waiver or state plan amendment based on the precedent set by the MSSP. 


The MSSP Final Rule has shaken up the pace at which providers participating in Medicare ACO programs will need to accept financial risk and move toward greater accountability. Given the similarity between MSSP models and many Medicaid ACO models, it is likely that these Medicaid models will adjust to conform to Medicare regulations over time, especially if some of the shifts are viewed by states as particularly attractive. However, states may decide to be cautious about shifting quickly to conform to these standards. Not all of the Medicare changes may make sense for states, their Medicaid ACOs, and their Medicaid populations. Further, many Medicaid ACO programs are performing well; hence, states may not want to disrupt the momentum by enacting new policies that may not be popular or efficacious. Finally, it remains to be seen how the MSSP ACOs will react to these new regulations.

Therefore, state Medicaid agencies should: (a) weigh the perceived benefit of the changes against the ACOs’ reactions to these changes; (b) determine whether these savings would allow the ACO program to continue to achieve savings and improve quality; and (c) predict how the changes would affect the number of ACOs participating in the program. Before making changes of this magnitude to Medicaid ACO programs, states may want to solicit stakeholder input on proposed changes before they are implemented and wait to see how things play out in Medicare.


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