Turning Medicaid Beneficiaries Into Purchasers of Health Care: Critical Success Factors for Medicaid Consumer-Directed Health Purchasing

A number of states are considering Medicaid consumer-directed health purchasing initiatives. Interest in these initiatives was originally sparked when health savings accounts were authorized as part of the Medicare Modernization Act of 2003.

Two primary models are emerging. In the direct services model, the state funds a health spending account for each Medicaid beneficiary, ranging from "rewards" for pursuit of healthy behaviors to more comprehensive accounts intended for direct purchasing decisions by beneficiaries such as the payment of deductibles, copayments, and/or the purchase of health services.

Medicaid reforms being implemented in Florida, Kentucky, and West Virginia include spending accounts to reward healthy behaviors. To date, no state has implemented the more comprehensive direct services model.

Key recommendations include:

• Protect access to care through risk adjustment, carve-outs for unpredictable care populations (such as disabled people), protect beneficiary purchasing power, cost sharing, and use of account funds for preventative treatments
   
• Anticipate effects on the behavior of insurers, providers, and employers
   
• Reformulate the roles of state agencies by engaging the state insurance superintendent, the Medicaid agency, and the state budget agency
   
• Develop new risk management approaches