Paying for Children’s Health: Building a Healthier Future from the Start 

“If we want to change the trajectory of adults’ health, we have to start with the health of children.” 

Over the past decade, states such as Vermont, Pennsylvania, and Maryland have experimented with innovative value-based payment models to slow cost growth and improve health outcomes. These initiatives have demonstrated progress, but they’ve also revealed limitations. Most have focused on adult populations with chronic conditions, leaving little room to prioritize accountability for improving the long-term trajectory of population health. 

If we want true transformation, the next generation of payment reform must move beyond a focus on managing costs and complications of chronic disease to prevention and investment in optimizing health potential of future generations. To do this, payment innovation initiatives must incentivize primary prevention and health improvement with a focus on investing in children. Prevention cannot be an afterthought. To reverse America’s health decline, payment systems must reward outcomes that matter across the lifespan: better health, lower long-term costs, and opportunity for every child to thrive. 

A Whole-Child Approach to Health 

Focusing on the whole child means looking beyond the doctor’s office. It means seeing each child within the web of relationships and environments that shape their health, including their family, school, neighborhood, and community. 

A new generation of payment models can make this holistic view real. They can: 

• invest to integrate behavioral health into pediatric primary care; 
• incentivize family linkages to early education, home visiting, and enrichment supports; 
• invest in programs and services to support healthy development, not just disease treatment; and 
• reinvest savings in the child health ecosystem, from early childhood education and parenting supports for school and enrichment, to address the root causes of poor health. 

Investing in robust child health ecosystems that support prosocial, developmentally appropriate, enriching, and nurturing environments is essential for improving long-term outcomes. States can be part of this investment through incentivizing prevention and connection to services and thus create a cycle of prevention and pro-health investment that pays dividends for decades. 

Delaware’s Bold Step Forward 

True to its status as the “First State,” in partnership with Nemours Children’s Health, Delaware has launched a first-in-the-nation pediatric global budget model. This Medicaid innovation and payment model is designed to stabilize costs and revenues while focusing on prevention and health outcomes for children enrolled in Medicaid. 

Under this model, Delaware aligns all inpatient, outpatient, and physician Medicaid payments into a single global revenue budget paid substantially through the state’s managed care organizations (MCOs). Instead of rewarding volume, the system rewards results. Under the model, Nemours’ providers and the MCOs are aligned in their shared accountability for keeping children healthy, reducing avoidable hospitalizations, and supporting long-term well-being. 

Initial key quality metrics include: 

• avoidable admissions for asthma and diabetes; 
• preventable emergency department visits; and 
• timely mental health follow-up after hospital discharge. 

These are practical, measurable outcomes that reflect what families value most: accessible, coordinated care that helps children stay well. 

Delaware’s model also adjusts payments for social and medical risk, ensuring that providers caring for children with the greatest challenges have the resources they need to successfully manage patient populations with complex needs. This approach recognizes that addressing social needs, such as food insecurity or housing instability, is fundamental to improving health outcomes. 

Because the model operates under Medicaid’s new managed care rule, Delaware’s innovation could become a blueprint for other states. It demonstrates how states can use their payment authority to create true value-based partnerships with hospitals—aligning financial stability with better population health. 

The Long View: From Pilot to Lifelong Health 

Delaware’s pediatric global budget is approved by the Centers for Medicare and Medicaid Services (CMS) for an initial three-year phase, with plans for expansion in year four and beyond to measure the full impact on children’s health and state health outcomes. Assessing the overall health of a generation of children growing up during implementation of the model into healthier adults will require monitoring for years to come. 

The model’s long-term vision is bold: a health care ecosystem that re-aligns the state, the MCOs, and providers toward fostering wellness and strengthening families to impact generational health. States can use this global budget model for reform their Medicaid program by rewarding early intervention and innovation rather than downstream, fee-for-service treatments. 

But to make this work, state policymakers should consider how to remain grounded in humanity, equity, and outcomes. The model needs to address health needs that are made more challenging by social drivers. For example, policymakers must consider how asthma is made infinitely worse by poor indoor air quality, unabated mold, environmental pollutants, poor ventilation and heating, or food insecurity. Finding aligned population health investments that support social drivers as well fostering health systems transformation is where this model brings collaborative innovation together. Accountability for outcomes can strengthen partnership between communities and health care systems. New opportunities to work with housing partners, food banks, schools and day care centers can more meaningfully improve performance on the model’s metrics. 

State considering such a model will need to consider:  

• incorporating social screening into the payment and quality measures, such as screening for food insecurity, neighborhood level environmental exposures, and mental health;  
• strengthening cross-sector partnerships with MCOs and providers by incentivizing discussions to meaningfully address contributors to conditions like asthma and mental health;  
• setting guardrails to prevent risk selection or the shifting of complex patients across systems; and tying incentives to outcomes to transparency and equitable access to ensure that improvements reach all families, not just those easiest to serve.  

The model will not be without national challenges. HR1/OBBBA put into question the future of hospital global budgets models such as this one and the AHEAD model. We encourage our national partners to ensure these models retain the Medicaid authorities that they need.  

Building a System Worth Trusting 

Delaware’s pilot in paying for children’s health is a powerful reminder that progress starts upstream and can be state-forward and focused. When we invest early and holistically, when we make prevention the expectation, we give every child, every family, and every community a better chance at health. It’s up to states to drive action and accountability. Policy is but one part of this process. Ultimately, generational success requires real partnership, shared values, and a commitment to each other as part of one community. That is the foundation of a stronger, healthier nation.