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[MM Curator Summary]: Some decent arguments on why the tech money guys should place more bets in Caid.
Clipped from: https://www.beckerspayer.com/leadership/why-medicaid-is-ripe-for-innovation.html
Medicaid startups receive significantly less outside investment compared to Medicare Advantage organizations, but there’s still key opportunities to innovate under the program and serve enrollees in new ways.
According to a Feb. 27 article in Health Affairs, the top 10 MA-focused startups have raised more than $20 billion combined in venture funding, compared to $1.5 billion for the top 10 Medicaid-focused startups. But in 2021, CMS spent $734 billion on Medicaid, compared to $427 billion on MA in 2022.
“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,” the authors wrote. “COVID-19 has removed cultural and regulatory barriers to technological adoption, and increased interest by private investors.”
According to the authors, Medicaid has noticeably less outside investment compared to MA because the program is different in each state and caring for beneficiaries can be more challenging.
Still, they wrote that four key opportunities exist for Medicaid startups to better serve members in the future: improve thin margins by utilizing new software and technology solutions, address social determinants of health to improve care quality, focus on health equity as an opportunity for cost savings, and move to align payments with improved care outcomes.
“So much of Medicare innovation has been about revenue optimization,” Rajaie Batniji, MD, PhD, co-founder and CEO at Waymark, told Becker’s. “In Medicaid, there’s no revenue optimization game to be played. What you need to do is actually improve care delivery.”
San Francisco-based Waymark is eighth on the list of Medicaid startups that have raised the most outside capital — the company closed on a $45 million financing round in January 2022.
Launched in 2021, Waymark manages a network of community health workers, pharmacists, behavioral health therapists and coordinators in clinics to manage care between Medicaid patients and primary care providers. Starting this year, the company has partnered with Aetna’s managed care plan in Virginia to provide community-based care services in the Richmond and Tidewater areas.
“There’s a lot more stability and a lot more opportunity in Medicaid because of the fact that you’re actually forced to focus on truly improving outcomes rather than improving risk scores,” Dr. Batniji said, referring to recent MA risk adjustment changes from CMS.
Dr. Batniji shared that while there are many different Medicaid programs across the country, there are also many commonalities that allow beneficiaries to receive community-based care.
He believes investors have stepped away from Medicaid largely for two reasons: lower margins compared to MA, and because Medicaid enrollees spend less time enrolled in the program compared to MA members on average, meaning desired outcomes need to be achieved more quickly. But Dr. Batniji also points out that there’s significantly more Medicaid members out there, suggesting that a lot more opportunity exists — if the right care model does.
CMS reported 81 million Medicaid members in 2022, compared to about 31 million MA members as of February 2023.
“There’s a huge opportunity to bring proven interventions around community-based care in partnership with local providers that health plans are already working with to improve outcomes and to meet the goals and objectives of patients, providers and state regulators in one maneuver,” Dr. Batniji said.