A Crucial Year for Value-Based Care in Medicaid

By Michael Poku, MD, MBA

This year marks a pivotal moment for Medicaid, its enrollees, and the clinicians who serve them. The joint federal-state program is facing significant challenges from the current Trump administration, which has proposed substantial budget cuts to Medicaid for both fiscal and political reasons.

Medicaid, established in 1965 as part of President Lyndon B. Johnson’s Great Society program, has long been a subject of debate due to its cost and its mission to provide health insurance for low-income individuals. The program saw a major expansion under the 2010 Affordable Care Act (ACA), which incentivized states to broaden Medicaid coverage to include more people in underserved communities who lacked employer-sponsored health insurance. This expansion continued in the aftermath of the COVID-19 pandemic, with 40 states and Washington D.C. extending coverage to an estimated additional 21 million people, which helped drive the U.S. uninsured rate to a record low level of 7.7% of all American residents.

However, those gains may be threatened with the expiration of expansion provisions detailed in the American Rescue Plan Act and Inflation Reduction Act—both passed by Congress in 2021.  We have already observed a contraction in coverage starting in the latter half of 2024, and further reductions are anticipated as the new administration imposes budget constraints and re-evaluates Medicaid.

Medicaid expansion is a focal point for conservative policymakers, who are advocating for the elimination or reduction of the additional federal funding that supports state expansions. Nine states—Arizona, Arkansas, Illinois, Indiana, Montana, New Hampshire, North Carolina, Utah and Virginia—have trigger laws that would end their Medicaid expansions if federal funding were cut below 90%. As a result, an estimated 3 million adults in those states would lose coverage. As well, three other states—Idaho, Iowa, and New Mexico—have legislation in place that would likely reduce or eliminate expansion.

Other program changes under consideration by the new administration include the introduction of work requirements and the capping of federal spending.

On top of it all, Medicaid is still reeling from the fallout of the end of the public health emergency (PHE) declared during the pandemic. Congress passed the Families First Coronavirus Response Act which required Medicaid programs to keep people continuously enrolled through the PHE and provided additional funding. After the PHE ended in May 2023, states resumed normal program operations, including restarting Medicaid and Children’s Health Insurance Program (CHIP) eligibility renewals and terminations of coverage for those who no longer qualified or who failed to reapply. An estimated 25 million people were disenrolled in Medicaid and CHIP as a result of the redetermination process.

A VBC model that helps Medicaid providers

Despite the constant flux of policy changes from Washington, D.C., Medicaid programs remain responsible for addressing the healthcare needs of historically marginalized populations. The prospect of doing so with reduced funding only exacerbates an already challenging task. Although states set their own reimbursement rates within federal guidelines, these rates are often low, and many have not been appropriately adjusted for inflation and rising costs in many years.

On top of it all, it’s well understood that relying solely on a volume-based fee-for-service (FFS) model is no longer feasible for providers, especially independent practices that are often on the front lines in historically disinvested communities across America. Succeeding in this new environment will require Medicaid providers to adopt innovative value-based care (VBC) models that will bridge the widening care gaps and address growing health inequities among these populations.

The innovative models will adopt a biopsychosocial approach, systematically considering biological, psychological, and social factors, as well as their complex interactions, to better design and coordinate healthcare delivery. This approach places patients at the center, helping clinicians understand their experiences, conditions, cultural practices, and personal desires.

These forward-thinking VBC models also integrate data science, advanced technology platforms, field teams, and community services to address social determinants of health (SDoH) such as health illiteracy, housing instability, food insecurity, language barriers, and lack of transportation. This comprehensive approach offers the best opportunity to ensure that even the most complex and disadvantaged patients receive the highest quality of care possible.

How the VBC model works

Many Medicaid-focused practices lack the technology and resources necessary to fully implement value-based care (VBC). Additionally, these practices are often hesitant to enter risk-based VBC contracts, as influencing patient health outcomes and reducing costs can be challenging for a single practice.

Most independent practices rely on VBC enablers—partners who provide the technology and expertise needed while acting as intermediaries between the practice and payers. The technology provided by enablers, often at no cost, allows providers to integrate data from electronic health records (EHR), healthcare information exchanges (HIE), and other sources to analyze and manage the data required for proactive clinical workflows, VBC reporting, and reimbursement. Through coaching and deep clinical and VBC expertise, an enabler also makes clinical staff more efficient by streamlining workflows, adopting best practices and prioritizing patients most in need.

Enabling partners can also assume the downside risk of value-based contracts and pay practices through an activity-based model, providing financial support well in advance of the typically lengthy payment timelines encountered when practices execute VBC contracts directly with payers.

Any comprehensive approach to treating the Medicaid population must address SDoH barriers, as they have an enormous effect on patient health. Some enablers use multi-disciplinary field teams that include nurse practitioners, care coordinators, and chaplains to address SDoH and help patients re-engage with providers. Practices also can align with non-profit groups, religious organizations, local government agencies and community service groups, which are important allies to provide whole-patient, comprehensive care.

An opportunity for success

It’s easy to feel discouraged about Medicaid’s prospects in 2025. Impending changes are likely to shrink coverage and reduce funding without corresponding initiatives to address the ongoing needs of these complex and vulnerable populations. This will make it even more challenging for providers who treat these patients to succeed financially.

That is why providers must embrace a VBC model that empowers them to identify and treat Medicaid patients with a whole-person approach.

Whatever else happens, 2025 should become the year Medicaid providers turn more fully away from the FFS-only model and adopt VBC. Innovative VBC models are essential to addressing care gaps, ensuring people receive the care they need and deserve, and helping providers move beyond the limitations of the FFS model. VBC not only secures providers’ financial futures but also has the potential to create a more effective U.S. health system that drives better health outcomes at a reduced cost.

Dr. Michael Poku is Chief Clinical Officer for Equality Health, a value-based care enabler with a Medicaid-first model uniquely equipped to address the needs of diverse and historically underserved populations.