How can Medicaid states considering alternative payment models address challenges?

While the use of alternative payment models (APMs) in the Medicare and commercial markets is prevalent, the use of APMs in the Medicaid market is low. There are several reasons why these models are more difficult to implement in Medicaid. Understanding the nuances of Medicaid APMs and building strategies to address them is critical to their success.

In this paper, Milliman’s Anders Larson, Rebecca Johnson, and Zach Hunt discuss seven key challenges that Medicaid payers face when trying to establish APMs with providers. The paper specifically focuses on shared savings/risk contracts based on total cost of care (TCOC) models. The following excerpt provides some perspective.

One challenge with any total cost of care model is that providers inherently take on some level of insurance risk due to random claims fluctuation that can influence results. This is true in the Medicare ACO models, which is why CMS uses a minimum savings rate (MSR) that varies by population size to limit its payments for “false positives.” This is likely to be more pronounced in Medicaid because of challenges with attribution, beneficiaries moving in and out of Medicaid, and a higher prevalence of zero-dollar claimants.

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