Policy Strategies for State Medicaid Agencies to Sustain Innovation That Advances Community Health and Well-Being  

Copublished with the Duke-Margolis Center for Health Policy

Policy Points 

• Despite major shifts in the federal policy and funding landscape for Medicaid, there are opportunities for state Medicaid agencies to engage communities and leverage managed care, value-based payment, and other policy levers to drive improvements in health care, health and well-being, and overall costs.  
• State Medicaid agencies can sustain innovation by focusing on (1) advancing whole-person integrated care models and services and (2) strengthening connections to the health care system and increasing access to services.  

Abstract 

Recent federal policy reforms and funding reductions pose significant challenges to state Medicaid programs. These changes will likely disrupt Medicaid agencies’ investments in innovative initiatives — such as efforts to address upstream drivers of health and modernize health information technology — that drive progress toward advancing high-quality, accessible, and cost-effective care. At the same time, Medicaid agencies can continue to preserve and scale promising innovations, with community voices playing an essential role in shaping priorities. This issue brief draws on community-based research conducted in North Carolina to identify policy approaches with potential impacts that align with Medicaid members’ priorities. Based on feedback from Medicaid stakeholders in North Carolina, we highlight two priority areas for advancing community health and well-being through innovation: (1) advancing whole-person, integrated care models and (2) strengthening connections to the health care system and improving access to services. Across these two areas, we outline six policy strategies, showcase leading state examples, and discuss crosscutting considerations for implementation.  

Introduction 

After the passage of House Resolution 1 (H.R. 1) in July 2025, state Medicaid agencies are grappling with substantial federal policy reforms and funding reductions. These changes are expected to have significant impacts on Medicaid programs nationwide, challenging states to quickly adapt and implement new initiatives, such as changes to eligibility criteria and systems and new investments in rural health, all while maintaining progress toward the core goals of ensuring access and quality of care for beneficiaries. 

Medicaid has long served as a catalyst for health policy innovation by testing new approaches to care delivery, financing, and coverage that aim to improve health outcomes while ensuring financial sustainability. While the current environment may strain state Medicaid agencies’ capacity to implement major programmatic changes beyond those required for H.R. 1, innovations designed to drive improvements in health care, health outcomes, and overall costs can still be advanced through existing tools states have in managed care, value-based payment (VBP), and other policy levers. Elevating input from Medicaid beneficiaries and caregivers will be particularly important for guiding priorities in resource-constrained environments.  

North Carolina provides a unique context for exploring these concepts. The state has made significant bipartisan investments in health care transformation, including the transition from Medicaid fee-for-service to managed care, coverage expansions, and investments in whole-person health. In this rapidly evolving environment, leveraging community feedback is essential to determine how best to build on this progress.  

To that end, we conducted community-based research in North Carolina between February and October 2024. We collected feedback from six focus groups with Medicaid members and family caregivers and held semi-structured interviews with leaders from provider organizations, Medicaid health plans, community-based organizations, the state Department of Health and Human Services, and other state Medicaid agencies. We then mapped our qualitative findings to a framework of policy levers, identified priority areas where community feedback aligned with available levers, and researched existing state approaches and evidence. This process identified two priority areas and six policy strategies for states to consider as they work to advance community health and well-being in a dynamic policy environment. 

In this issue brief, we detail these priority areas and policy strategies, highlighting state examples and, where available, evidence of their impacts. While shifts in federal funding and policy will affect the feasibility and implementation of these strategies, states can adapt these approaches to align with their own community feedback, policy priorities, and infrastructure. 

Priority Policy Areas & Policy Strategies 

We engaged North Carolina community members with Medicaid experience to solicit their feedback on the most important factors for ensuring access and quality of care for Medicaid beneficiaries. This process yielded consensus on two priority policy areas: (1) advancing whole-person, integrated care models and services and (2) strengthening connections to the health care system and increasing access to services. Drawing on community feedback and research on state approaches, we identified six innovative strategies that some states are already pursuing in these priority areas. These are summarized in Table 1 and described later in more detail. 

