Medicaid: Overview of The Emerging Startup Market
TL;DR: the first half of this article provides a high level overview of Medicaid for folks new to the space; the second half is the market map that highlights the startup landscape.
Medicaid is the public health insurance program in the United States. It is a federal-state partnership program, meaning it is administered by states, according to requirements set by the federal government. Acting as an assistance program, it typically provides health coverage to the most underserved populations – including low-income adults, children, pregnant women, elderly adults, and people with disabilities. Medicaid members typically have complex, high-cost care condition profiles, among them are substance use disorder, childbirth, anxiety, hypertension, and depression.
As of April 2022 nearly 81.2 million Americans were enrolled in Medicaid, making it the single largest insurance program in the US. Following a period of enrollment declines from 2017 to 2019, the pandemic accelerated Medicaid enrollment, which was up 25.9% (16.7 million enrollees) from February 2020 to April 2022. The recent increase in enrollment was driven by economic changes (increased unemployment), Medicaid expansion initiatives, and the temporary continuous enrollment requirement (aka Families First Coronavirus Response Act) – which blocked states from disenrolling Medicaid members during the emergency period.
As the Medicaid population has expanded in recent years, we have seen various stakeholders gradually move further into serving more Medicaid markets. For instance, Humana recently announced its acquisition of Inclusa – a Wisconsin-based managed care organization (MCO) that provides long-term care and support services (LTSS) to the senior population. In May, we also saw Anthem complete its acquisition of Integra, a long term care plan, bringing 40,000 additional Medicaid members into Anthem’s network.
While market activity has increased in recent years, major health disparities between the Medicaid and commercially insured populations continue to worsen by the day. These disparities came to a head during the pandemic, a time when access to quality and timely health care was critical, yet not equal across these groups.
A similar (yet unsurprising) trend in health tech innovation has also persisted. Historically, innovators and investors have prioritized building and selling health tech products and services to commercial and employer buyers, leaving the Medicaid population broadly behind.
Of course, it is worth noting that Medicaid has not gone entirely ignored. In fact, many incumbent organizations have attempted to drive innovation in Medicaid for some time now – albeit with very little sustained success. Some of the more interesting payor and provider initiatives include:
- Allina Health worked to improve rural health outcomes across a community via The Heart of New Ulm project.
- Geisinger worked to address food insecurity via its Fresh Food Farmacy program.
- University of Pennsylvania is working on IMPaCT, a model seeking to scale the use of community health workers.
- UnitedHealth Group worked to address housing instability via its MyConnections program.
- A group of 30 major health systems worked to drive Medicaid innovation forward broadly via the Medicaid Transformation Project.
What is consistent across these programs is that they all demonstrate the impact these interventions can have in improving health in the Medicaid population. While we know what it takes to improve care for the Medicaid population, these programs all have struggled to consistently scale the impact they’ve generated, with many of these efforts quietly shutting down altogether after the initial funding and momentum dries up.
When applying a VC investor perspective with a sole focus on maximizing LP returns, trying to build and scale companies for the Medicaid population has not been attractive.
For one thing, Medicaid is a highly fragmented and heterogeneous market, consisting of 50 different state audiences, each with nearly infinite local sub-populations – not exactly the perfect recipe for universally scaled product lines. And even in the case these models are brought to scale, the reimbursement rates are substantially lower than what Medicare (let alone commercial insurers) will put up to cover them – further disincentivizing investors. In fact, in 2019 Medicaid FFS payments for physician services were about 30% below Medicare payment levels.
Beyond the economic gymnastics it requires to operate in the Medicaid market, there are even more deeply rooted systemic issues that complicate matters. The historical biases and inequities – emerging from systemic racism – that result in consumer fear, mistrust, and care avoidance, are significant issues we have only recently begun to untangle.
Despite the seeming litany of barriers to entry for tech-enabled solutions to find success in the Medicaid space, a growing cohort of startups have emerged in recent years, aiming to transform the way care is delivered to this grossly underserved population.
In this market map, we highlight several startups existing across 11 categories, including mental and behavioral health, post-cute care, social determinants of health, and more.
HTN’s Medicaid Market Map
This market map consists of private companies that serve the Medicaid population only and is not intended to be exhaustive of the space. Categories are not mutually exclusive and companies are mapped according to primary use case.
Companies in this segment deliver various types of care services to Medicaid patients.
Mental & behavioral health
Medicaid is the largest payor for public mental health services, catering to patients with a range of disorders such as substance use disorder, serious mental illnesses, among others. In fact, as of 2020, nearly 29% of Medicaid enrollees suffer from a mental illness, this compares to 21% of privately insured, and 20% of uninsured individuals.
