Community-based Accountable Care Organizations to improve health outcomes for the Illinois Medicaid program

The Medicaid program was primarily designed to assist social welfare populations in receiving needed health care, but it has increasingly faced challenges that render its services costly and often ineffective. Low-income and disabled Medicaid enrollees in Illinois face systemic issues in access to health care, in part due to low and often delayed provider payment rates. As the passage of the Patient Protection and Affordable Care Act (PPACA) prevents states from reducing Medicaid eligibility, managing costs for programs involves reducing provider payment rates or changing benefits for enrollees. PPACA expands coverage to an estimated additional 500 thousand Illinois Medicaid enrollees and will add an estimated $2 billion of revenue to the Illinois budget from federal funds. However, current evidence does not necessarily suggest that increased Medicaid funding will result in improved health outcomes. Some argue that the current fee-for-service payment model for Medicaid-- in which providers are paid for the number of services they provide and not improved outcomes-- incentivizes providers to increase utilization (regardless of effectiveness) to enhance their income, while contributing to inefficiency in Medicaid spending. Current provider payment reform efforts involve establishing accountable care organizations (ACOs) to reimburse providers for the measured quality of care, not the number of services they provide. Although various bundled payment mechanisms are being promoted, further research is needed to evaluate whether community-based ACOs will be cost-effective and provide better health outcomes for new Illinois Medicaid enrollees. This paper explores issues expected to be faced in Illinois as the PPACA implementation proceeds.