Innovating Care for Children and Families through Community Partnerships that Leverage Medicaid Managed Care
The second in a three-part series of issue briefs examining how faith-based social service organizations in Lutheran Services in America’s nationwide network are leveraging partnerships with Medicaid Managed Care Organizations to improve the health and wellbeing of children and families.
Key Takeaways
- As states seek to innovate with value-based payment arrangements, opportunities exist for managed care organizations (MCOs) to partner with community-based, social service organizations, including LSA members, to achieve savings while improving health outcomes.
- These opportunities help bridge critical gaps in care, strengthening both behavioral and physical health services while improving health outcomes and reducing costs of health care.
- There is increasing evidence that addressing HRSNs can have a positive Return on Investment (ROI) and can enhance important relationships between managed care organizations and social service providers.
- LSA member organizations have harnessed their community connections as trusted health and human service providers to pioneer innovative behavioral health care solutions that improve outcomes for children and families.
Background
The Medicaid program is placing greater emphasis on the impact of nonclinical factors on enrollees’ health outcomes, known as health-related social needs (HRSNs). HRSNs are an individual’s unmet, adverse social conditions that contribute to poor health outcomes, including challenges with housing, food and transportation.
As states seek to innovate with value-based payment arrangements to address HRSNs, opportunities exist for managed care organizations to partner with community-based, social service organizations, including Lutheran Services in America (LSA) members, across the country to achieve savings while improving health outcomes. These opportunities can help bridge critical gaps in care, strengthening both behavioral and physical health services while improving health outcomes and reducing costs of health care. In studies that assessed interventions—including those focused on housing, nutrition, transportation, care management and legal/social/financial supports that seek to both improve HRSNs and health conditions—there have been documented improvements in both health care utilization and patient outcomes as well as cost savings.
In addition, there is increasing evidence that addressing HRSNs can have a positive Return on Investment (ROI). One evidence review evaluated studies examining the interventions across six key social service areas—housing, nutrition, transportation, home modification, care management and counseling—that yielded positive ROIs for healthcare entities. Notably, interventions in housing, nutrition and care management demonstrate the most significant financial returns. For example, in one of the studies, providing affordable housing, transitional case management, and tenancy support services for high-need dual eligibles yielded $1.57 in savings for every $1 invested.
This issue brief provides an overview of the Medicaid program, including a discussion of recent trends in the program. Throughout, it provides examples of how LSA member organizations have harnessed their community connections as trusted health and human service providers to pioneer innovative behavioral health care solutions that improve outcomes for children and families.
Lutheran Services Florida Health Systems (LSFHS): A Statewide Leader in Behavioral Healthcare
Through a unique contracting arrangement with the state of Florida, LSFHS is the second largest of seven entities servicing the behavioral health needs of low-income individuals and other clients needing support in Florida, overseeing care for 3.9 million individuals in 2023. Because of its vast reach, LSFHS has contracted with numerous providers across the state to provide tailored and community-oriented care that serves diverse needs. Although 97% of the organization’s funding comes from the Department of Children and Families, LSFHS has been proactive in securing grants from the Substance Abuse and Mental Health Services Administration (SAMHSA), Health Resources and Services Administration (HRSA) and private foundations, and has also partnered with Medicaid MCOs in an effort to expand services. For example, in 2023, LFSHS worked with Humana Healthy Horizons to support enhanced training for wellness recovery action planning, applied suicide intervention skills and verbal de-escalation/compassion fatigue training for their 24/7 Mobile Response Team program that provides immediate response to individuals experiencing behavioral health crises.
An Overview of the Medicaid Program
Medicaid operates as a federal/state partnership, providing comprehensive health coverage to millions of eligible individuals across the United States. The program includes low-income children and families, seniors, certain people with disabilities and eligible pregnant women. As the nation’s largest health insurance program, Medicaid served approximately 40.6 million adults and 36.8 million children (inclusive of those on CHIP) as of October 2024.
Medicaid served approximately 40.6 million adults and 36.8 million children as of October 2024.
Medicaid operates as a federal/state partnership, providing comprehensive health coverage to millions of eligible individuals across the United States. The program includes low-income children and families, seniors, certain people with disabilities and eligible pregnant women. As the nation’s largest health insurance program, Medicaid served approximately 40.6 million adults and 36.8 million children (inclusive of those on CHIP) as of October 2024.
Although Medicaid follows broad federal guidelines, each state administers its program with some flexibility within these parameters. Every state operates under a Centers for Medicare and Medicaid Services (CMS) approved State Plan, which outlines key aspects of its Medicaid program, such as eligibility criteria, covered services, provider reimbursement methodologies and administrative procedures.
Federal law requires states to cover certain mandatory benefits, such as inpatient and outpatient hospital services, physician services, laboratory and X-ray services, home health services, nursing facility services, Early and Periodic Screening, Diagnostic and Treatment (EPSDT) services and tobacco cessation counseling. Additionally, states can offer additional optional benefits, including case management, dental services, health homes for enrollees with chronic conditions, and hospice care, among others. This structure allows states to tailor their Medicaid program to meet the specific needs of their populations while ensuring compliance with federal requirements. Medicaid is jointly funded by the federal government and state governments. The federal government pays a percentage of the program’s costs and states pay the rest.
