Clamping the soaring Medicaid IT costs

Over 68 million Americans are enrolled in the Medicaid program, and the cost to support the program is on the rise, a trend which is expected to continue through 2025. In 2015, government spending on Medicaid grew 9.7% to $545 billion, roughly 17% of the total National Health Expenditure (NHE). In addition to the expensive healthcare costs, federal and state governments are expected to spend more to upgrade their Medicaid IT systems, some of which are decades old and costly to maintain 13. In this article, we discuss how states can generate savings by deploying and sharing cloud based Medicaid IT systems.

In 2014, the Centers for Medicare & Medicaid Services (CMS) asked each state to analyze their current Medical Management Information System (MMIS) “as-is” state and future “to-be” state. As a result of this exercise, states found most of their systems were outdated, and maintaining these systems was cost ineffective. A MMIS may cost up to $200 million and take years to build with no guarantee that it will perform as stated. So, upgrading these systems will be costly for states despite the enhanced funding CMS is offering to modernize state Medicaid IT systems, which covers 90% of the expenditures. In the Medicaid Information Technology Architecture (MITA) 3.0, CMS laid out new technology, information, and process procurement guidelines and requirements. One of the key technical requirements is that the states must implement “modular” IT systems which would give them the flexibility to swap systems or vendors when needed.

There are multiple ways to reduce the costs associated with the design, development, and implementation (DDI) and ongoing operation and maintenance (O&M) of MMIS systems. One possible avenue to achieve savings would be through collaboration with other states. States can share their current MMIS modules with other states and bring down the cost and time associated with setting up, maintaining, and modifying/swapping the MMIS systems.

The traditional way to implement a new system is to purchase the system, host the system at a location, and contract vendor(s) for the maintenance. These costs can rack up quickly for smaller and larger states alike. Also, if there is a newer offering in the market, a state would have to spend for these upgrades/replacements. Most states use this mechanism.

Using a reusable and reconfigurable modular system hosted on the cloud can have three key benefits:

1. States can share the entire MMIS or just some components of the overall system with other states. For example, the eligibility verification system can be shared between two states with some changes in the underlying rules to verify eligibility based on state laws.

2. Cloud infrastructure is scalable. If a state wants to share a system, they can share it without worrying about the system’s ability to host more records and amend those when needed.

3. Technology research and advisory firm Gartner predicts that through 2020, public infrastructure as a service (IaaS) will suffer 60% fewer security issues than the servers hosted on the premise, predicting that publicly hosted cloud is more secure than traditional on-premise hosting.

There are some states that have experimented with sharing Medicaid IT systems with reasonable success. Two examples are Illinois and Michigan, and Arizona and Hawaii. Below, we look at the Michigan and Illinois’ Michigan Program Alliance for Core Technology (IMPACT) partnership. The original cloud MMIS system was implemented by Michigan, and Illinois joined Michigan later to form the IMPACT partnership. As a result of this partnership, Illinois stands to save $10 million upfront and $57 million over the next five years in operation and maintenance costs, and the federal government stands to save about $76 million upfront and $196 million over the course of the next five years. The savings will be across three dimensions: across: planning; DDI / system integration (SI); and infrastructure.

Therefore, by moving to a cloud hosted shared system, there is room for both federal and state governments to save costs, collaborate with other states, and reduce the deployment times of these complex systems.

Sources:

1. http://www.kff.org/medicaid/state-indicator/growth-in-medicaid-spending/?currentTimeframe=0&sortModel=%7B%22colId%22:%22FY%202010-2014%22,%22sort%22:%22asc%22%7D

2. https://www.cms.gov/research-statistics-data-and-systems/statistics-trends-and-reports/nationalhealthexpenddata/nationalhealthaccountshistorical.html

3. http://images.more.deltek.com/Web/DeltekInc/%7Be1ff64b8-1e11-4d92-a5bf-f029569fc7e5%7D_Whitepaper-State-IT-Budget-April-2015.pdf?elqTrackId=340ea22947624e5695313180540f175a&elqaid=5961&elqat=2

4. https://www.illinois.gov/hfs/SiteCollectionDocuments/GTMagNov2013.pdf

5. http://forthegoodofillinois.org/wp-content/uploads/Impact-Federal-Partner-Overview.pdf

6. http://www.govtech.com/health/Arkansas-Signs-190-Million-Deal-for-New-MMIS.html

7. https://healthpayerintelligence.com/news/120-million-settlement-ends-medical-claims-processing-failure

8. https://www.medicaid.gov/medicaid/data-and-systems/mita/mita-30/index.html

9. https://www.cms.gov/research-statistics-data-and-systems/statistics-trends-and-reports/nationalhealthexpenddata/nhe-fact-sheet.html

10. http://investigations.blog.ajc.com/2016/01/26/insurer-that-runs-georgia-health-plan-lost-hard-drives-with-data-on-950000-individuals/

11. http://forthegoodofillinois.org/wp-content/uploads/Impact-Federal-Partner-Overview.pdf

12. https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/Downloads/proj2016.pdf

13. http://www.govtech.com/health/States-Look-to-Modernize-Aging-Medicaid-IT-Systems.html

14. https://www.datapipe.com/blog/2017/01/09/gartner-cloud-computing-in-2017/

15. http://www.gartner.com/smarterwithgartner/is-the-cloud-secure/