Report Recommends a New Child-Centered Approach to Value-Based Payment in Medicaid

By Kate Breslin, Schuyler Center for Analysis and Advocacy and Andrea G. Cohen, United Hospital Fund

As part of its Delivery System Reform Incentive Payment (DSRIP) waiver, New York Medicaid has set an ambitious goal to rapidly implement value-based payment across 80 percent of managed care payments by 2020. For all of the challenges associated with this huge shift, one of the most consequential for the long-term is how this set of payment changes should apply to the more than 2 million Medicaid enrollees –nearly 40 percent of all Medicaid enrollees in the state — who are children and adolescents.

A review of existing literature found that there was little published in peer reviewed or grey literature about value-based payment models for children’s health services. There was some descriptive work on pediatric Accountable Care Organizations, but little of it addressed payment policies that could be scaled across communities where most children are served.

Together, our organizations commissioned a report to help fill that gap. The report, Value-Based Payment Models for Medicaid Child Health Services, written by Bailit Health, proposes a new child-centered approach to value-based payment in Medicaid. Our hope is that this report will open a broader conversation, in New York and nationwide, about Medicaid’s opportunity – as the dominant payer for child health services – to drive more value in children’s health care.

Grounded in data on children’s utilization of health care services, literature on children’s health and health care, and expert interviews, the Bailit team concludes that substantial differences in children’s health care utilization compared to adults – and differences in the “value” of children’s health care – argues for a distinct approach to value-based payment, not modeled on approaches that were designed for adult populations and utilization patterns.

Many of the report’s conclusions are rooted in two key observations: first, “unlike adults, most children are generally healthy,” and second, “the management of childhood adversities and chronic conditions has payoffs many years into the future.” The report pays particular attention to the very significant issue of childhood adversity and child development. “Given the increased recognition of how profoundly social determinants of health (including Adverse Childhood Experiences, or ACEs) affect childhood development and adult health and social productivity, payment models need to consider how to motivate and support attention in this area.”

A third key observation identifies that children with very high costs – a very small percentage of children – generally have complex medical conditions that require intensive use of health care services by specialists, calling for a distinct payment model for the group.

The report recommends a primary care payment model that is a capitated model, supplemented by a care coordination payment risk-adjusted for “medical and social risk factors,” and a performance incentive bonus. The capitation should be based on historical costs “adjusted upwards, if necessary, to assume delivery of services consistent with Bright Futures guidelines,[1] screening for social determinants and other risk factors, including parental screening.” Vaccine costs should continue to be paid on a fee-for-service basis, and rates should be adjusted down if a particular practice is making higher-than-expected use of emergency rooms, urgent care, or specialists.

The care coordination payment should “fund care coordination for children within the practice with medical and social risk factors.” The payment would cover care coordination for clinical and social services that can help with addressing social determinants of health.

For children with medical complexity, the report recommends a “total cost of care” approach where there is a sufficiently large population to ensure an accurate assessment of financial performance (no easy task when only between 1 and 5 percent of children are in this group, and their health issues are very heterogeneous); where the model would evolve from “shared savings” to “shared risk,” but not be “full risk” due to the impact of high cost outliers; and eligibility for “earned savings” would be predicated on performance on a set of measures that are relevant to the health status of the target population. A risk-adjusted care coordination payment “which recognizes the need for higher clinical credentials than would be needed for children without medical complexity and would reflect more intensive care coordination” needs.

Finally, the report notes that measures used to determine performance incentives and shared savings distribution “would capture social determinants that are subject to health care provider influence.” It suggests that these could include:

  • Parental depression and stress
  • Kindergarten readiness (eg, pre-reading skills)
  • Environmental triggers of asthma,
  • Parental education and supports regarding ACEs

While there is much room for debate about particular features of the recommended pediatric payment model, we cannot wait to engage. The report raises critical points about the need to net invest in children’s health care in order to expect better value; about the critical role of social risk factors in the long term health of children; and pediatric providers’ potential – if properly incentivized — to influence some of those factors.

We are delighted that New York Medicaid is planning to tackle some of these payment issues head on, with a planned stakeholder workgroup on value-based payment for children and adolescents expected to be launched this year. And we hope that other jurisdictions will soon follow suit.

Access Value-Based Payment Models for Medicaid Child Health Services here:

[1] Bright Futures is a national health promotion and prevention initiative, led by the American Academy of Pediatrics and supported by the Maternal and Child Health Bureau, Health Resources and Services Administration. The Bright Futures Guidelines provide theory-based and evidence-driven guidance for all preventive care screenings and well-child visits, including the AAP’s recommended “periodicity schedule” for immunizations and developmental screenings.