Medicaid Reentry is an Untapped Opportunity For Value-Based Care

More than 650,000 individuals in America are released from prison every year.

And upon reentry, approximately 80% of those individuals become eligible for Medicaid, either newly or reinstated if they were enrolled prior to incarceration.

The majority of individuals who leave incarceration are highly socially and economically vulnerable.

They are poorer than the average American.

They have lower levels of education.

They experience higher rates of mental illness.

They have been victims and experienced trauma themselves.

They suffer from substance use issues at higher rates.

They are more likely to have a disability.

The vast majority of adults incarcerated in federal and state prisons (94%) will eventually be released.

When people have access to Medicaid during the reentry period, they are more likely to find employment, more likely to utilize health care services, and less likely to go back to jail or prison.

Studies on the Total Cost of Care (TCOC) for reentry patients are limited, yet it is well-documented that individuals in incarceration have higher rates of certain chronic conditions and infectious diseases, disabilities, and face exceptionally high rates of mental illness compared to the general U.S. population.

This disparity, in large part, arises from the inadequate medical and mental health care provided in prisons and jails.

This leaves many who leave incarceration in worse health than when they entered.

The combination of subpar healthcare behind bars and the gap in post-release healthcare coverage are pivotal factors contributing to the heightened risk of death after release.

These conditions make people recently released from incarceration among the most vulnerable populations in our communities.

The 1115 Waiver Tailwind

To support incarcerated individuals' reentry, in July 2024, Illinois, Kentucky, Oregon, Utah, and Vermont received approval from CMS for the 1115 waiver.

The waivers, in this case, allow states to use Medicaid funds to cover pre-release services and implementation costs, which was previously prohibited under the inmate exclusion policy

As a result, these states will cover certain services during the 90 days before an individual's release from incarceration, ensuring a seamless transition without gaps in coverage.

They join California, Massachusetts, Montana, and Washington in this innovative approach.

Additionally in December 2023, Congress enacted national changes to the inmate exclusion by requiring Medicaid agencies to provide certain services to incarcerated young people beginning in January 2025.

CMS continues to expedite the approval of other state requests under this streamlined approach.

For incarcerated people these waivers mean:

• Increase coverage, continuity of coverage, and appropriate service uptake through assessment of eligibility and availability of coverage for benefits in carceral settings just prior to release.

• Improve access to services prior to release and improve transitions and continuity of care into the community upon release and during reentry.

• Improve coordination and communication between correctional systems, Medicaid systems, managed care plans, and community-based providers.

• Increase additional investments in health care and related services, aimed at improving the quality of care for beneficiaries in carceral settings and in the community to maximize successful reentry post-release.

• Improve connections between carceral settings and community services upon release to address physical health, behavioral health, and health-related social needs (HRSN).

• Reduce all-cause deaths in the near-term post-release.

• Reduce number of ED visits and inpatient hospitalizations among recently incarcerated Medicaid beneficiaries through increased receipt of preventive and routine physical and behavioral health care

Mental Health and Substance Use Disorders During Incarceration

Most individuals who are incarcerated were likely eligible for Medicaid prior to incarceration. However, due to the Medicaid Inmate Exclusion Policy (MIEP), Medicaid beneficiaries have their coverage suspended during periods of incarceration.

As a result, CMS oversight of healthcare delivery does not extend to carceral settings.

This is critical, because over half of people in state prisons and two thirds of individuals in jails have Substance Use Disorders (SUD), compared to 8.5% of the general population.

However, patients are not receiving the treatment they need.

For context, Medication-Assisted Treatment/Medication for Opioid Use Disorder (MAT/MOUD) is the gold standard crucial for effectively treating Substance Use Disorders by combining medications with behavioral counseling to prevent relapse and support long-term recovery. And only about 20% of jails have this treatment available.

A large part of this failure to deliver effective healthcare results in individuals reentering society after incarceration facing a mortality rate that is 10 times greater than that of the general population.

Healthcare funding and oversight within correctional facilities vary widely across states and counties, resulting in inconsistent care quality. The lack of standardized program evaluations and quality metrics, along with few transparency mandates, limits accountability in carceral health systems.

Addressing the mental health crisis and SUD could significantly reduce the systemic challenges that lead to incarceration and improve reentry outcomes.

No Support System During Reentry

The system is set up to fail those reentering society after incarceration.

70% of those incarcerated are rearrested within five years.

When individuals reenter communities, they often face "civil death," which refers to the barriers they encounter in finding housing and employment due to legal restrictions or societal stigma associated with their criminal records.

Individuals often have no support system when reentering. Resulting into a hard drop into reality, forcing individuals to do everything on their own now.

Because of this, after incarceration, people experience unemployment at high rates and report low incomes. Formerly incarcerated people are unemployed at a rate of over 27%, which is higher than the total U.S. employment rate during any historical period, including the Great Depression.

Why VBC Can Work Here

I have no doubt that this is an incredibly challenging population.

Given the vulnerability of this population, addressing social determinants of health is critical.

Because of this, ensuring that funds support CBOs in playing a pivotal role in reentry is critical. CBOs can provide the essential support system that these individuals lack.

The most important things being housing, then employment.

Thankfully, leveraging the 1115 waiver tailwinds I mentioned, along with the recently growing use of ILOS and Z-codes, can uniquely improve resources and address social drivers of health.

