Paying for medical and social complexity in Massachusetts Medicaid

IMPORTANCE: The first MassHealth Social Determinants of Health payment model boosted payments for groups with unstable housing and those living in socioeconomically stressed neighborhoods. Improvements were designed to address previously mispriced subgroups and promote equitable payments to MassHealth accountable care organizations (ACOs). OBJECTIVE: To develop a model that ensures payments largely follow observed costs for members with complex health and/or social risks. DESIGN, SETTING, AND PARTICIPANTS: This cross sectional study used administrative data for members of the Massachusetts Medicaid program MassHealth in 2016 or 2017. Participants included members who were eligible for MassHealth's managed care, aged 0 to 64 years, and enrolled for at least 183 days in 2017. A new total cost of care model was developed and its performance compared with 2 earlier models. All models were fit to 2017 data (most recent available) and validated on 2016 data. Analyses were begun in February 2019 and completed in January 2023. EXPOSURES: Model 1 used age-sex categories, a diagnosis-based morbidity relative risk score (RRS), disability, serious mental illness, substance use disorder, housing problems, and neighborhood stress. Model 2 added an interaction for unstable housing with RRS. Model 3 added rurality and updated diagnosis-based RRS, medication-based RRS, and interactions between sociodemographic characteristics and morbidity. MAIN OUTCOME AND MEASURES: Total 2017 annual cost was modeled and overall model performance (R2) and fair pricing of subgroups evaluated using observed-to-expected (O:E) ratios. RESULTS: Among 1 323 424 members, mean (SD) age was 26.4 (17.9) years, 53.4% were female (46.6% male), and mean (SD) 2017 cost was $5862 ($15 417). The R2 for models 1, 2, and 3 was 52.1%, 51.5%, and 60.3%, respectively. Earlier models overestimated costs for members without behavioral health conditions (O:E ratios 0.94 and 0.93 for models 1 and 2, respectively) and underestimated costs for those with behavioral health conditions (O:E ratio >1.10); model 3 O:E ratios were near 1.00. Model 3 was better calibrated for members with housing problems, those with children, and those with high morbidity scores. It reduced underpayments to ACOs whose members had high medical and social complexity. Absolute and relative model performance were similar in 2016 data. CONCLUSIONS AND RELEVANCE: In this cross-sectional study of data from Massachusetts Medicaid, careful modeling of social and medical risk improved model performance and mitigated underpayments to safety-net systems.