New payment model narrows Medicaid primary care funding gap

© ink drop - stock.adobe.com

Primary care, although essential for ensuring continuity of care and managing chronic disease, is inaccessible for millions of Americans, due in large part to a fee-for-service model that does not account for the complexity of caring for medically and socially high-need patients.

Since 2018, the Massachusetts Medicaid and Children’s Health Insurance Program (MassHealth) has promoted coordinated care through accountable care organizations (ACOs), and in 2023 it shifted to prospective, monthly payments that initially relied on historical spending.

However, relying solely on past costs risks underfunding practices that provide care to complex patients. For this reason, a research team from UMass Chan Medical School developed a risk-adjusted payment model using a proxy measure, called the Primary Care Activity Level (PCAL), to allocate payments more appropriately based on both medical and social risk factors, ensuring payments better reflect patient needs.

A study, published Monday in JAMA Network Open, examined MassHealth’s PCAL model, evaluating the support provided for primary care practices serving medically and socially complex patients.

The cross-sectional study considered almost 1.1 million MassHealth members enrolled in 3,602 primary care practices. Using 2019 data, the researchers built the PCAL model to adjust monthly, prospective payments by accounting for both medical complexity — including chronic conditions and behavioral health issues — and social risk factors including housing instability and socioeconomic status.

The study found that traditional age- and sex-adjusted payments would result in overpayments for practices serving the lowest-need patients by 10%, while underfunding those treating the most complex patients by 34%.

In contrast, the PCAL model more accurately aligned payments with patient needs, nearly eliminating overpayments in low-need practices and reducing underpayments for high-need practices to just 6%.

The PCAL outcome combines costs from primary care visits, specialty care, hospitalizations, emergency department (ED) visits and pharmacy spending. The method is meant to reflect not only the services delivered during visits but also the behind-the-scenes coordination of care for patients likely to use other parts of the health care system.

MassHealth initiated its 2023 reform to shift away from fee-for-service payments, toward a model that provides a stable monthly revenue stream. The study notes that the previous model, based largely on historical spending and simple demographic adjustments, risked underfunding practices that care for high-need populations. The PCAL model addresses these concerns by linking payments more closely to patient complexity.

Although the study is specific to MassHealth’s managed care population, the authors suggest that similar risk-adjusted models could support primary care practices nationwide by ensuring that payment systems more accurately reflect the resource demands of managing medically and socially complex patients.

The findings suggest that other Medicaid programs or insurers could adopt similar approaches to more equitably distribute primary care funding.