Table 1. Summary of Priority Areas and Policy Strategies for Sustaining Innovation to Advance Community Health and Well-being 

States have a range of policy tools available to implement these policy strategies, including managed care authorities, VBP programs, State Plan Amendments, and Medicaid waivers. In the following text, we highlight leading examples of these initiatives, along with evidence of their effectiveness, where available. In the “Crosscutting Considerations for Implementation” section, we further explore the advantages and challenges associated with these approaches.  

Advancing whole-person, integrated care models and services 

This priority area focuses on integrating health-related services that are either not traditionally part of health care or have been historically siloed or carved out, to better meet patients’ holistic needs. 

Addressing upstream drivers of health  

Many community members shared that they are looking for more support with addressing social conditions that affect health — including access to and affordability of food, housing, and transportation — to meet their community’s health needs and goals. Providers also shared challenges in helping their patients with these needs, which are impacting their health. 

North Carolina has one of the leading national models for addressing upstream drivers of health through its Healthy Opportunities Pilots (Pilots) program, authorized as part of the state’s Section 1115 waiver. The Pilots program has worked to address needs related to food and nutrition, housing, transportation, and interpersonal violence and toxic stress for select Medicaid members. The state developed an innovative fee schedule to define and price 29 services to address these needs. To date, over 1.1 million Pilots services have been delivered, and program evaluations have demonstrated significant cost savings (an average of $85 per beneficiary, per month, inclusive of spending on medical and program services) and broader improvements to the health, infrastructure, and economies of communities across the state.  

It is important to note that as of July 2025, implementation of the Pilots is paused due to ongoing state budget negotiations, but North Carolina Medicaid is working with its partners to continue and build from the program. Other states can learn from the Pilots’ implementation lessons as they consider implementing similar or smaller-scale programs to address upstream drivers of health and drive cost savings.  

Expanding whole-person care management and coordination 

Community members described how understanding and navigating Medicaid and different parts of the health care system — like primary care, specialty care, behavioral health, and social care — can be overwhelming and challenging. Members desired more support with finding, accessing, and coordinating the services and resources members need for themselves and their families. Many community members expressed that they would benefit from a one-stop-shop model of care management, to help coordinate across health and social care. 

California is one state that is working to meet these needs through its Medicaid transformation efforts. Launched in 2022, a statewide Enhanced Care Management (ECM) benefit provides access to a single lead care manager for eligible members with complex medical and social needs. Through ECM, members receive comprehensive care management services and support with coordination across health and health-related services through one primary point of contact. The state also provides incentive payments to managed care plans, for building infrastructure and provider capacity for ECM. So far, over 325,000 unique members have received ECM. The state hosts regular listening sessions with providers and community members to obtain their feedback on implementation, and it released an initial Action Plan detailing opportunities for continuous improvement. 

Community care hubs offer another promising model for whole-person care coordination, acting as a centralized entity to help coordinate across health care, government, and community-based services. These models, which continue to receive federal funding, are continuing to grow across states and could be valuable partners for state Medicaid agencies in their efforts to advance whole-person care.  

Advancing behavioral health integration 

Community members expressed a need for more support with managing behavioral health needs for themselves and their family members, without introducing additional complexity that can be associated with navigating different parts of the health care system.  

Massachusetts is one state working to address this need through a primary care VBP initiative. Launched in 2023, the Medicaid program’s primary care sub-capitation program works to support primary care providers in promoting team-based, integrated care models and providing more advanced services in primary care settings. Through the program, participating practices receive increased payments for shifting to integrated care models and meeting criteria for one of three clinical tiers. These requirements include providing screenings, referrals, and interventions for behavioral health conditions. While evaluation of the program is ongoing, early indicators show positive impacts for primary care practices, including high rates of provider participation, progression to more advanced tiers over time, and greater financial sustainability.  

