Just 10 years ago, Kentucky found itself in a budget crisis that was largely precipitated by ballooning Medicaid costs. The state needed over $150 million to make up for shortfalls in the program. Elected leaders were staring at potentially devastating cuts to healthcare services for low-income and at-risk Kentuckians. This also posed a major threat to the state’s healthcare infrastructure because a 30% reduction in reimbursements for providers was in the offing without a major course correction in Frankfort.
At the time, Kentucky was using a Fee-For-Service (FFS) Medicaid model− a pay-as-you-go system that is unplanned in nature, which means care coordination is severely lacking, resulting in limited prevention services and lack of early treatment of chronic conditions. FFS also meant the biennial Medicaid budget was a moving target because providers were paid by volume, not value of services and there was limited accountability when it came to ensuring individuals were receiving appropriate care. The unpredictability of the FFS model forced a change.
Kentucky first introduced statewide managed care within its program in 2011 to maximize private competition, empower consumers with choice, promote personal responsibility, and ensure more efficient and predictable use of taxpayer resources. Kentucky contracted with managed care companies through its Medicaid program to provide patient-centered care management and delivery of healthcare as well as additional services aimed at improving the health and well-being of the state’s Medicaid members. The state designed this new model of providing healthcare services to address the state’s challenging baseline of health status and lifestyle dynamics.
In doing so, the state was able to avoid massive cuts to services and providers, while also raising key health quality indicators.
A recent report from The Menges Group, a health policy consulting firm, found that based on 2000-2019 cost trends in Kentucky relative to other states, costs under KY’s Medicaid managed care program in 2019 were 15% to 20% lower than what would have occurred had Kentucky relied predominantly on the fee-for-service coverage model. These percentages equate to overall Medicaid savings of $1.2 billion to $1.7 billion in FFY2019.
At the same time, amidst a national doctor shortage, Kentucky was able to work to retain a robust provider network with the 2nd highest 2020 physician compensation in the nation, according to Medscape.
Most importantly, the transition to Medicaid-managed care has meant important quality and access improvements for Kentucky Medicaid members. Based on composite national Medicaid quality scores from 2016-2019:
- Access to prenatal and postpartum (post newborn delivery) care for pregnant women improved by 2.6 percentage points
- Access to well-child visits (i.e., preventive care services) improved by 3.0 percentage points for children in the 3-6 age range and by 7.3 percentage points for children in the first 15 months of life
- A key childhood immunization rate measurement improved by 8.5 percentage points
- Access to blood pressure screenings and control improved by 6.1 percentage points
- Annual Dental Exam access improved by 2.3 percentage points
- Weight Assessments improved by 17.1 percentage points for children and by 7.5 percentage points for adults
A competitive procurement process and a depth of contract requirements are driving these improvements by incentivizing plans to innovate and tackle health disparities by addressing the social determinants of health (SDOH) like transportation, housing, food security, etc.
Governor Andy Beshear recently cheered KY’s regional #1 ranking of fully vaccinated that have received their COVID-19 booster. In addition, Kentucky is outperforming 5 of 7 of our border states in individuals with at least one dose. This is at least partially attributable to Kentucky’s significant MCO enrollment relative to our neighbors and the extensive, multi-channel outreach and incentive programs that come with it.
It’s clear that Kentucky benefits from an active MCO model as opposed to FFS where care management and SDOH initiatives are extremely limited.
As we look ahead to the next 10 years and beyond, Kentucky’s MCOs will continue to work to tackle Kentucky’s unique population needs and deliver value to taxpayers while doing it.
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