The Role of Medicaid in Addressing Social Drivers of Health: MCO Community Investment Requirements

Health Highlights

Overview

Increasingly, states are using their Medicaid managed care (MMC) contracts to define the role Medicaid and Medicaid managed care plans can play in addressing unmet social needs and promote a “whole person” approach to care. A few leading states are leveraging contracts with Medicaid managed care organizations (MCOs) to require health plan investment into the community being served. This article describes the context for these requirements and sample approaches for state Medicaid agencies to integrate community investment strategies into MMC contracts.

Community Investments Are Critical Now, More Than Ever

There is a growing recognition that socioeconomic factors significantly affect health outcomes—research suggests that 80 percent of an individual’s health outcomes are attributable to nonmedical factors.1 Often referred to as “drivers of health,” these factors refer to “the structural conditions in which people are born, grow, live, work and age” that have profound implications for an individual’s overall well-being.2 Recognition of this reality is fueling new community investments and change in health care delivery systems.

The COVID-19 crisis has cast a sharp light on the extent to which addressing the drivers of health is integral to ensuring the health of vulnerable individuals and communities. Those hardest hit by the pandemic are low-income communities and communities of color that not only have experienced higher rates of infection, hospitalization and death, but also have been disproportionately impacted by downstream job loss and socioeconomic instability.3, 4 The pandemic has underscored just how critical the linkages between economic and social services and health care are to the well-being of both individuals and their communities. The Biden Administration has issued dozens of Executive Orders on strengthening Medicaid and the Affordable Care Act (ACA) and advancing “whole person care,” making now an opportune time for states to evaluate opportunities to integrate these approaches into their Medicaid programs.

Medicaid Managed Care Provides a Strong Foundation for Community Investment

Medicaid, which currently provides health coverage for one in seven adults and two in five children nationwide, is the largest payer for health care for low-income populations.5 States are increasingly seeking to integrate strategies to address health-related social needs into their care delivery models, including by integrating requirements into contracts with MCOs that address social drivers of health. As evidenced by Manatt’s recent report and corresponding 50-state survey titled “In Pursuit of Whole Person Health: A Review of Social Determinants of Health (SDOH) Initiatives in Medicaid Managed Care Contracts and 1115 Waivers,” a few leading states are requiring MCOs to reinvest a portion of their revenues or income back into the community being served. Since the October 2020 release of Manatt’s SDOH survey, community investment requirements have started to proliferate and are one way that states are pushing MCOs to tailor their interventions to state-specific and community-defined priorities.

Examples of States Requiring MCO Investment

The following states have directed or encouraged MCOs to reinvest a portion of revenue or profits into the communities they are serving:

  • Arizona requires MCOs to invest a share of profits in community-based services. Specifically, Arizona requires its MMC plans to spend six percent of annual profits on “community reinvestment activities” and to regularly obtain community input on local and regional needs prior to undertaking these activities.
  • Nevada includes community reinvestment requirements in its recently released request for proposal (RFP) to re-procure MCOs. In particular, the state is requiring MCOs to invest three percent of pretax profits into the community being served. MCOs are required to submit a plan to the state detailing the anticipated community reinvestment activities.
  • North Carolina encourages health plan reinvestment into the community being served, by allowing plans that fail to meet the enforceable medical loss ratio (MLR) standard to take some or all of the money they otherwise would need to return to the state as a rebate and, instead, invest it in activities to address social drivers of health. Health plans that proactively reinvest in the community served may be rewarded with an one percent bump in their auto-assignment algorithm.
  • Oregon requires its Coordinated Care Organizations (CCOs) to reinvest a portion of the plan’s previous year’s net income through Oregon’s SDOH and Equity spending program (known as the “Supporting Health for All through Reinvestment (SHARE) Initiative”) back into local communities (i.e., reducing health disparities, addressing homelessness, providing parenting classes).
  • Tennessee requires as part of the state’s recently released MCO re-procurement RFP that MCOs commit to a level of community reinvestment spending as part of their application response. Upon award, this level of spending becomes the MCO’s minimum community investment requirement annually thereafter. In addition, RFP respondents will be scored on their level of community investment commitment. 

Conclusion

States are in a unique position to promote a “whole person” approach to health that embraces the full continuum of care across physical health, behavioral health and health-related social and economic needs through MCO contracts. Some states are leading the way by requiring or encouraging their MCOs to invest in local, community-defined “drivers of health priorities.” These types of requirements are likely to continue to proliferate—especially as more beneficiaries confront COVID-19-related economic instability and as the evidence documenting the impacts of these investments grows.


1 S. Artiga and E. Hinton. Beyond Health Care: The Role of Social Determinants in Promoting Health and Health Equity. Kaiser Family Foundation. May 10, 2018. Available here.

2 M. Marmot et al. Closing the Gap in a Generation: Health Equity through Action on the Social Determinants of Health. The Lancet. 372, no. 9650. November 8, 2008. Available here.

3 Human Rights Watch. US: Address Impact on COVID-19 on Poor: Virus Outbreak Highlights Structural Inequities. March 19, 2020. Available here.

4 Centers for Disease Control & Prevention (CDC). COVID-19 Hospitalization and Death by Race/Ethnicity. CDC Control Cases, Data & Surveillance. September 9, 2021. Available here.

5 Kaiser Family Foundation. Fact Sheet: Medicaid in the United States. October 2019. Available here.

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