New York State has embarked on an ambitious multi-year effort to overhaul its taxpayer-funded Medicaid program, which has long combined high costs with less than impressive health outcomes. Governor Andrew Cuomo’s “redesign” of Medicaid will be heavily focused on “complex, high-cost populations” – the roughly one million Medicaid recipients with long-term disabilities and chronic health problems such as diabetes, heart disease, substance abuse and mental illness.
While most Medicaid recipients in New York are enrolled in managed care, where conditions are carefully monitored and treatment costs controlled, the majority of the chronically ill are still covered on a fee-for-service basis, which tends to reward a high volume of treatments and procedures. The Cuomo administration wants to centrally coordinate and intensively manage health care for this particularly expensive group of patients, with a stronger emphasis on health education and prevention.
The proposed changes, which will require the federal government to waive many of its usual Medicaid rules, are both appropriately targeted and potentially transformational.
But there remains a missing element in the Medicaid redesign: the role of patients themselves.
Many of the most costly-to-treat health conditions – for example, those linked to obesity -- are caused or exacerbated by lifestyle and behavioral factors. Even the best-designed and best-coordinated system of managed care will fail to deliver the desired results if too many patients continue to smoke, or fail to exercise adequately or indulge eating and drinking habits that make their health problems worse.
This paper focuses on the Medicaid population with or at risk for chronic diseases (excluding the elderly and disabled in institutional care). It details how incentives to practice healthy behavior and reasonable requirements that patients take ownership of their health care by seeking early preventive care in appropriate settings can lead to better health outcomes and lower costs in Medicaid.
The persistence of unhealthy behaviors among some chronically ill individuals is a daunting problem – seemingly every bit as intractable as the dependency issues confronting welfare prior to major reforms in 1996.
Yet, in the case of welfare, a true transformation did eventually occur. The historic, bipartisan federal welfare reform of 1996, using the findings from multiple state experiments, turned public assistance from what had been a program with few expectations of the recipient into a system of incentives and responsibilities designed to encourage work. The result was that more people left welfare for work, especially single mothers, and states were able to experiment with finding avenues to encourage and reward work, including incentives, case management and various support services such as child care and transportation.
Some of the central lessons of welfare reform can be replicated in Medicaid, not in order to reduce the caseload, but by understanding that incentives matter, rewards can make a difference in promoting healthy behavior and client responsibility can play a major role in success.
Getting individuals to adopt healthier personal habits is a difficult and complex, but necessary challenge. As reviewed in this paper, several other states have pursued promising approaches in this area. New York can also draw from emerging insights from the field of behavioral economics and from private health insurance and employer innovations.
New York is already poised to take an initial step in this direction. It is among 10 states that have received small federal grants to provide direct cash or other rewards to Medicaid patients who enroll in disease prevention and management programs.
Building on this start, New York should become a leader in testing new avenues to engage patients in their health care and improving public health outcomes.
Specific recommendations include:
Experiment with a variety of cash or cash-like incentives to encourage patients with chronic conditions to access primary and preventive services, adopt healthy behaviors and follow recommended treatment plans. Such incentives are often called conditional cash transfers, which predicate the receipt of payments on fulfilling certain responsibilities.
Remove barriers that limit private managed care plans’ ability to provide higher cash or cash-equivalent rewards for healthier behavior to their Medicaid clients.
Incorporate proven approaches from other states that have already designed incentive programs and mechanisms to boost patient responsibility.
Test multiple approaches on a small scale and evaluate them carefully both to add to the research literature on incentives and to expand successful programs.
>> 1. New York Medicaid at a Crossroads
Support for this work was provided by the New York State Health Foundation (NYSHealth). The mission of NYSHealth is to expand health insurance coverage, increase access to high-quality health care services, and improve public and community health. The views presented here are those of the author and not necessarily those of the New York State Health Foundation or its directors, officers, or staff.