Medicaid: Two Evolutions in the Program
Greater Reliance on Managed Care
Over the past decade, Medicaid has largely transitioned from a fee-for-service (FFS) program to a program that relies on managed care to deliver services; forty states and D.C. now contract with MCOs, and 72% of Medicaid beneficiaries nationwide are enrolled in managed care plans. With managed care, states pay MCOs a capitated rate for each Medicaid enrollee (a fixed fee per enrollee). This financial structure incentivizes MCOs to prioritize preventive care and avoid costly hospitalizations.
Forty states and D.C. now contract with MCOs, and 72% of Medicaid beneficiaries nationwide are enrolled in managed care plans.
Consequently, MCOs are increasingly tailoring their benefits to manage costs by covering HRSN-related services. Some states require that MCOs support, engage or incentivize providers to participate in HRSN activities for Medicaid enrollees. These activities include housing navigation services, medically tailored meals, medical nutrition therapy, community-based wraparound services and partnerships, crisis stabilization services, family counseling and enhanced care management and coordination. For example, Arizona requires MCOs to pay community-based organizations (CBOs) and other eligible providers an enhanced rate for using a closed-loop referral system to screen patients for their HRSNs. LSA member organizations have strong partnerships with Medicaid managed care organizations, community-based providers, and social service agencies to support children and families through integrated care models that address physical and behavioral health needs.
Lutheran Family Services of Nebraska (LFS): Advancing Behavioral Health through a Medicaid Health Home
LFS’s programs are designed to address health and health-related social needs across the lifespan. Since 2016, LFS has partnered with Optum, a Medicaid managed care organization in Nebraska to operate an integrated behavioral health home for individuals with high acuity conditions, including behavioral health challenges, who are high utilizers of care.
In this partnership, LFS provides Optum members a variety of services including comprehensive care management, care coordination as well as linkages to community and social supports. This initiative provides LFS with capitated per-member per-month payments while incentivizing LFS to produce better outcomes as measured by various Optum selected Healthcare Effectiveness Data and Information Set (HEDIS) and other quality metrics. In exchange for improved outcomes and certain cost efficiencies, LFS is provided with shared savings performance bonuses.
Value-Based Care and Increased Flexibilities for Addressing HRSNs
Also, over the past decade, in tandem with the shift to managed care, Medicaid payment reforms have moved away from volume-based models and toward value-based care, focusing on quality and efficiency rather than service quantity. States have implemented several innovative strategies within Medicaid managed care to support this transformation:
- One approach is State-Directed Payments, where states design payment models and require MCOs to adopt them within a defined structure.
- Another method involves Flexible Value-Based Approaches, in which states mandate that a portion of Medicaid spending be allocated to Alternative Payment Models (APMs), or payment methods that encourage healthcare providers to offer high-quality, cost-efficient care.
- One form of APMs includes Accountable Care Organizations (ACOs), which consist of clinicians, hospitals and other health care providers that are responsible for coordinating health care services for the individuals to whom they provide care. ACOs get paid in a way that motivates lower costs and higher health care quality with a focus on interventions that prevent illness.
Lutheran Social Services of Illinois (LSSI): Improving Health Through Value-Based Care
Lutheran Social Services of Illinois is a founding member of the Illinois Health Practice Alliance (IHPA), partnering with MCOs like Centene, Meridian, County Care, Aetna and other social services and health care provider organizations. IHPA was developed to transform the state’s outpatient behavioral health network to deliver better value for patients, providers and payors. Through a value-based care model that allows partners to meet performance metrics in exchange for shared-savings, LSSI and other partners are seeing rewards for their performance. For instance, between 2021 and 2023, IHPA produced numerous HEDIS quality-care measurements that were in the 90th percentile nationally and, in the first year of operation, providers saw a 32% improvement in completed care transitions and a 41% improvement in completed risk assessments.
Lutheran Social Services of Northern California (LSS): A Trusted Community Partner
Since 2022, through their partnership with MCOs under California’s $10 billion CalAIM Medicaid transformation initiative, LSS of Northern California has used data from the state and MCOs to identify Medicaid enrollees at risk of homelessness. Upon identifying these enrollees, LSS of Northern California provides Enhanced Care Management (ECM) and Community Supports (CM) such as housing stabilization and medically tailored meals to create a more coordinated, person-centered and equitable health system in California. The partnerships with MCOs under CalAIM have helped better position LSS for future collaborations with managed care organizations, including overcoming administrative challenges collecting reimbursement.
In Massachusetts, a state that heavily utilizes ACOs that have been approved via a section 1115 Medicaid waiver, ACOs seek to address HRSNs including housing and nutrition by partnering with social service organizations. ACOs in the state are required to screen members every year for HRSNs and are either rewarded or penalized financially for performance on various quality metrics, including numerous HEDIS measures.