In addition, state Medicaid agencies can learn from and engage in ongoing federal initiatives in this area. For example, the Centers for Medicare & Medicaid Services Innovation Center’s Innovation in Behavioral Health Model is a state-based model focused on better integrating physical and behavioral health care for people dually enrolled in Medicare and Medicaid with moderate to severe mental health conditions and/or substance use disorder, and current state participants are Michigan, New York, and South Carolina. 

Strengthening connections to the health care system and increasing access to services 

Community members shared feelings of disconnection with the health care system, both in terms of their ability to access high-quality care in a timely manner and in the types of providers and services they can use through the Medicaid program. For example, community members described the lack of providers who accept Medicaid and are within easy driving distance, an issue that is particularly prevalent for behavioral health and other specialties, and in rural areas. This section explores strategies for increasing that connection through consideration of other modalities, coverage of nontraditional providers, and reductions in administrative barriers to care.  

Considering opportunities to encourage telehealth use among Medicaid providers and members   

States around the country have maintained an important access point to care by making many COVID-era telehealth flexibilities permanent. Telehealth can be particularly important for expanding access to care based on geographic location, complex care needs, or other factors. Research also suggests expanding access to telehealth can help generate cost savings within Medicaid programs. Despite the potential utility of telehealth, previous research in North Carolina shows there are disparities in telehealth use by race, ethnicity, and rurality. Potential contributors to these disparities include equitable access to high-speed internet, provider uptake of telehealth, and lack of trust among community members. Additional state policy action can help address these persistent disparities.  

Some states, like Ohio, have built requirements for telehealth capabilities or other alternative modalities into their Medicaid VBP models to expand timely access to care. Others, such as Georgia, have leveraged Medicaid managed care plan procurement processes to ask health plan applicants to describe how they would support access to telehealth. Building these questions into Medicaid procurement processes can help state Medicaid agencies evaluate prospective health plan capacity to support and address telehealth disparities among community members.  

Reimbursing nontraditional providers, including those with lived experience 

Community members also shared the need for better access to providers who offer community-based, culturally sensitive, and whole person–centered care. State Medicaid programs can increase access to paraprofessionals and other nontraditional providers like community health workers (CHWs), doulas, and peer support specialists who can offer more flexible, person-centered approaches to engaging with community members across a variety of health care needs (e.g., behavioral health, substance use disorder, upstream drivers, chronic disease management, maternal health). These paraprofessionals can also bring increased cultural congruence and support increased trust. States can also consider leveraging nontraditional providers like CHWs to help support individuals in maintaining continuous enrollment and complying with forthcoming work requirement reporting from H.R. 1.  

Several states are supporting access to and sustainable funding for these providers through value-based initiatives. For example, Maine used a Medicaid State Plan Amendment to incorporate CHW services into its primary care alternative payment model, Primary Care Plus (PCPlus). PCPlus offers incentives, resources, and technical assistance to provider practices to help increase access to CHW services. Practices interested in participating in more advanced tiers of the model with higher payment rates are required to submit an environmental scan that describes plans for how CHWs are being deployed currently and/or will be in the future. Maine’s Medicaid program is also working with partners to form an advisory group to further inform payment and delivery reforms that include CHWs.  

Several state Medicaid agencies, including Virginia Medicaid, have pursued State Plan Amendments for credentialing and reimbursing doulas. Virginia Medicaid heavily leveraged engagement with diverse stakeholders — including health care providers, doulas, community members, and managed care plans — to inform the design of policy and payment structures for doula coverage. The Medicaid agency developed a unique payment structure for doula services to incentivize continuity of care: a fixed payment amount for up to eight prenatal/postpartum visits and support with labor and delivery, plus an additional VBP incentive payment for postpartum follow-up visits, to encourage linkages to ongoing care.  

Current evidence demonstrates that individuals who receive doula care are more likely to have healthy birth outcomes and lower rates of cesarean sections. Achieving improved birth outcomes via coverage of doula services can lead to potential cost savings for Medicaid programs over time. Lessons learned across states that have implemented coverage include the importance of engaging the doula community in the design and implementation, considering flexibility in training requirements, and providing supports needed for doulas in navigating the enrollment and contracting processes.  

