TECH – Startups Should Stop Being Afraid of Innovating the Medicaid Space, Exec Says

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[MM Curator Summary]: Oh look! Another Private Equity / VC money guy telling us we all need to get bullish on the last remaining untapped market they are pointing portfolio companies at. Seems legit to me!



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At a recent conference, Yuvo Health CEO Cesar Herrera said he is proud to bring value-based care to Medicaid populations, but he wishes there was more innovation activity dedicated to these beneficiaries. In his view, the main obstacles preventing startups from entering this space are ignorance about how the Medicaid market works and the false belief that they can’t make money in it.


Growing up in Detroit without health insurance, Cesar Herrera struggled to find access to care — his family’s only saving grace was federally qualified health centers. That’s part of the reason he founded his startup Yuvo Health, which is focused on helping FQHCs participate in value-based payment models.

Yuvo contracts directly with payers — including Medicaid, Medicare and commercial health plans for various risk arrangements. The startup then partners with FQHCs, wherein these health centers delegate the risk of their attributed patients to Yuvo. As the company’s CEO, Herrera is proud to bring value-based care to Medicaid populations, but he wishes there was more innovation activity dedicated to these beneficiaries, he said Thursday at HITLAB’s Innovators Summit in New York City.

In his view, there are two main obstacles that prevent startups from launching initiatives or partnering in the Medicaid realm. The first is ignorance. Many people in the healthcare field still lack a developed understanding of what the Medicaid population needs and how Medicaid payment structures work, Herrera declared.



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Organizations have tried doing things in Medicare and translating that into the Medicaid space. Then they say, ‘This doesn’t work in Medicaid,’ and automatically assume it’s because Medicaid is the problem or the communities that are being served by Medicare are a problem — but these are two vastly different populations. What may work in a Medicare population should not and would ever be applicable to a Medicaid population — you have to do something different,” he explained.

The other obstacle preventing innovation in Medicaid is that people assume they can’t make any money in this space due to the fact that Medicaid has much lower premiums than Medicare. 

Herrera doesn’t think this is true, but he said it’s “really hard to compare” opportunities for profit in Medicare versus Medicaid because of “the relative dearth of precedent in the Medicaid innovation space.” He noted that this lack of activity in the Medicaid market has led some healthcare stakeholders to draw the conclusion that Medicaid populations don’t want to be engaged, but he contended that this is not the truth.

Medicaid and CHIP serve about a third of the U.S. population, so there’s plenty of opportunities in every state to try new payment models and create better pathways to care access, Herrera pointed out.



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While the Medicare market has a much more established presence in the value-based care world than Medicaid does, Herrera acknowledged that Medicaid innovation has made some strides in recent years.

“We’re seeing lots of states choosing to be much more innovative —whether proactively by choice or because they have no choice. This is because Medicaid is a third of their budget and they’re trying to figure out how to be financially sustainable with their taxpayer dollars. That’s creating a lot of room for different innovation, which we’re not just seeing in blue states. In many heavily red states, we’re seeing a lot of interesting innovation happening with alternative payment models in Medicaid because they have to be sustainable,” Herrera declared.

Other healthcare stakeholders share Herrera’s view that Medicaid is in dire need of innovation. In April, Justin Norden, partner at GSR Ventures, told MedCity News that companies seeking to innovate the Medicaid space face little competition.

He added that there’s also an “incredible need” for startups to focus on this space, as Medicaid beneficiaries often struggle with care access and poor health outcomes.

“There’s been almost $20 billion in startup investment towards Medicare Advantage which has a roughly $300 million annual budget. This is contrasted with Medicaid, an area that generates almost $700 billion per year in terms of spending in the U.S., and only about $1 billion dollars of startup money is invested in that space,” Norden said.

Photo: zimmytws, Getty Images