CMS Issues New Guidance to Advance Value-Based Payment Models in Medicaid

The U.S. Centers for Medicare & Medicaid Services (CMS) is once again calling attention to its previously outlined commitment to value-based care strategies.

The agency on Tuesday released new guidance to help states shift more toward value-based approaches under their Medicaid programs. The overarching goal of the guidance is to better align health care provider incentives across payer types, in turn moving the U.S. health care system closer to a quality-over-quantity methodology.

“Our health care providers need Medicare, Medicaid and private insurance payers to work in tandem with one another, and I am calling on our state partners to use this guidance to develop a plan to improve quality for their Medicaid beneficiaries by advancing value-based care in their own programs,” CMS Administrator Seema Verma said in an announcement on the new guidance.


Federal health care officials have made modest progress on their value-based care efforts in Medicare and Medicare Advantage over the past several years, with the Value-Based Purchasing Model (VBPM) in the home health space serving as one noteworthy example.

CMS now wants to see similar progress in the Medicaid world, which has roughly 74 million beneficiaries.

Tuesday’s guidance includes an assessment of key lessons learned from early state and federal experiences in implementing value-based care reforms, as well as a toolkit of available federal authorities for states to adopt innovative payment reform efforts within their individual Medicaid programs.


Additionally, the guidance stresses the importance of multi-payer alignment in value-based care to drive care transformation.

Examples of payment models include advanced payment methodologies under fee-for-service, bundled payments and total cost of care models, the announcement clarified.

“Value is more likely to improve across the larger health care system when provider incentives are aligned across payers,” CMS wrote in a related letter to state Medicaid directors. “By advancing [value-based care] in Medicaid, states have the opportunity to improve beneficiary health while reducing costs.”

In addition to VBPM, CMS cited Medicare shared-savings models and Accountable Care Organizations (ACOs) as successful examples of value-based payment strategies.

“States should consider the capabilities of their delivery systems to drive performance improvement when designing and implementing payment methodologies, recognizing their sophistication in influencing up- and downstream providers, as well as community-based organizations,” the letter continued.

In terms of timing, advancing value-based care in Medicaid is also important to help ensure that the nation’s health care system is better prepared and equipped to handle unexpected challenges, such as the ongoing COVID-19 pandemic, CMS said.

A stronger value-based approach in Medicaid could also help manage costs as programs expand.

In 2020, growth in Medicaid expenditures is projected to increase by 4.5%, which is mostly attributable to faster expected growth in both the net cost of insurance and Medicaid payment rates to providers compared to 2019, according to the CMS Office of the Actuary.

From 2021 to 2023, Medicaid spending is projected to grow more rapidly, at 5.7%, on average.

A 2018 report from the Health Care Payment Learning & Action Network found that 34% of total U.S. health care payments in 2017 were tied to alternative payment models. That was an increase from 23% two years before that.

The full guidance is available here.

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