Enrollment in health coverage? Medicaid and CHIP know how to do it! News accounts last week that 3.9 of the 6 million people who signed up for health coverage between October 1 and the end of 2013 were enrolled in Medicaid or CHIP came as no surprise to those of us who follow these critical public programs.

But that’s not the only indication of the effectiveness of the Medicaid and CHIP enrollment process. Last week, 23 states earned over $307 million dollars in performance bonuses for enrolling eligible uninsured children in Medicaid. The performance bonus program was enacted as part of CHIP reauthorization in 2009 to incentivize and reward states for adopting best practices to promote enrollment and retention of uninsured children. To qualify, states must implement at least five of eight specific policy options or administrative procedures. But adopting the five options only gets them in the competition. To receive an award, states must also meet aggressive Medicaid enrollment targets that increase annually. Over the past five years, 27 states have earned a total of $1.1 billion (yes, that’s a “B”) in bonuses.

Unfortunately, CHIPRA performance bonuses have not been extended beyond the initial five-year reauthorization period, making 2013 the final round of awards. To be fair, many of the strategies, having proven their value over time, are now required by the Affordable Care Act. Nonetheless, the performance bonus program has demonstrated that incentives encourage states to make program improvements. So how might we restructure a performance bonus program to further strengthen Medicaid and CHIP?

Four of the original eight strategies are no longer applicable: removing asset tests, eliminating face-to-face interviews, adopting administrative renewals, and creating joint application and renewal forms. However, three of the eight have proven particularly helpful in enrolling and retaining coverage for children and should be preserved: 12-month continuous eligibility, presumptive eligibility, and express lane eligibility. Plus, there are many ideas for new strategies or measures, including giving states credit for:

• Expanding Medicaid to low-income parents and adults
• Removing any waiting period for children eligible for CHIP
• Extending Medicaid to former foster youth who aged out of the system in another state (currently states are only required to cover foster youth who aged out in their state)
• Eliminating the 5-year waiting period for lawfully residing immigrant children
• Improving timeliness of eligibility determinations by achieving a specified proportion of applications processed within 24 hours
• Demonstrating high retention rates for eligible individuals and/or reducing the percentage of enrollees who are denied or lose coverage at renewal for procedural reasons (e.g., did not provide documentation)
• Establishing a certified application counselor program or meeting benchmarks for out-stationed eligibility workers.

If Congress wants to think even more seriously about health policy, performance bonuses don’t have to be limited to enrollment and retention measures. Other consumer-related goals, such as meeting standards for quality of care, timely access to services, and/or consumer satisfaction, could be incorporated into a bonus program. Reporting such measures and showing improvement over time could add a practical new angle. For example, achieving a high proportion of children receiving a dental check-up or attaining a high level of consumer satisfaction with the application process offer new opportunities to structure a performance incentive program intended to improve and strengthen Medicaid and CHIP.

In 2009, the first year of the performance bonus program, 10 states qualified for bonuses. Over time an additional 17 states met the program’s requirements, demonstrating that states will strive to make improvements that cover more kids when incentivized to do so. During the first three years, participation of eligible uninsured children in Medicaid increased by 5.5 percentage points from 81.7 to 87.2 percent, achieving a participation rate in a public program second only to Medicare. There is no doubt that the performance bonus program has contributed to the significant progress we have made in covering children in recent years.

Recognizing and rewarding top performance is a key element that drives success in business, and policymakers are often heard saying that government needs to run more like private business. The question is – will they put the money where their mouths are?