States are Cultivating a Medicaid Marketplace Where MCOs Must Prove Their Worth

A growing 69% of Medicaid beneficiaries are enrolled in comprehensive managed care plans nationally. With national, regional, and provider-sponsored health plans aggressively vying for shares of states’ Medicaid programs, state Medicaid procurement cycles have increased in length, scope, and competitiveness—making it more important than ever for health plans to not only have a future-focused strategy, but to be deliberate in implementation and maintenance for these programs.

States are designing requests for proposals (RFPs) that require health plans to demonstrate they can offer more than the standard “blocking and tackling” capabilities to best serve Medicaid members. In an increasingly competitive marketplace, where six firms account for more than half of all managed care organization (MCO) enrollment, providing data-driven evidence that speaks to MCO program effectiveness will be essential as organizations seek to win future Medicaid bids.

Funding and Requirements for Medicaid MCOs are Increasing

States are expanding their requirements to manage the full “360 degrees” of covered memberships, and consequently MCOs need to constantly evaluate and innovate service offerings and operating models to remain compliant. As competition for covered lives intensifies, Medicaid MCOs must ensure they are positioned to implement and demonstrate success when responding to RFPs addressing both core competencies (e.g., member services, provider network, and population health) and more innovative capabilities (e.g., social determinants of health, health equity, and payer/provider partnerships).

Specifically, a Guidehouse analysis identified trends that MCOs will need to consider as they think about investment dollars to remain competitive during upcoming procurement processes. Notably, innovative capabilities received higher priority in recent Medicaid RFPs, including health equity, population health, social determinants of health (SDoH), and value- and risk-based payments.

This analysis can help MCOs determine where to invest resources to align with Medicaid procurement trends, as well as where additional support is required to modernize and improve existing functions. By strategizing in advance of future RFPs, MCOs can demonstrate program success and differentiate their approach among competitors.

Member Services and Population Health are the Biggest Areas of Focus

Guidehouse evaluated the scoring methodologies of common RFP response categories across 13 states and the District of Columbia in CY 2021: California, DC, Delaware, Hawaii, Indiana, Louisiana, Minnesota, Missouri, North Dakota, Nebraska, Nevada, Ohio, Oklahoma, and Texas. These states cover nearly 23.5 million Medicaid members and spend over $110 billion on Medicaid managed care each year.

To compare among states, Guidehouse evaluated the total point allocation as defined by the individual state’s scoring guide and weight allocation across common RFP response categories to determine which categories received the highest priority across different states.

RFP Response Categories

Each state designs RFPs with various categories, questions, and scoring methodologies. To most accurately analyze how each state prioritizes health plan capabilities, Guidehouse identified a common set of RFP sections that allow for consistent evaluation across time and state-specific RFPs, including: Behavioral Health, Behavioral Health/Physical Health (BH/PH) Integration, Care Management, Claims/Encounter Data, Community Engagement, Financial Management, Information Systems, Long-Term Services and Supports (LTSS), Member Services, Population Health, Prenatal/Maternity, Price, Program Integrity, Provider Network, Provider Services, Quality Management, Reporting SDoH and Health Equity, Special Healthcare Needs, Staffing, Utilization Management, and Value-Based Care (VBC) and Alternative Payment Models (APMs).

Member services and population health were weighted the heaviest. These categories, where MCOs often describe “blocking and tackling” functions in RFP responses, can benefit from differentiated or innovative capabilities beyond common RFP response language. MCOs need a wealth of demonstrable experience to stand out from the competition in these areas.

States Want Proof of Past Performance and Improved Results

States are now often requiring empirical evidence of past performance and outcome improvement, especially now that they are on their second or third Medicaid managed care procurement cycle. This additional required data also creates more objective scoring for state evaluators, as they analyze metrics such as: HEDIS®, complaints/appeals, provider/member satisfaction, and care management outreach rates, among others. Health plans need the people, processes, and technology in place to support accurate and continuous monitoring and act upon these types of metrics to effectively compete in both new and existing markets.

Additionally, states have prioritized the evaluation of capabilities proving that members are receiving the right care, at the right time, in the right setting, and at the correct rate. This is evidenced by the increased focus on program integrity, behavioral and physical health integration, and VBC/APM implementation (average point total comprising 12%-13% of the total score). In fact, 29 states require MCOs to implement value-based payment (VBP) models with providers, according to another Guidehouse analysis.

In doing so, several states have specifically included innovation as a desired priority for health plans (e.g., Delaware and Mississippi), pointing out a need for organizations to consistently invest in strategy, implementation, and management of new programs.

There may also be an increased emphasis on health plan responses explaining capabilities related to population health, SDoH, health equity, and VBC/APM integration, given the health inequalities exacerbated by the COVID-19 pandemic. For example:

• Louisiana and Ohio required specific health equity administrator roles in their recent RFPs
• States are more interested in incorporating VBC/APM models as a vehicle to incentivize improvements in quality of care for members
• Some states have included requirements for health plans to have a community reinvestment program to help advance health equity and outcomes (e.g., California and Ohio)
• Medicaid MCO RFP procurement is more competitive than ever

States are designing RFPs that require health plans to demonstrate they can offer more innovative capabilities to best serve Medicaid members—revealing clear implications for MCOs. This means that before MCOs seek an RFP, they must identify where to invest and ensure investments can be successfully implemented and reported. To do so, MCOs should focus on three key areas.

1. Bolster approaches to core competency operations, including empirical evidence and innovative strategies with successful results.

States desire innovative approaches and the corresponding empirical evidence demonstrating success from other markets, related to standard core capabilities, such as member services, provider network, quality management, and population health. MCOs need to deliver evidence around how they can improve outcomes, reduce administrative burden, and further advance each state’s individual goals for their Medicaid managed care program. Centralized data collection and analysis services that can readily inform business development efforts can greatly improve an MCO’s ability to effectively respond to increasing RFP demands.

2. Integrate SDoH and health equity initiatives into core business operations.

While MCOs can often speak to their overall commitment to advancing these efforts, states are emphasizing the need for a robust approach to address health equity and the improvement of SDoH. For example, the RFPs for DC and Minnesota each weighted their SDoH initiatives with over 25% of the total RFP score. Although health plans are expected to address SDoH improvement initiatives, those that can demonstrate successful implementation through empirical evidence from other markets will be better positioned to have effective responses.

3. Invest in strategic planning, implementation, and management of initiatives that differentiate and drive change for prospective state clients.

States have begun to require specific responses related to more innovative capabilities, such as VBP/APMs and the integration of physical and behavioral health. MCOs should consider how to use these more innovative capability requirements to drive change in core competencies, such as improving provider network development and physical/behavioral health integration via VBP models to advance quality management and performance metrics. Additionally, MCOs must consider their timelines with an eye toward prioritizing investments in new programs in advance of key RFP procurement cycles, so that meaningful data can be woven into the response, helping organizations differentiate in an increasingly crowded marketplace.

Data-Driven Results and Innovation are Key to Future MCO Success

MCOs need to intentionally identify capabilities that address state priorities and serve as a differentiator among competitors, all while improving the quality of care and health outcomes for the member. As the number of health plans competing for open Medicaid contracts grows, as well as the total membership and dollars available to these plans, MCOs are required to offer a differentiated, highly proficient service to both new markets and those they currently serve. The ability to demonstrate pre- and post-award service planning through a robust RFP response is critical.

Guidehouse helps payers, providers, and states initiate strategies for Medicaid MCO success.

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Co-authored by Brinda Gupta, Baxter DeBruyn, Christina Koster, Nicholas Lincoln