A trio of physicians, all of them involved either in investment management or public policy, is arguing in an op-ed in the Forefront section of Health Affairs online that the leaders of Medicaid programs nationwide should look at some of the innovations that have taken place in the Medicare Advantage program involving technology developed by startup companies, and apply some of those lessons to Medicaid.
Justin Norden, M.D., a partner at GSR Ventures, and the former CEO of Trustworthy AI; Andrey Ostrovsky, M.D., former chief medical officer of the Medicaid program and managing partner at Social Innovation Ventures; and Nirav R. Shah, M.D., M.P.H., a senior scholar at Stanford University’s Clinical Excellence Research Center, authored the article, “How Startups And Medicaid Can Collaborate To Improve Patient Outcomes,” which was published online on Feb. 27.
The physicians write that, “In the past decade, investors have eagerly embraced startup companies focused on the Medicare Advantage (MA) market, the health insurance program funded by the Centers for Medicare and Medicaid Services (CMS). The top 10 MA startup companies have received more than $20 billion in venture funding. Understandably, the MA market is attractive to entrepreneurs and investors: CMS spent more than $427 billion on the program in 2022, which accounted for 55 percent of total federal Medicare spending. MA enrollment has also doubled in the past decade, and startups have only captured a small fraction of those covered lives, representing a large opportunity to gain market share. At the same time,” they write, “startups focused on Medicaid populations received only a fraction of the venture capital funding of their MA counterparts: The top 10 Medicaid-focused startups attracted only $1.5 billion in investment (exhibit 1). Yet, in 2021, CMS spent $734 billion on Medicaid, nearly twice as much as on MA. The notable disparity of investment and entrepreneurship in Medicaid can be attributed to the added challenges of working with Medicaid. The fact that each state has different Medicaid rules and regulations introduces substantial complexity. Moreover, on average, Medicaid beneficiaries have more comorbid mental health conditions and more burden attributable to social determinants of health (SDOH). Importantly, despite these added challenges, fewer dollars are reimbursed per patient.”
The article’s authors argue that, “While historically innovation in Medicaid has been hindered by low margins, technology has the potential to deliver access and engagement at scale, for a fraction of the cost. MA plans that have both lowered cost and maintained or improved quality tend to use technology to continually assess quality and track outcomes. They also encourage technology use among network providers and members to improve access and ongoing engagement in care.”
Indeed, they argue, “The COVID-19 pandemic greatly expanded telehealth adoption and digital interactions around health within Medicaid populations. Today, Medicaid-focused startups can leverage these new behaviors to engage and educate patients in a more continuous fashion, through such tools as asynchronous telemedicine, Food and Drug Administration-approved digital therapeutics, and home testing around infection and chronic disease management—tools that can change what and where care is delivered and at a lower cost. Plans must be quick to reimburse and promote those solutions that are able to document better care and lower cost.”
The authors argue that Medicare Advantage plans have reduced disparities in healthcare and that innovations in that sphere demonstrate “a big opportunity for culturally competent startups, most likely developed by diverse and representative teams, to deliver quality care and measurable return on investment (ROI).” Further, they note, addressing health equity is one of the chief goals cited by senior officials at the Department of Health and Human Services (HHS) and the Centers for Medicare and Medicaid Services (CMS).
The opportunity they see, then, is thus: “Startups and Medicaid plans must move toward more capitation arrangements and work together to align payment with improved outcomes. Capitation or other value-based arrangements allow startups to deliver quality metrics and measurable ROI through more creative and flexible solutions that can ultimately benefit Medicaid members and reduce cost. For example, instead of maximizing billable patient visits in a fee-for-service model, providers can maximize patient access, experience, and outcomes by using digital health solutions in a value-based payment model.” And in that, they write, “Applying the best lessons learned from MA entrepreneurs has the potential to drive better outcomes at lower cost for Medicaid populations. Medicaid is ripe for innovation, as startups serving Medicaid enrollees have received an order of magnitude less funding than their MA peers, despite almost double the market size. COVID-19 has removed cultural and regulatory barriers to technological adoption, and increased interest by private investors. We are optimistic that technology has the potential to transform and democratize care for Medicaid populations.”
