The Financial Impact of Medicaid Quality Scores


Delivering affordable, quality and timely healthcare to low-income populations has been the cornerstone of Medicaid since the program’s inception in 1965. Amidst industry-wide calls to advance health equity, low costs of care and improve chronic disease management, achieving the goals of the Medicaid program comes with significant challenges.

The Centers for Medicaid and CHIP Services (CMCS), a branch of the Centers for Medicare & Medicaid Services (CMS), has transformed plan performance requirements over the last 50 years by continuously evolving quality measures. Alongside these national metrics, state health departments have their own initiatives to employ new measurements of success for Medicaid health plans. The implementation of the Children’s Health Insurance Program (CHIP) has further pushed government sponsored health plans to achieve higher standards of quality for low-income children.

As states implement new benchmarks for withholding payments and pay-for-performance bonuses, understanding the financial ramifications of low quality scores allows health plans to determine the right strategies and interventions to optimize plan performance. Medicaid and CHIP plans that address poor plan performance will be in a strong position to unlock quality incentives.

How is Medicaid Plan Performance Measured?

CMCS uses a series of core quality measures to evaluate and monitor the health of Medicaid and CHIP members on a national scale. These measures are divided into five core sets that track quality of care for different populations and scenarios:

  • Adults
  • Children
  • Maternity care
  • Behavioral health services
  • Health home services

State health agencies can determine which measures they will use to evaluate plan performance based on the needs of their populations. One state may focus heavily on prenatal and postpartum care, another may determine that improving behavioral health will have the strongest impact on health outcomes. States may also use member experience surveys to evaluate plan performance, such as the Consumer Assessment of Healthcare Providers and Systems Home and Community-Based (HCBS CAHPS®) Survey.

Reporting for the core sets is voluntary, but starting in 2024, states will be required to report the Child Core Set and behavioral health measures in the Adult Core Set. Data is collected is reported back to CMCS to calculate national estimates and publicly shared through the Medicaid and CHIP Scorecard.

These measures influence financial incentives for Medicaid plans. States have the freedom to assign incentives to performance in specific measures and penalize plans that fail to reach benchmarks. The threshold for receiving incentives is assigned by comparing current quality scores against the previous year’s scores to determine if past thresholds were too challenging, if they need to stay the same or if other measures need to be targeted.

What are the Financial Consequences of Medicaid Plan Performance?

Medicaid and CHIP plans are financed through local, state and national funding depending on each state’s financial structure. Similar to the CMS bid submission process, a state will determine the cost of providing care to the average Medicaid member and pay plans a fixed dollar amount, also called the capitation rate, per member. These healthcare reimbursements are vital for determining health plan budgets and what quality improvement programs a plan can finance.

To ensure these funds are used to deliver quality care and improve health outcomes for members, states incentivize plan performance in one of two ways:

  • Pay-for-performance: This type of payment arrangement incentivizes Medicaid plans for achieving specific quality scores and penalizes plans that perform under those scores. Plans that perform well in specific quality measures will earn incentives based on the state’s capitation rate in addition to funding for providing services. Pay-for-performance programs may have multiple thresholds, encouraging plans to continue improving scores to increase incentive payments. Plans that perform under benchmarks risk paying financial penalties or missing the opportunity to earn incentive payments.
  • Capitation withholding: State agencies can create withhold arrangements with Medicaid plans where an agency withholds a portion of funding from a Medicaid plan to encourage it to improve quality scores. Like pay-for-performance, withholds are determined by a capitation rate that is set each year. Plans that achieve benchmarks for certain quality measures will receive a withholding payment at the end of a performance period, whereas plans that perform under the benchmark will lose out on significant earnings. Some states may approve additional payments higher than the assigned capitation rate when a plan demonstrates significant improvements in quality scores.

A handful of states offer enrollment incentives on top of financial incentives. For example, in Texas, California and New York, members who do not select a plan may be auto assigned to a high performing plan. CMCS may also provide additional incentives to plans who improve performance in specific measures outside of targets assigned by a state.

Addressing Poor Performance in Medicaid and CHIP Plans

Reaching quality benchmarks is vital for continuously improving plan performance and quality care. Quality incentives support Medicaid and CHIP plans efforts to design coordinated care programs, health equity initiatives, behavioral health services and supplemental benefits. Stronger quality scores also influence enrollment rates, which further increases the incentives a plan is eligible for.

States can change the thresholds for quality incentives and which measures health plans should target each year. Plans that perform well one year may be at risk of losing out on quality incentives if a state chooses to change the criteria. Wherever a plan has scored in previous years, there is always the opportunity to secure quality incentives by remaining flexible and implementing the right quality improvement strategies.

Use Past Performance Data to Support Future Improvements

Poor quality scores in previous years provide valuable lessons for where plans need to direct attention the following years to continuously improve plan performance. Plans should start by reviewing past performance, determining which measures are below the incentive threshold, identify which members will have the strongest impact on measure performance and optimize care management programs with intelligent member engagement strategies to bridge the gap.

Develop Comprehensive Views of Member Needs and Challenges

Based on past performance, plans may not only determine which members are unengaged with their healthcare and need assistance with improving health outcomes, but also why they are unengaged can be more complicated. Even if a state health agency does not use the HCBS CAHPS survey to evaluate plan performance, capturing member feedback and self-reported data through surveys does allow plans to surface whole-person views of members. Mock-CAHPS surveys, health risk assessments and pulse surveys are all useful tools for understanding member pain points and guiding quality improvement strategies that address barriers to care.

Align Quality Strategies with High-Value Measures

Each state will incorporate different measures into their quality programs, and plans should be aware of which measures will have the strongest influence on pay-for-performance incentives and withholding payments. Crossing the threshold for these top measures ensures plan will have proper financial support for future improvements. Measures should be addressed with the appropriate interventions, resources and staff to control costs and optimize plan performance.

Equip Your Quality Programs with the Right Tools

Medicaid and CHIP plans are challenged to provide quality care to at-risk populations with lean budgets, high targets and limited resources. Plans that achieve higher scores in spite of these constraints do so by innovating and adapting their quality programs with data-driven tools and tactics.

Designed to help health plans to reach time-sensitive and high-value quality goals, Healthmine’s quality improvement solutions streamline monitoring measure performance in real-time and identifying opportunities to boost quality scores. From one platform, your staff can move from surfacing contract-level insights into plan performance to directly engage members with personalized care plans, rewards and education to close care gaps.

Augment your Medicaid quality strategies with Healthmine’s digital suite of member-centric solutions to achieve higher incentive payments. 

Healthmine is the leading member engagement and rewards solution focused on empowering people to take the right actions to improve their health.

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