By integrating value-based care models, Medicaid has strengthened its ability to improve care delivery to drive better health outcomes and cost efficiency. LSA member organizations have played a pivotal role in collaborating with MCOs to integrate value-based payment models, enhance behavioral health care delivery, achieve quality outcomes, and earn savings through performance-based rewards.
As states transition to value-based care, they are increasingly integrating HRSNs into Medicaid and managed care programs to improve outcomes and reduce costs, with some programs directly funding HRSN services. CMS advanced this effort by releasing the Medicaid and CHIP Health-Related Social Needs Framework in 2023, which guides states on integrating social care into healthcare delivery. Although CMS recently rescinded this guidance on March 4, 2025, they remain committed in supporting state innovation to improve the Medicaid program and will continue to evaluate state HRSN-related applications on a case-by-case basis.
As states transition to value-based care, they are increasingly integrating HRSNs into Medicaid and managed care programs to improve outcomes and reduce costs, with some programs directly funding HRSN services.
States can use various authorities—including home- and community-based services (HCBS) waivers, managed care flexibilities, and Section 1115 demonstrations—to address HRSNs. Early adopters like North Carolina, Oregon and California pioneered Medicaid-funded HRSN services, focusing on housing, nutrition and transportation support. Other states, including California, New York, Oregon, Colorado, Kentucky, Florida, Rhode Island and Massachusetts, have used Medicaid waivers to expand access to medical services, including substance use disorder (SUD) and mental health treatment, HIV/AIDS services and extended postpartum care coverage. While the future of HRSNs initiatives remains unclear, it is important to note that the focus on HRSNs began under the first Trump administration. As Medicaid continues to evolve into a program that prioritizes value and innovation to improve outcomes and contain costs, the Trump administration is likely to embrace community partnerships, including partners like LSA.
As states increasingly prioritize care models that integrate physical, social and behavioral health services, Medicaid MCOs can leverage LSA’s expertise and local networks of trusted health and social service providers to deliver targeted, community-based HRSN services that improve health outcomes for their members and reduce healthcare costs.
LSS of Wisconsin and Upper Michigan (LSS): Advancing Behavioral Health Through Innovative Partnerships
Since 1882, LSS has provided critical supports to the communities it serves. Despite this success, LSS has in the past several years expanded services, improved health outcomes through strategic initiatives, including partnerships with Medicaid managed care organizations.
LSS’ Healthcare Partnership, launched in 2022, consists of LSS-network providers who care for children with significant behavioral health conditions who are assigned to a Medicaid MCO. The program utilizes intensive case management as well as skill development, medication management and linkages to community and social services.
The Partnership has seen declines in total cost of care, inpatient admissions and 30-day readmissions while reducing costs for both LSS and the MCO with which they partner. Additionally, LSS’ focus on in-house data analytics and performance measurement/evaluation has positioned the organization to continue investing in programs and partnerships that yield results while eliminating services that lacked promising outcomes. Consequently, LSS has improved quality-of-life and satisfaction for clients.
Strengthening LSA's Medicaid Partnerships for Sustainable Impact
LSA member organizations have a long-standing history of addressing social services for individuals, including those historically eligible for Medicaid. They have successfully adapted to evolving policy landscapes, consistently providing integrated social and healthcare services. By leveraging value-based care, data analytics and community-centered interventions, LSA member organizations are establishing a model for sustainable, impactful Medicaid partnerships that enhance care for millions of individuals needing support. Continued investment in these partnerships will be essential as Medicaid evolves to better meet the comprehensive needs of the populations it serves.
Next up: A Deeper Look at LSA Member Organization Approaches
The next issue brief will provide more detail into the innovative approaches that LSA member organizations are implementing, partnering with Medicaid MCOs to improve health and behavioral health outcomes for children and families.
About this Project
Lutheran Services in America (LSA), in partnership with United Healthcare (UHC), is embarking on a multi-year initiative to reshape and foster alignment between health and social care systems to strengthen families.
About Lutheran Services in America
LSA–the 19th largest charity in the country–is rooted in a century-long faith tradition of service in, with, for and to the community. Through its nationwide network of more than 300 independent faith-based health and human service providers, LSA works in 46 states, Washington, DC and Puerto Rico, and reaches six million people annually: 1 in 50 people in America, in 1,400 communities, with more than 250,000 dedicated employees.
With a commitment to whole-person, whole-community care, LSA utilizes its national member network to identify emerging policy and practice trends, make targeted investments to test innovative approaches, assess opportunities for scaling successful initiatives, evaluate outcomes and share best practices with stakeholders across the health and human services sector.
Acknowledgments
Special thanks to Katie Horton, JD, RN, MPH, Naomi Seiler, JD, Mekhi Washington, MPH and Aaron Karacuschansky, MPH at the Department of Health Policy and Management, Milken Institute School of Public Health at George Washington University for their research and contributions to make this brief possible. Thanks also to John Capecci of Capecci Communications for his efforts in narrative framing to support the development of this issue brief.
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