Manatt on Medicaid: Are Health Homes Here to Stay?

Authors: Deborah Bachrach, Partner, Healthcare Industry, Manatt, Phelps & Phillips, LLP | Dori Glanz,Senior Analyst, Manatt Health Solutions | Andy Detty, Senior Analyst, Manatt Health Solutions

Launched amid a flurry of activity in late 2010, the Affordable Care Act’s (ACA’s) Medicaid health home program was quickly adopted by several states. To spur adoption of this coordinated care model, the ACA provided a 90% federal financing match for health home services in the first two years of implementation, and CMS released a state plan amendment template, a dedicated website, and guidance to assist interested states. By January 2014, nearly two and a half years after the first Medicaid health home was approved in Missouri, 15 states had taken advantage of these resources and implemented health homes, and more than 1 million individuals were enrolled.¹

Now, early adopter states are nearing the end of the enhanced match period, and analyses on health home results are beginning to emerge—raising the question of whether health homes will continue to grow and mature as components of state Medicaid reform efforts.

Background on Medicaid Health Homes

The ACA created a Medicaid state plan option allowing states to cover coordinated care provided through “health homes” to enrollees with chronic conditions or serious mental illness. Health homes bring together a team of professionals to provide coordinated and person-centered care to Medicaid enrollees with complex conditions, with the goal of improving outcomes and lowering costs.

States have taken a variety of approaches to health homes, implementing them through a range of providers and social service agencies. Missouri, for example, relies primarily on federally qualified health centers (FQHCs) and rural health clinics to operate “primary care health homes” for those with chronic conditions. Community mental health centers act as health homes for those with serious mental illnesses. New York, on the other hand, contracts with broad provider networks and has no restrictions on the types of Medicaid providers that can deliver health home services. New York has also leveraged the capabilities of its existing targeted case management (TCM) providers by converting them into health home providers for individuals with behavioral health conditions or HIV/AIDS. In New York, as in most states, individuals select or are assigned to health homes which are then reimbursed a per member per month fee for each patient.

One implementation issue that faces states is how best to integrate health homes into patient centered medical homes (PCMHs) and managed care organizations, which likewise have a level of responsibility for patient care coordination. Preventing duplication of effort and ensuring these care management systems are complementary and seamless for patients require a clear delineation of responsibility. Efforts to define these relationships remain a work in progress.

The Future of Health Homes

As the early implementer states reach the end of their two-year period of enhanced federal funding, they are evaluating whether their health homes are sustainable platforms for Medicaid care coordination. In particular, states are assessing the role of health homes in emerging patient-centered payment and delivery models, where providers are accountable for patient outcomes and cost. Several factors suggest that health homes are here to stay.

For one, health homes are an attractive care coordination option for high need Medicaid populations that have generally been excluded from state managed care programs and instead receive fee-for-service Medicaid with limited care coordination. Health homes offer a care coordination vehicle that can work within and enhance a fee-for-service system.

Second, early data suggest that the program is accomplishing its objectives of better outcomes and lower costs of care. New York has seen increases in primary care visits and decreases in emergency room and inpatient utilization among health home enrollees.² Preliminary analyses in Missouri have likewise found decreases in emergency room visits, ambulatory care-sensitive hospitalizations, and overall Medicaid costs for enrollees.³

Third, enhanced federal funding remains available for many health home programs and services. Even states that have already implemented health home programs are eligible for the enhanced match on a rolling basis if they expand to new geographic regions or add new populations. In addition, in expansion states, the ACA provides an enhanced federal match (100% through 2016 declining to 90% in later years) for services provided to all newly eligible adults. This means that states may enroll eligible medically frail new adults in health homes and receive the ACA enhanced federal funding for health home services provided to these new adults.

Finally, in many states, health homes are integral to broader delivery system efforts. In Arkansas, for example, health homes are a central pillar of the State Health Care Innovation Plan, supplementing the state’s patient-centered medical home initiative and coordinating care for complex Medicaid patients whose needs cannot be met by PCMHs alone. As New York transitions behavioral health services into managed care, health homes will serve as care managers for people with serious behavioral health conditions. They will also provide functional assessments and service planning for individuals in need of home and community-based services. In the long term, New York envisions the new relationships developed among providers in health home networks enabling broader Medicaid reforms, including the development of integrated delivery systems and alternatives to fee-for-service reimbursement.

Conclusion

As anticipated, the enhanced federal funding successfully spurred state implementation of Medicaid health homes. And promising early results from states that initiated health home programs, coupled with ongoing pressures on state Medicaid programs to improve care and reduce costs, suggest that health homes will continue to gain traction as a component of state payment and delivery reform initiatives.