Using Value-Based Payment Arrangements To Increase Equity

We are well into the second decade of the implementation of The Center for Medicare and Medicaid Innovation (CMMI), which was established in 2010 as part of the Affordable Care Act (42 U.S.C. 1315a). CCMI develops value-based health care payment and service delivery models - focused on financial incentives that increase quality and decrease costs for federal health care programs like Medicare. Earlier this year, CMMI released its "Innovation Center Strategy Refresh," which outlined CMMI's lessons learned over the last 10- plus years, plus additional steps towards achieving value-based care.

One of the lessons learned by CMMI is the need to embed health equity in every model. This comes on the heels of COVID-19, which further exposed long-standing inequalities that have seriously impacted the health of racial and ethnic minority populations and other underserved groups. CMMI believes there must be a more intentional focus on fixing health disparities and ensuring equitable access, quality and outcomes. CMMI thinks providers can accomplish this by increasing participation among safety net providers, designing models that are simpler and more responsive to the needs of beneficiaries, and addressing barriers to participation for providers that serve a high proportion of underserved and rural beneficiaries.

We can also see this focus on equity in the redesigned Global and Professional Direct Contracting Model to become the ACO Realizing Equity, Access, and Community Health (REACH) Model this year. One of the goals of ACO REACH is to promote health equity and focus on bringing the benefits of accountable care to Medicare beneficiaries in underserved communities. Data collected in connection with other CMMI models revealed that aligned beneficiaries were likely to be white, and less likely to include those who live in rural areas or be dually eligible for Medicare and Medicaid.

In California, we can see this focus on equity in connection with the bidding process for Medi- Cal managed care program that kicked off in February of this year. The Request for Proposals required managed care plans to address how they would increase health equity and reduce health disparities. Specifically, the Department of Health Care Services asked bidders to identify physical and behavioral health disparities in access, utilization, and outcomes among racial, ethnic, language, limited English proficient and Lesbian, Gay, Bisexual, Transgender, and Questioning groups. Plans must also set targets for reduction of disparities and inequities, and have a chief equity officer charged with ensuring policy and procedures promote health equity, collaborate with providers and beneficiaries in equity-related efforts and initiatives, and provide diversity, equity and inclusion training.

Improving equity will require payors, including government health care programs and commercial payors, to incentivize providers. Typically, this includes shifting financial risk to providers - meaning a payor's responsibility to provide or pay for health care is transferred to the provider. Commonly, downstream providers will bear the risk of paying for costs that exceed a certain threshold. This can be viewed as a provider engaged in the business of insurance. State approaches to regulating these types of arrangements are all over the map, creating operational and legal hurdles.

Downstream risk arrangements received attention from lawmakers in the 1990s, but despite a continued focus on value-based arrangements, some states have still not solidified an approach to regulating these types of arrangements. The vast majority of states do not have laws that address downstream risk arrangements, which often require state outreach on an arrangement-by-arrangement basis. That is not the case in California. In 2019, the Department of Managed Health Care (and as the only state to have an agency devoted to managed health care), adopted its own approach to regulating certain downstream risk arrangements. As set forth in Section 1300.49 of Title 28 of the California Code of Regulations, medical groups and similar entities engaged in certain forms of downstream risk from an HMO must be licensed as a "restricted" HMO, or be exempted. Such restricted HMOs must meet most of the same standards as a non-restricted HMO.

The focus on improving equity (and paying for this improvement) is bringing new participants to the value-based table, including companies focused on people in rural areas, women of child-bearing age and those living with chronic conditions like diabetes and kidney disease. As these arrangements gain popularity, the hope is that state regulators will become more comfortable with these arrangements and regulatory barriers will be reduced.