Illinois Medicaid lowered costs with enhanced fee-for-service model

October 6, 2014 | By Dina Overland

As insurers continue the shift toward value-based reimbursement, two Medicaid health plans improved members' health outcomes and lowered costs by combining value-based payments with a fee-for-service approach.

The Illinois Medicaid program, Illinois Health Connect, saved about $237 million over three years by paying participating providers a monthly fee for each patient as well as fee-for-service payments, reported RevCycle Intelligence. IHC, which resembles patient-centered medical homes and accountable care organizations and covers about 1.7 million people, also saw improved utilization patterns and generally better quality.

A separate Medicaid program, called Your Healthcare Plus, saved $518 million and lowered hospitalization rates by 18 percent over four years. The complementary disease management program also decreased avoidable hospitalizations by almost 10 percent.

"The largest savings within all Medicaid programs were due to reductions in inpatient services, which fell by 22.7 percent--30.3 percent compared to projections," according to a report from the Robert Graham Center for Policy Studies in Family Medicine and Primary Care.

Additionally, the report concluded that the enhanced fee-for-service payment model led to more doctors participating in Illinois' Medicaid programs, which meant Medicaid members had greater access to providers. It also found that other forms of blended payment, including capitation and quality rewards, led to lowered inpatient and emergency department costs and utilization.

The report authors noted, however, that it could take at least three years for other states trying to incorporate similar payment methods into their Medicaid program to see the full effects.

Other insurers have seen success with value-based payments as well. The Blue Cross Blue Shield Association's plans, for example, saved $500 million in 2012 alone by incorporating this reimbursement model, as FierceHealthPayer has reported.

To learn more:
- here's the report
- read the RevCycle Intelligence article