A Cheaper, Faster Way to Modernize Medicaid Management

As enrollment expands dramatically under the Affordable Care Act, the states' aging technology systems are under increasing pressure. There's a way to give them new life.

States that have expanded their Medicaid programs under the Affordable Care Act are experiencing phenomenal growth, with 7.5 million people added to the program's rolls in those states alone as of this October. Over the next decade, Medicaid could grow by as many as 21 million enrollees.

Now more than ever, state Medicaid programs need to be able to handle massive volumes of data, process thousand of enrollment applications, provide real-time eligibility determinations and give program managers the reporting they need for planning and control. But many of these functions reside on platforms that are 10 years or older, developed when Medicaid enrollment was significantly lower. In California, the system that manages eligibility data resides on a platform that is over 35 years old. It's estimated that replacing it would take two years at a cost of more than $300 million.

Many states that are expanding their Medicaid enrollment are taking that route, moving to replace their Medicaid management information systems with new ones. But replacing a legacy MMIS is not only costly and time-consuming. As with so many major information-technology projects, building a new system carries significant risks of cost overruns, busted deadlines and even outright failure.

There is an alternative, however, that states should consider: keeping those legacy systems while converting, rewriting or porting them to a modern computer programming language with updated software libraries, protocols and hardware platforms.

Legacy system modernization has two big advantages over complete replacement: cost and time to completion. Typically, a complete MMIS replacement runs six to 10 times higher than what the system being replaced cost. A modernization effort typically runs two times higher while cutting ongoing operation and maintenance costs by half.

There's another incentive to move quickly: The federal government is financing as much as 90 percent of technology costs associated with the ACA's Medicaid expansion, and now is the time for Medicaid programs to position themselves to take advantage of current technology innovations for delivery-system and payment reform.

Because of the enormous scope of the ACA, the transformation of the nation's health-care system will require sustained, evidence-based decision-making fueled by timely and accurate financial and population-health data. Legacy system modernization can save tens of million dollars in the near term and provide cost-effective program administration sooner rather than later. That can go a long way toward avoiding the unfortunate health outcomes that contribute to our current unsustainable overuse of health-care resources. It's the kind of success that can benefit everyone.

Gregory Franklin is the founder and CEO of Franklin Health Solutions, a Sacramento, Calif.-based consulting firm.
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