Community Reinvestment: Forging New Partnerships in Medicaid

A Growing Trend of Community Reinvestment

State Medicaid agencies are increasingly implementing community reinvestment requirements in their contracts with Medicaid managed care organizations (MCOs) which require that MCOs reinvest in the communities they serve to improve health, often based on a percentage of their profits. States see community reinvestment as an opportunity to make financial commitments in key priorities that are informed by communities and serve entire communities—not just Medicaid members. At the time of this publication, at least ten (10) states have implemented, or are in the process of implementing, a community reinvestment requirement (see Figure 1).

This newsletter provides an overview of community reinvestment requirements, examples of how states have operationalized them, and key considerations for the development of a community reinvestment initiative.

Figure 1. States With or Developing Community Reinvestment

Sources (accessed August 2024):

• Arizona: Community Reinvestment Policy
• California: Medi-Cal Managed Care Plan Transition
• Georgia: Medicaid Managed Care Services – Request for Proposals (RFP) #41900-DCH0000133
• Michigan: https://sigma.michigan.gov/PRDVSS1X1/Advantage4
• Nevada: Medicaid Reinvestment Advisory Committee
• New Mexico: Turquoise Care MCOs Contracts
• North Carolina: Revised and Restated Request for Proposal #: 30-190029-DHB, Prepaid Health Plan Services
• Ohio: Medicaid Managed Care Provider Agreement
• Oregon: 2024 SHARE Initiative Guidance for CCOs
• Tennessee: TennCare Contracts

Defining Community Reinvestment

While states are consistent in the overall intent of community reinvestment—to increase funding in communities to improve health—they vary in how much is reinvested and what the funding can support.

Most states require MCOs to reinvest consistent with broader state priorities. For example, some states are using community reinvestment to increase financial support for interventions that address social drivers of health, while others are using community reinvestment to support quality initiatives or address workforce shortages. While reinvestments must be made in line with state-determined parameters, they can be used to support innovative initiatives beyond the services typical of a Medicaid program that benefit entire communities and not just Medicaid members.

There are two main strategies states use to determine how much an MCO must reinvest: a ‘Profit Strategy’ and a ‘Medical Loss Ratio (MLR) Strategy’.

• Profit Strategy: A state assesses the amount of profit an MCO earned in a given contract year and requires that a percentage of total profit be reinvested. States like Arizona, Ohio and Nevada have used this strategy and percentages of profit required to be reinvested range from 3 – 7.5%.
• MLR Strategy: A state assesses whether an MCO meets the minimum MLR in a given contract year, and if an MCO does not meet the minimum MLR, it is allowed to reinvest or remit funds to the state. States like North Carolina and Tennessee have used this strategy.

Figure 2. State Medicaid Examples of Community Reinvestment Requirements

State	What Funding Can Support	How Much Is Reinvested	What Makes the Program Unique
Arizona	Community reinvestment funds in Arizona must align with and support the Whole Person Care Initiative to address the health-related social needs of Medicaid members. Funding must support activities that address housing, combat social isolation, reduce recidivism or promote employment.	Arizona’s Medicaid managed care plans must contribute a minimum of six (6) percent of after-tax profits from each line of business.	Based on research Manatt conducted, Arizona appears to be the first state to have formalized a community reinvestment policy.
Oregon	Community reinvestment funds in Oregon must support activities that fall within Oregon’s four social determinants of health and equity domains, which include economic stability, neighborhood and built environment, education and social and community health. Additionally, a portion of community reinvestment funds must be used on housing-related services and supports.	Oregon’s Coordinated Care Organizations (CCOs) must contribute a percentage of average adjusted net income or 10% of dividends recorded or similar payments or both to shareholders. The final amount is determined by a formula established by the state.	Each CCO has a community advisory council. CCOs are required to engage their community advisory councils in community reinvestment spending decisions. This could include, for example, engaging the community advisory council to review proposals for community reinvestment funding or designing the approach to score proposals.
Ohio	Community reinvestment funds in Ohio must be used to support population health strategies within the region(s) an MCO serves. MCOs must use available population health data to determine what to fund and prioritize reinvestment opportunities identified by community partners.	Beginning in 2025, Ohio’s Medicaid MCOs must contribute five (5) percent of their actual underwriting margin with adjustments applied in recognition of taxes, as applicable.	MCOs must work collaboratively with other MCOs serving the same region to maximize the collective impact of community reinvestment funding.

Design Considerations for Implementing Community Reinvestment Requirements

States set a vision for how community reinvestment funding could be used to address key priorities, and MCOs then innovate within state-determined parameters to reinvest in the communities they serve. The components below could be considered when establishing a community reinvestment requirement.

Setting Goals for Community Reinvestment: States should have a goal, or set of goals, that drive the design of community reinvestment requirements. State goals could include:

• Funding activities to advance existing strategic plans, statewide goals, population health and/or quality strategies (e.g., requiring funding support perinatal quality collaboratives or allowing MCOs to provide funding for the purchase of a van that will deliver healthy meals in the community);
• Encouraging collective impact by focusing MCO investments on specific priorities which may open a door for non-governmental partners (e.g., state philanthropies) to fund similar initiatives; and/or
• Building cross-governmental relationships (e.g., State Medicaid agencies collaborating with State Housing agencies on housing initiatives).

To date, many states have used community reinvestment to fund “upstream” strategies that address social drivers of health, an area with potential for high impact on health outcomes.

Determining What Funding Can Support: When states set guardrails for what community reinvestment funding can support, they must determine how narrowly to set these parameters, balancing flexibility with consistency in how funds are spent. Flexibility can allow MCOs to innovate and be responsive to the unique needs of the local communities they are serving, while consistency can increase opportunities for MCOs to “pool” funds, increasing the collective impact of reinvestments toward broader statewide needs.

States also determine whether and how to encourage funds be spent equitably across the state. This could include mandating that MCOs reinvest in each region(s) they serve or apportioning funding by region. Regional considerations can ensure funding reaches individuals in all parts of the state but also reduce flexibility and possibly the amount of funding available for larger initiatives.

The Importance of Timing: Timing considerations drive how quickly communities receive funds. Timing questions states must answer when designing a community reinvestment requirement include, but are not limited to, the length of time MCOs must reinvest, when that reinvestment period begins, and when key reports will be due. States can align existing financial reporting and implementation of community reinvestment to increase consistency across state programs.

The Need for Collaboration: Collaboration across partners is critical to create buy in for community reinvestment. This includes considering how different partners—the state, payers and community members—are engaged in the development and implementation of community reinvestment requirements.

In developing a community reinvestment requirement, states foster engagement opportunities with partners around the issues described above. States can also encourage or require collaboration, including encouraging MCOs to work with communities to determine how funds are spent or requiring MCOs across a state or region work together to invest.

Call to Action

Community reinvestment requirements are growing in use across Medicaid programs and represent an opportunity for partners in a state to collaborate on and advance shared priorities that are known to advance community health.