HOW RELATIONAL CONTRACTING CAN ADDRESS MEDICAID LONG-TERM CARE'S ACCOUNTABILITY CRISIS.

• Author: Gemar, Lukas

INTRODUCTION 569 I. WHY ACCOUNTABILITY IS LACKING 577 A. Routes for Beneficiaries to Enforce Rights 579 1. The Inadequacy of Appeals 580 2. Limitations on Private Causes of Action 581 B. Government Oversight 582 1. Shortcomings in State Agency Contracting 583 2. Shortcomings in Federal Agency Oversight 584 3. Administrative Law's Failure to Remedy Mismanagement 586 II. PATHWAYS FOR CONSTITUTIONAL ACCOUNTABILITY 587 A. Possible Accountability Mechanisms 588 1. Procedural Due Process 589 2. The Duty to Supervise 591 B. Opportunities for Better Protections 592 1. Requiring Evidence of Change for Reductions 593 2. Bringing Transparency to Care Decisions 596 III. THE BEST APPROACH: FORMAL RELATIONAL CONTRACTING BY STATES 597 A. Why Traditional Contracts Fail in Managed Long-Term Care: Shading 597 1. Drivers of Shading 598 2. How Shading Manifests 600 3. Addressing Alternative Explanations 602 B. Formal Relational Contracting as a Solution to Shading 603 1. History of Relat ional Contracting Approaches 605 2. An Example of the Approach in Practice 606 3. Why Formal Relational Contracting Is a Necessity 607 4. Why Formal Relational Contracting Is Particularly Well- Suited to Managed Long-Term Care 610 C. Avoiding Practical Barriers & Pitfalls 611 1. Maintaining Compliance with Procurement Laws 611 2. Ensuring Institutional Capacity 612 3. Involving Third Parties 613 4. Aligning Structural Supports and Incentives 614 CONCLUSION 616 INTRODUCTION

Long-term care in the United States is in the midst of a transformation driven by privatization. States have largely transitioned care for many of the nation's most vulnerable into the hands of privately run insurance companies called managed care organizations (MCOs). (1) At the same time, demand for long-term care--which aids those who are aging or have a chronic illness or disability--is expected to grow rapidly because of multiple demographic trends of an aging population coupled with increasing life expectancies. (2) A widespread push to avoid unnecessary moves to institutions, such as nursing homes, also means care is increasingly provided within the home, tracking consumer demand. (3) Long-term care services cover basic needs, such as getting dressed, eating, going to the bathroom, or living independently in the community. (4) The shift to MCO control through privatization creates barriers to accountability that impede quality of this vital care, especially when MCOs' payment structure can result in a financial interest to reduce the utilization of services. (5)

Issues with care upend the lives of individuals and their families. Consider a representative example: in 2016, Alejandra Negron, who struggled with a disability after a lifetime of work in a factory, relied on fifty hours a week of care from a homecare aide. Ms. Negron's homecare assistance was made available through Medicaid, the government health care program for people with low incomes or disabilities. (6) The support got her through the workweek while her two daughters and granddaughter alternated staying on nights and weekends. (7) A managed care organization then cut Ms. Negron's care in half to twenty-five hours, and rescheduled the hours to weekends. (8) The change left Ms. Negron petrified at the thought of being institutionalized, and left her family scrambling, unable to help. (9) This situation is far from unique. (10) Studies have found such cuts in as many as a majority of cases across the bulk of MCOs contracted through Medicaid. (11)

The primary payer for long-term care, often referred to as long-term services and supports (LTSS), (12) is Medicaid, covering over forty percent of all LTSS costs. (13) Medicaid spending on LTSS--jointly funded by states and the federal government--is above $200 billion, (14) a massive figure that represents about five percent of national health expenditures (15) and nearly one percent of U.S. gross domestic product. (16) Yet, the long-term care system remains underfunded by global standards (17) and relies on a high volume of sporadic, uncompensated care from family members, (18) leaving states with difficulty meeting individuals' needs on insufficient budgets.