While mental and behavioral health issues are highly prevalent among the Medicaid population, the delivery of adequate care has been stymied due to shortages of mental health care providers, the stigma surrounding the access of care, and infrastructure deficiencies.
Companies in this category aim to provide tech-enabled solutions to overcome these logistical barriers and address issues like substance use disorder, anxiety, and depression for adults and children on Medicaid.
For example, firsthand is targeting individuals with serious mental illnesses, which largely has been an overlooked demographic having more complex diagnostic profiles, compared to other conditions like anxiety and depression that have been the primary audience of health tech startups. The company employs community health guides that help people with counseling support, food assistance, discounted gym memberships, and more.
Regular and comprehensive visits with primary care physicians help to protect against downstream, high-cost medical care, such as emergency department visits and hospitalizations. Of course, primary care visits continue to be the “nice-to-have” layer of care that many people forgo year to year, especially among the Medicaid population where issues like low income, lack of trust, or low education make individuals less likely to seek care.
Startups in this space are building full-stack primary care models that integrate components like community health workers, telehealth, home visits, transportation services, and more to fill gaps in care.
Cityblock has served as the example organization in this category, centering its model around the community health worker who works to coordinate care for individuals across underserved communities. Since its launch in 2017, the company has expanded from primary care, into mental health, and complex care management across 6 different states.
A new player, Nest Health is building a home-based primary care model around young families on Medicaid. Through its concierge care model, Nest looks to assemble care teams of NPs, MAs, pediatricians, and others to provide holistic care, including primary care, as well as behavioral health and nutrition. The company aims to launch services in January 2023 in Louisiana.
Women’s & maternal health
Medicaid plays a significant role in maternal health. In fact, Medicaid finances about 42% of all births in the US. Yes, you read that right – of the 3.6 million babies that are born each year in this country, Medicaid pays for over 1.5 million of those births.
Yet payment rates are still quite low - in California, doulas have been paid only $450 per birth on Medi-Cal, below living-wage rates. It wasn’t until this past August that HHS extended coverage of postpartum care to 12 months (up from just 2 months) for 34,000 Medicaid members across Hawaii, Maryland, and Ohio.
Of course, the prioritization of expanding services and improving maternal and broader women’s health outcomes is rightly deserved. Seeing that the community faces several health crises, including, but by no means limited to the following:
- The US has the highest mortality rate (17.4 deaths per 100,000 live births as of 2020) compared to all other developed countries, including France, Canada, and the UK.
- The recent overturning of Roe v. Wade ending federal abortion rights has limited or completely blocked access to important reproductive health services.
With no shortage of problems to tackle, startups in this category are building tech-enabled platforms to improve access and equity issues for women’s health.
One company, Diana Health provides access to various services, such as obstetrics, general gynecology, family planning, mental health counseling, and more. So far, the startup has one in-person clinic in Tennessee and accepts most forms of insurance, including all TennCare (Medicaid) plans.
The adoption and implementation of virtual care has been acutely important for the Medicaid population – offering a cost-effective alternative to individuals that historically have struggled to access in-person care, being more highly concentrated in rural communities with fewer hospitals and clinics.
Startups like Galileo offer virtual services across a range of complex conditions, including infectious diseases, behavioral health, and chronic condition management. The company is an in-network provider for select Medicaid managed care plans in New York and North Carolina.
Unfortunately, due to high-risk and complex care profiles, ED visits and hospitalizations are not uncommon among the Medicaid population. Logically, post-acute care – the delivery of follow-up care services after hospital discharge – has become a critical part of the care continuum, helping to reduce hospital readmissions.
Notably (yet again unsurprisingly), there are disparities between post-acute care for individuals insured by Medicaid versus commercial plans. In a 2021 study, researchers found that post-hospitalization, 12% of individuals on Medicaid experienced an emergency department visit compared to just 4.2% of commercially insured patients.
Being seen as an increasingly important care function, several startups have emerged to deliver post-acute care services to Medicaid enrollees. Dispatch Health, for instance, partners with managed Medicaid plans to treat various conditions – like respiratory infections, heart palpitations, asthma attacks, among others – offering many home tests and procedures.
Long-term services & supports
Long-term services and supports (LTSS) include institutional care, as well as home- and community-based services. Individuals using LTSS often suffer from a range of physical and cognitive disabilities. These services – such as assistance taking baths, grooming, cooking, etc. – aim to help people live more independently. Notably, Medicaid is the primary payor in the US for LTSS.
