Primary Care: Health Homes

Introduction | Evidence of Quality Improvements | Evidence of Savings | Key Considerations | Further Resources | State-by-State Ratings

The Policy

The state implements the State Option to Provide Health Homes for Enrollees with Chronic Conditions (Section 2703 of the Affordable Care Act).


The sickest and most vulnerable Medicaid beneficiaries, representing only 5 percent of Medicaid enrollees, account for 54 percent of Medicaid spending. Of this small group, 80 percent have three or more chronic health conditions. These very complex health needs combined with a very complicated and difficult to navigate U.S. health care system leads to fragmented, costly, uncoordinated care. This often results in unnecessary hospitalizations and institutionalizations. It is this especially vulnerable population that offers the greatest potential for improvements in care and reductions in cost through new methods of service delivery.

Uncoordinated health care in such a vulnerable population makes it even more likely that they will not receive needed medical treatment, will have higher numbers of emergency room visits, will have greater numbers of preventable hospital admissions/readmissions, and/or receive duplicate medical services. A 2009 study of more than 9 million Medicaid patients in five states found that patients with uncoordinated care had average annual health care costs of $15,100 vs. $3,116 for those with better coordinated care.

The Health Home option in the Affordable Care Act provides states with a tool to help improve care coordination among Medicaid's sickest - and most expensive - beneficiaries. By offering enhanced federal dollars to states who take up this option, Health Homes could not only bring in immediate federal resources, but it could help states save money in Medicaid in the medium-run by lowering health care costs of those with multiple conditions.

Specifically, section 2703 of the ACA provides for a 90 percent federal medical assistance percentage (FMAP) rate for eight quarters to reimburse states for implementing the six Health Home services delineated below. To be eligible for these services, Medicaid enrollees must have at least two chronic conditions, one chronic condition and be at risk for another, or one serious and persistent mental health condition. While the structure of Health Homes is not specifically defined by the ACA, they must provide individuals with all of the following:

The ACA requires that Health Homes operate under a "whole-person" philosophy, meaning that they care not just for an individual's physical condition, but also provide linkages to long-term community care services and supports, and family services. States are allowed a great deal of flexibility in designing how services are provided, as long as the above noted six guidelines are met. This allows for states to tailor the Health Home not only to the needs of the larger Medicaid population, but allows for further tailoring to provide greater health benefit at an individual level as well.

Evidence of Quality Improvement

The implementation of the Health Home as defined by the Affordable Care Act is just now beginning, but quality and cost comparisons can be made by looking at medical homes programs that have been implemented in recent years.

Community Care of North Carolina (CCNC), a state-wide medical home program for North Carolina Medicaid recipients, has been in existence since 2001 and its medical home services surpass those defined by the Agency for Healthcare Research and Quality (AHRQ). By creating a strong medical home system for its beneficiaries, it has achieved significant improvement in the quality of health. For example, between 2003 and 2006 CCNC saw a 40 percent reduction in hospitalizations for patients with asthma. CCNC is also in the top 10 percent in the US, compared to commercially managed Medicaid programs, for health care quality measures relating to testing for and control of cholesterol, blood pressure and diabetes Further, potential preventable hospital admissions and readmissions have decreased despite the significant increase in the enrollment of persons with severe chronic illnesses.

A study of 30 distinct medical home programs for children with special health care needs found that a majority, but not all, of the medical home programs showed improvements in care. The programs were found to improve:

Further, the Commonwealth Fund's 2006 Health Care Quality Survey showed that access to a medical home along with insurance can help reduce racial and ethnic disparities and increase preventative screenings.

Evidence of Savings

Thus far, medical home programs have proved difficult to evaluate for various reasons including: formal patient centered medical home (PCMH) evaluation criteria are relatively new and not yet widely implemented, decisions to implement only certain components of a PCMH rather than the full model, a lack of rigorous studies, and in some cases poorly defined evaluation criteria. Not all medical homes have been shown to reduce costs and the cost savings created by the medical home program must be large enough to offset cost increases due to the necessary medical home infrastructure and for those patients who are not high-risk. However, there are a number of significant reductions in cost that have been achieved by medical homes thus far. By 2006 CCNC had achieved an estimated savings of $161 million annually and the largest areas of savings were through decreases in emergency room utilization (23 percent less than projected) and outpatient care (25 percent less than projected). External assessment of CCNC estimated a savings of $984 million in health care costs between fiscal years 2007 and 2010 despite the rising enrollment of populations with complex chronic health conditions.

In addition to potential cost-savings from improved care coordination, the Health Home option offers states the opportunity to draw down enhanced federal funding for services they may already be offering at regular matching rates. Many states already have significant medical home programs in place for their Medicaid enrollees, but do not qualify as Health Homes unless they meet the six specific criteria set forth in the ACA and have a State Plan Amendment (SPA) approved by the Centers for Medicare and Medicaid Services (CMS). By making adjustments to existing medical home programs in order to comply with the requirements set forth in the ACA, existing Medicaid medical home programs can qualify as Health Homes and receive the 90 percent FMAP rate for the Health Home services delineated by the ACA.

Key Considerations

State Investment:

Special Populations: Mental health issues are two to three times more common in patients with chronic health conditions and require special considerations around the cultural competency of mental health providers. Health Homes must successfully integrate the wider community of mental health providers in order to increase the diversity of the mental health workforce involved in the treatment of Health Home enrollees and collaborate with organizations in minority communities to provide further support.

Models of Care:

Reimbursement and Financial Incentives:

Medicaid Managed Care: Currently, more than 50 percent of Medicaid beneficiaries are enrolled in risk-based managed care. While the widely varying structures of Medicaid Managed Care Organizations (MCOs) add further complexity to the implementation of health homes, the health home is an important opportunity for MCOs to redefine their role and confirm their value in an evolving health system. With careful consideration of the advantages and challenges, states with Medicaid managed care can take advantage of the ACA Health Homes option. States must consider which existing elements of the MCO offer building blocks for the health home and also the challenges posed by contracting and reimbursement. The Further Resources section contains specific information on implementing health homes in a risk-based Medicaid managed care system.

Outreach and Enrollment: To increase patient engagement, eligible beneficiaries must be aware of the Health Home services available to them and how to access those services, know which providers are participating, and understand how a Health Home will benefit them. This will require that the state's Medicaid program, providers, and community organizations successfully reach out to and communicate with eligible beneficiaries about Health Homes. Further, providing information to patients about how they can make the most of their medical visits will improve the physician-patient interaction and engagement.

Consumer Engagement in Quality Improvement: Health Homes should make every effort to include patients and families in quality improvement efforts. Ways that this can be accomplished include surveys, focus groups, involvement in governance and/or on patient/family advisory councils or quality improvement teams, as well as participating in the development of educational materials.

Further Resources

Centers for Medicare and Medicaid Services, Letter to State Medicaid Director and State Health Official, SMDL#10-024, ACA#12, November 16, 2010

Community Catalyst, Medicaid Health Homes: A new state option can improve patient care, save money, and capture additional federal dollars

The Commonwealth Fund, States in Action Newsletter - Health Homes for the Chronically Ill: An Opportunity for States

Center for Health Care Strategies, Inc., Implementing Health Homes in a Risk-Based Medicaid Managed Care Delivery System

Community Care of North Carolina Toolkit

State-by-State Ratings

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