Reforming prior authorization 

Prior authorization remains a contentious strategy to manage health care costs, utilization, and quality. While it can help ensure that patients are given high-value, appropriate care, we heard about challenges with its use from both providers and community members. Providers shared they encountered additional administrative burdens associated with payer requests and denials, and community members shared their access to certain health care services and treatments has been delayed or complicated. Medicaid agencies and managed care plans have opportunities to leverage VBP to ease prior authorization requirements as providers accept more risk for cost and quality outcomes. New federal policies and commitments from health plans may further help improve prior authorization processes.  

To date, Medicaid agencies across the country have leveraged managed care contracts and procurement processes to reform the administrative processes associated with requesting prior authorization. Oklahoma is a national leader in this area. Leveraging a State Plan Amendment, the Medicaid agency directly negotiated agreements with drug manufacturers to waive prior authorization for two specific prescription drugs on the condition of overall cost neutrality to the state. Otherwise, the contracts stipulated that the manufacturers would cover any increases in costs via rebates. This value-based arrangement is the first of its kind between a Medicaid agency and a pharmaceutical manufacturer.  

Crosscutting Considerations for Implementation 

There are several important considerations for states as they weigh options for sustaining innovation to advance community health and well-being amid an evolving policy landscape.  

First, meaningfully engaging Medicaid beneficiaries and caregivers can help guide states’ decisions on where to focus limited resources, while also building trust and momentum for future reforms. States can leverage mandated structures like Beneficiary Advisory Councils to center community engagement throughout the policymaking process. Numerous tools are available to support states in meaningful and effective community engagement. 

Second, given changes to Medicaid financing provisions under H.R. 1, states should consider opportunities to leverage existing efforts and infrastructure where possible. The upfront investments required for new initiatives can present significant barriers to launching and scaling. Especially in the current environment, in which pursuing new initiatives may be less feasible, states can consider opportunities to integrate payment and care delivery innovations within established frameworks — such as VBP models and existing waiver authorities — to maximize impact, drive efficiency, and support financial sustainability. Similarly, many states are considering opportunities to leverage Rural Health Transformation Program funding to enhance existing initiatives and make lasting investments to support health care access.  

States can also consider prioritizing investment in areas that can serve a dual purpose in meeting the access and care delivery needs of the Medicaid population while addressing challenges associated with H.R. 1 implementation. For example, investments in CHWs could enhance Medicaid members’ access to high-value care while providing assistance in navigating new eligibility requirements and reporting processes. 

Lastly, there are trade-offs across different policy levers associated with varying feasibility and longevity. For example, Section 1115 waivers offer broad flexibility but are time limited and subject to federal approval and renewal, which can threaten longer-term sustainability. Changes in Medicaid demonstration budget neutrality policies over time, including H.R. 1 provisions codifying budget neutrality requirements, may also increase the burden for states. Growing pressure on states to demonstrate the returns on investment of their health policy efforts adds another layer of complexity, as evidence of impacts takes time to accumulate, especially for prevention-oriented initiatives.  

Nevertheless, states can leverage growing evidence on the financial and other returns on investment for certain initiatives, such as addressing upstream drivers of health and leveraging CHWs, as a foundation for continued innovation within fiscal constraints. There is also growing interest among states and their partners in leveraging rapid learning approaches to identify effective strategies more quickly and inform program refinements that drive improved outcomes and cost savings. 

Conclusion 

Over the last 60 years, the Medicaid program has worked to improve health care coverage, access, quality, and outcomes for low-income individuals and families across the United States. While the program has evolved over time, recent federal policy reforms and funding changes are expected to reshape what the program looks like. This will be a critical time to engage community members and translate their priorities into innovative policy action. 

This issue brief synthesizes community feedback about priority investments to sustain innovation and advance community health, highlighting leading examples of those policies in action across states. States have a variety of policy strategies to consider for advancing the health and well-being of their Medicaid members. Looking ahead, approaches to connect community feedback with policy priorities can also be extended to emerging policy areas, including the implementation of new initiatives following H.R. 1.