About half of the nine million people who qualify for Medicaid on the basis of disability have a mental illness, and 45% have three or more chronic conditions. “Health homes” are a new state option established by the Affordable Care Act (ACA) to manage and coordinate care and reduce costs for Medicaid beneficiaries with chronic conditions. At least 20 states have shown an interest in health homes, and six have received federal approval for their programs, according to a recently issued policy brief from the Kaiser Commission on Medicaid and the Uninsured. The brief describes ongoing programs in the first four states to receive approval: Missouri, Rhode Island, New York, and Oregon.

Under the ACA, Medicaid beneficiaries are eligible for health home services if they have at least two chronic conditions, or one chronic condition and risk factors for another, or one serious and persistent mental health condition. Services include comprehensive care management, care coordination and health promotion, comprehensive transitional care from inpatient to other settings, patient and family support, referral to community and social support services, and use of health information technology to link services. Services may be provided by a designated health provider, such as a physician practice, a team of health care professionals linked to a designated provider, or a community health team. The 16-page Kaiser brief outlines similarities and differences in the four states' health home programs. For example, all four states have implemented health homes on a statewide basis rather than in a limited geographic area. All four are targeting individuals with serious and persistent mental illness, among other conditions, consistent with the vision of health homes as a mechanism for improving coordination between general medical and mental health services. However, the four states have taken different approaches to designating the entities that can provide health home services and to paying providers, including managed care organizations.

States considering health home programs will face some challenges, according to the brief, particularly from competing health reform priorities. States are facing enormous pressures to address several ACA requirements—expanding state Medicaid programs by 2014, establishing health insurance exchanges, and upgrading information technology systems—at a time when state resources are limited. Even when additional federal support is available, states must decide how to prioritize the ACA opportunities that they will pursue. States receive a 90% federal match rate for health home services during the first two years that a health home plan is in effect; however, to ensure continued state funding at the regular match rate once the enhanced federal match expires, states must establish a mechanism for identifying the savings attributable to their health home initiatives. In addition, states must decide on the role of health homes in evolving delivery systems. For example, how will health homes fit into or coordinate with capitated Medicaid managed care organizations?

Health homes hold promise for improving care and outcomes for Medicaid beneficiaries with chronic conditions, the brief concludes. Lessons learned by the early-adopter states can provide other states with a menu of options in designing their own programs and may also guide broader system reforms aimed at delivering more coordinated and effective care for those with the most complex needs. The policy brief is available on the Kaiser Web site at www.kff.org/medicaid/upload/8340.pdf.