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States Look to Modernize Aging Medicaid IT Systems

Most have avoided upgrading the systems that run our biggest health-care program themselves. But some are looking to outsource.

The technology upon which most states run their Medicaid programs is old, clunky and slow. To make matters worse, the expansion of Medicaid in a number of states under the Affordable Care Act has only put more pressure on these aging systems. Now nearly a quarter of states are looking to modernize them, according to the Centers for Medicare and Medicaid Services. But officials aren’t eager to risk a lot of money on another system that will be old, clunky and slow by the time it’s completed.

For decades, states have built their Medicaid Management Information Systems (MMIS) all at once -- and that makes sense. After all, a single, tightly integrated computer system seems like it would be the best way to run one of state government’s biggest and most complex programs. This big-bang approach, however, has a couple of serious flaws.

First and foremost, it’s extremely expensive. No matter the population of a state, it can cost anywhere from $75 million to $100 million to build a MMIS. Part of the huge price tag stems from the highly customized way in which each state designs these systems to conform to its specific business rules. They are also expensive to maintain and modify. Second, it takes a long time -- from three to seven years -- to build a MMIS.

One reason for the lengthy time frame is delays, which are often triggered by changes in the business rules and by new policies. Not surprisingly, states have been loath to overhaul their MMIS, with the result that many are now decades old. California, North Dakota, Oregon and Wyoming, for instance, built their systems before the age of the Internet.

So naturally, states are looking for a better way to create and manage these behemoth projects. One solution that’s been floated -- and which could impact how governments handle technology for other big ventures -- is to break MMIS into pieces and turn some of those pieces into a service. In April, the Centers for Medicare and Medicaid Services proposed updating the polices that govern the certification process for building a MMIS, and thus making it easier to develop separate modules for, say, claims management or pharmacy benefits, instead of building the entire system at once. The federal agency is also revising its development requirements so that states will find it easier -- and less risky -- to adopt alternatives, such as contracting for a service.

Wyoming is one state that’s eager to try something new. With just 90,000 enrollees, it has one of the smallest Medicaid programs in the country. Yet Wyoming would have to spend the same amount for a new MMIS as a much bigger state with an enrollment population many times Wyoming’s size.

That’s because the current system is 30 years old; furthermore, the state doesn’t have the staff and resources to build another system from scratch. “We’re frustrated with the traditional approach,” says Teri Green, the state’s director of Medicaid Services. “The costs are out of control.”

Instead, the state hopes to purchase services rather than the hardware, software and tech support needed to maintain the complicated system. It’s a radical shift in thinking, but one that Green feels is both necessary and cost-effective in the long term. This approach would also allow the state’s Medicaid program to leverage current technologies right away, rather than having to wait the years it takes to build a traditional MMIS. Green adds that there are several vendors that can offer the services Wyoming is looking for, so “we won’t be held hostage by one vendor.”

But to change the current approach from buying Medicaid technology to buying Medicaid as a service isn’t going to be quick or easy. While states are frustrated with the current system, many are unsure about adopting a new approach, especially if there is any uncertainty about federal reimbursement. The Centers for Medicare and Medicaid Services have proposed updating the certification process for building MMIS, but it’s still a work in progress. Meanwhile, there are more vendors today that say they can provide modular services, but “when you look at the details of what they are offering, it still looks like a traditional, vertically integrated system,” says Nicole McNeal, a management consultant with the firm Public Knowledge.

If vendors have to adapt, though, so do states. In order for things to be done more simply and cheaply, state Medicaid rules will have to become less convoluted. “Otherwise,” says McNeal, “they will be caught in the same complex, expensive and lengthy planning and implementation process that has ruled MMIS in the past.”

This article was originally published on Governing.

With more than 20 years of experience covering state and local government, Tod previously was the editor of Public CIO, e.Republic’s award-winning publication for information technology executives in the public sector. He is now a senior editor for Government Technology and a columnist at Governing magazine.