Integrating this reentry care model, along with the necessary infrastructure, is new territory. Given a company's expertise in developing care models and technology compared to state agencies, this expertise can be leveraged to the company's advantage.

Including necessary infrastructure updates to effectively integrate EHRs and payment systems between carceral healthcare and CBOs.

After having the ability to support CBOs, one of the other big challenges of VBC care models, particularly in a Medicaid population, is the challenge to effectively engage patients.

CHWs are of high value to help improve this.

Specifically, having CHWs who were formerly incarcerated is critical for building trust and improving engagement through shared experiences. This also serves as a dual effort to support formerly incarcerated individuals who may have trouble finding employment.

What Would a VBC Model Look Like?

If regulations allow it, a company can come in and contract with an MCO to deliver care prior and post release, which can now be covered by Medicaid.

Initiating relationships, prescriptions, and care prior to reentry can make a significant impact.

To better understand what has worked in the past for a care model after reentry let’s look into the care model developed by the Transitions Clinic Network (TCN).

The TCN is a national consortium consisting of 45 primary care-based programs across 14 states and Puerto Rico. These programs are dedicated to addressing the health needs of individuals reentering the community from incarceration.

What the TCN does:

• Provides primary care services immediately upon release.

• Integrates care coordination to manage follow-ups and referrals.

• Offers chronic disease management and preventive care to reduce hospital readmissions.

• Includes behavioral health services to address mental health and substance use disorders.

• Medications for behavioral health and chronic conditions before and after incarceration.

• Ensuring access to opioid use disorder medication before release and maintaining continuity of care.

Each TCN program is rooted in an existing community health center and focuses on delivering enhanced primary care to individuals released from correctional facilities, specifically targeting those with chronic health conditions or those over 50 years of age.

The TCN focuses on coordinating healthcare services, providing social support, linking individuals to community resources, and ensuring continuity of care to promote successful reintegration and reduce recidivism."

CHWs are critical in this model to provide peer support to patients and build relationships with public defenders and probation and parole officers and can add medical context to situations which might otherwise lead to recidivism, such as relapse to substance use or poorly controlled mental health.

Participation in TCN is entirely voluntary, with individuals typically referred by correctional systems.

The TCN did a study with 95 patients over a 12-month period.

Here is what the TCN study found:

1. The study did not find significant differences in Medicaid costs between the control group.

2. The program, catering to those with chronic conditions and aged 50+, yielded a $2.55 return on every dollar invested through CHW interventions.

3. ROI varies based on the investor and beneficiary perspectives. There state-centric analysis, focused on Connecticut's Medicaid and correctional systems, may not generalize to other states with different healthcare and incarceration models.

4. While financially neutral for Medicaid in Connecticut's FFS framework, TCN programs potentially offer broader societal benefits like improved health outcomes and reduced incarceration rates, aligning with state goals to manage healthcare and criminal justice costs.

The lack of decreased TCOC results in the study may have been due to a small sample size—only 94 patients. My guess is that this study also suffered from the same problem as the Camden Study, which was that the ROI of preventive care takes longer to showcase.

Even without demonstrating decreased TCOC costs, the leaders of the TCN are doing incredible work and have produced one of the most practical research studies I’ve ever read.

How to Make the Economics Work on a VBC Company

A company can take on different approaches, from things such as providing the technology infrastructure, care management, and/or delivering more of the clinical care.

While the TCN study found it was budget neutral, I imagine there are some options a company could explore to generate more revenue:

1. Recruit a state agency, such as a probation system, to provide an additional revenue stream that makes the model more sustainable and provides greater margins, particularly for a venture-backed company.

   1. In the state of Texas, for example, parole costs $4 per day per offender, whereas incarceration costs $50.

2. Find greater margins through utilizing patient-facing digital health apps alongside care management.

3. Create a parole officer-facing application to connect with patients, allowing the healthcare company to leverage more effective labor without additional costs.

   1. Parole officers and clinical care teams could collaborate closely to support individuals transitioning from incarceration to community life.

   2. This collaboration could involve sharing health data, addressing social drives of health, and providing ongoing monitoring and support.

4. Take downside risk, perhaps in partnership with a community health center, on the population to capture greater revenue.

Because there are a few players in the VBC Medicaid space, I imagine having a deep understanding of the population and former incarcerated peer support staff can be an effective value-prop and moat.

There is also significant potential to partner with community health center (CHC) services into the pre-release period.

The reason why this can be mutually beneficial is because CHCs have staff shortages, so the idea of passing along patients to CHCs after reentry is not a great value proposition.

Additionally, a company could benefit from a pilot study and/or channel partnership with the TCN.

A Great Step, Yet Policies Need to Continue

The VBC model I’ve been writing about introduces an interesting approach.

Typical VBC models in Medicaid may not fully account for the financial return of broader community benefits. However, there is an opportunity to collaborate with other high-cost state programs to improve outcomes and reduce costs.

More fundamentally, we must reinvest tax dollars to address root causes rather than just symptoms. Shifting from mass incarceration to more effective investments is crucial. Policies need to focus on crime prevention rather than just responding to it.

Care models like the one I discussed support successful reentry by expanding SUD programs and providing robust support systems to prevent justice system involvement.

As a nation, we must prioritize both prevention and providing second chances.

I’m optimistic that this reentry care model is a significant step in the right direction.