Infrastructure & Enablement
Companies in this segment are building the infrastructure and technology enabling providers to deliver care.
Referral management & SDOH
Referral management is the process of coordinating the transition to the next step of care for patients. Typically, this happens in the context of a primary care physician connecting a patient with a specialist. This is an important strategy, particularly in the Medicaid population, where health conditions are identified and escalated in disparate settings by various stakeholders (i.e. PCPs, community health workers, etc.).
Some companies – such as Unite Us and n1Health – offer analytics platforms to streamline referral management, connecting patients with appropriate and timely services, whether they be medical or social determinants of health (SDOH).
Other startups in the category focus on providing services aimed at enhancing social determinants of health. For instance, Papa connects seniors on Medicaid to college students that offer transportation, social connectedness, and assist with home activities.
Population health & analytics
Population health helps health systems and clinics identify and engage high-risk patients to effectively coordinate care.
These digital tools are necessary to help Medicaid providers engage individuals, manage population health, and meet the high medical and socioeconomic needs of complex patients.
One company, ClosedLoop.ai offers an AI-enabled population health platform that helps clinicians more effectively connect with patients, resulting in increased utilization and improved health outcomes.
Care enablement & administration
Providing quality care to Medicaid patients should be clinicians top priority – back office tasks, such as contracting, managing referrals, and medical documentation should be the least of their worries.
Startups in this category offer tech-enabled solutions to automate these processes, enabling clinicians to spend more time with patients.
For instance, Yuvo Health is building an administrative services and managed care contracting platform to help Federally Qualified Health Centers (FQHCs) across New York transition to value-based care models.
Electronic consultations (eConsults) are secure, asynchronous interactions that take place between primary care physicians and specialists to review specific patient cases. They serve as a new approach to reduce the need for face-to-face specialty consultations and result in decreased care costs, while improving patient experience.
Underserved groups – such as Medicaid – are a prime audience for adopting eConsults. For the Medicaid model where it is hard to gain access to a specialty provider, eConsults can help to alleviate the access issue.
For Medicaid patients, eConsults provide more timely access to high quality specialist opinions and reduce friction for individuals.
Companies in this category – like AristaMD – are developing eConsults platform solutions to streamline the connection of primary care clinicians to specialty care docs, helping to remove barriers and connect patients with the appropriate care.
Patient engagement & outreach
Medicaid consists of a diverse population of individuals, including members that are low-income, non-English speaking, elderly, and more. The challenge of overcoming barriers – whether they be language, social, or physical – to connect with this population is crucial in delivering appropriate and timely care that results in improved health outcomes.
Startups in this section act as the digital front door to healthcare for Medicaid members – offering a range of solutions including educational content, provider search platforms, scheduling tools, and more.
One example, Health in her Hue connects women of color to culturally trained healthcare providers, evidence-based health content, and community support.
Our overview of the market: Observations & opportunities
After analyzing and organizing the Medicaid startup landscape, we came across a couple of interesting observations:
- While the companies included on our map currently serve the Medicaid population, it is important to note there is a cohort of startups that are not yet, but have announced or alluded to plans to expand into the Medicaid market. For instance, players like Mainstreet Health and Homeward have their origins building new care models for communities in the Medicare Advantage market, given higher reimbursement rates and more similar populations make the economics and scale more straightforward. However, the move into the rural, Medicaid population makes sense and we expect to see these models go there in the future. Other companies across the behavioral health market – such as Hopscotch and Foresight – have also made plans to expand to Medicaid moving forward.
- In our market framework, we dove into both the infrastructure and enablement and provider segments, but there is one piece to the puzzle missing – payors. Interestingly, we have not seen any Medicaid-focused startups look to become payor innovators. Circulo Health has offered the best attempt thus far with their ambitions to build out a Medicaid focused insurance plan. However, the company has since scrapped plans for its insurance product and is instead pivoting to a home care model for individuals with intellectual and developmental disabilities (IDD). This served as an unfortunate, yet important reminder of the major barriers – such as cost, infrastructure, and regulations – that exist for new businesses in this space.
More broadly, the process of reviewing the Medicaid market (like any other segment of healthcare) generated a long list of questions for us. As such, we have decided to spend more time moving deeper into the space and are planning a series of Medicaid-focused articles. Be on the lookout for those in the coming months.
If you’re reading this and you also have new questions or topics about Medicaid that come to mind, please email us at email@example.com detailing your thoughts and we’ll follow up.