One way that states have managed budgets is to call on the aid of private MCOs. Historically, states have paid for LTSS through what is called a feefor-service model, where states pay providers directly for services. (19) Increasingly, states are outsourcing payments management, however, using new payment models. To offer long-term care services to Medicaid recipients, about half of states contract with MCOs. (20) MCOs receive a fixed per person per month payment to cover LTSS, regardless of the volume of services sought (21)--referred to as a "capitated" payment. (22)

MCOs are often the same large insurers that sell and manage private health insurance plans. (23) As an example within the long-term care context, as of 2021, Fortune 5 insurer (24) UnitedHealthcare operated nine managed LTSS programs nationally, covering care for 300,000 individuals. (25) The Managed LTSS Institute, a collaboration between policy makers and insurers around Medicaid managed LTSS, has board members from UnitedHealthcare, Anthem, Aetna, and Centene, each of whom have operated a number of managed LTSS programs. (26)

Several expectations have motivated states to move to managed LTSS: greater budget certainty from capitated (per person) payments, improved care coordination and experience for consumers and their families, and increased provision of care at home rather than in institutions like nursing homes. (27) The number of states operating managed LTSS programs has grown rapidly, from just eight states in 2004 to twenty-four states in 2021. (28) In monetary terms, the spending on managed LTSS has grown markedly from $6.7 billion in 2008 to $47.5 billion in 2019--an average annual growth rate of almost twenty percent over eleven years, or more than a sevenfold increase. (29) The privatization of LTSS is here to stay.

This shift of care into the hands of private organizations raises questions of accountability. Once states contract with an MCO and set the monthly budget, there is little day-to-day involvement of the state in an MCO's decisions. (30) The MCO can aggressively manage benefits. (31) In 2020, the Government Accountability Office (GAO) published a report finding that the turn to managed care has created problems in the quality and access of care across Medicaid LTSS because of deficiencies in service authorizations, care planning, care coordination, and other activities. (32) In some states, many beneficiaries had personal care service levels reduced without justification. (33) Since these services, such as dressing or going to the bathroom, are essential for basic needs, cuts in hours suddenly shift the responsibility to provide services to a family member (34) or put the beneficiary at serious risk of injury. (35) In addition, MCOs were often unresponsive to individuals' needs and preferences--care plans were not kept up to date, beneficiaries lacked sufficient care coordination, and beneficiaries were not given autonomy to choose who leads their care team--and quality concerns went unheeded by the states responsible for overseeing these MCOs. (36)

Meanwhile, oversight of managed LTSS is complicated by the federalist division of responsibilities inherent to the Medicaid program. (37) States have tremendous flexibility to design and manage the Medicaid program. (38) States adhere to minimum coverage requirements and standards while the federal government supports financially by sharing in the cost. (39) But states can decide the package of services offered as well as whether to deliver services through either fee-for-service or managed care. (40) Importantly, in managed care delivery systems, states hold the contracts with MCOs. (41) State discretion increases the complexity of supervision for federal authorities, and the GAO has pointed out gaps in supervision at the federal level. (42) At the same time, courts have a limited role in policing state decisions or catalyzing federal oversight. (43)

The injection of technology into decisionmaking further heightens concerns about accountability. Algorithmic tools increasingly support decisions in the long-term care space, (44) following the broader trend of the use of artificial intelligence (AI) in healthcare. (45) However, these tools can be highly problematic. For example, a faulty algorithmic system implemented in Arkansas led to inappropriate reductions in homecare for nearly half of the state's Medicaid recipients. (46) In one case, the system reduced homecare hours for an amputee due to a lack of "foot problems." (47) Throughout the state, Medicaid recipients with severe disabilities had no access to food, bathrooms, and medicine due to these reductions. (48) Eventually, a court enjoined the state from using the algorithmic system, but vendors were not forthcoming in explaining how decisions were subsequently made, and the state lacked the expertise and tools needed to debug the technology. (49) Idaho also implemented an algorithmic tool, which led to similarly drastic reductions in homecare hours. (50) Tools like those in Arkansas and Idaho can disrupt care patterns for beneficiaries under the care of MCOs. (51) And they can greatly undermine the accountability of care decisions--especially when coupled with privatization. (52)

To be sure, the same features of the long-term care system that create barriers to accountability--privatization, federal-state coordination, and technology--offer their respective benefits. Privatization through managed care can improve care coordination, (53) innovation, (54) and performance. (55) States can provide supervision that is responsive to the local needs of the programs they oversee. (56) And AI and technology can increase the speed and accuracy of care decisions. (57) While these systemic benefits should be...