Medicaid Directors: High Turnover Impedes Success
America’s Medicaid programs have a big problem; but not for the reasons you might think. One of the most underappreciated, under-reported, and consequential challenges facing Medicaid programs across the country is the significant level of leadership turnover. Among the 51 programs across the country — including all 50 states and the District of Columbia — the median tenure of a Medicaid Director is less than two years. 70 percent of Medicaid Directors have been in their positions for under three years and fewer than 15 percent have been on the job more than five. Not only does high turnover inhibit growth, stability, and the strategic direction of the Medicaid program, but it also creates systematic gaps in the experience and competencies of leaders responsible for a program that often makes up majority of state budgets.
19 new Medicaid Directors have taken office since last year’s midterm elections. Texas, with one of the largest Medicaid programs in the country to its name, has seen four Medicaid Directors since 2015. Similarly, Illinois is on its fifth Medicaid director since 2014. Because many Medicaid Directors are appointed, political turnover often creates volatility in leadership. With such high directorship churn, the enormous challenge of successfully leading a Medicaid program — already perpetually underfunded and infinitely complex — becomes even more challenging.
Medicaid Directors: An Overview
Medicaid provides health insurance coverage for approximately 76 million individuals, representing roughly 23 percent of all Americans and 17 percent of the nation’s total health expenditures. Spending on the Medicaid program was north of $625 billion in 2018, and annual growth is high — spending is projected to reach $1 trillion by 2026. The median Medicaid spend by state is $8 billion. On average, 1,050 full-time employees work for an individual state’s Medicaid program — for comparison, the ten Fortune 500 companies closest to $8 billion in annual revenue have 23,000 full time employees. When federal Medicaid funding is included, the program is often the largest item in a state budget.
While states split program costs with the federal government, they are largely responsible for program administration and design. A Medicaid Director bears responsibility for defining covered populations, structuring benefits, validating provider qualifications, operating delivery systems, managing utilization, determining participant eligibility, measuring quality, and implementing enrollee protections to ensure program integrity. In addition to the myriad of responsibilities, Directors are charged with the care of some of the most vulnerable populations across the country, including dual-eligible beneficiaries (12 million individuals who qualify for both Medicaid and Medicare), babies (Medicaid is the primary source of coverage for more than forty percent of babies born in the U.S.) and individuals with behavioral health and substance abuse issues (the program covers forty percent of adults addicted to opioids in the U.S.). The charter is ambitious and these programs are often under-resourced.
The Challenge Of High Turnover
Forty-six of the fifty-one Medicaid programs would qualify for the Fortune 1000 list. Given their size alone, comparing Medicaid Directors to CEOs of large managed care companies is far from unreasonable. The average tenure of the CEOs of the five largest private managed care companies in the U.S. is six years — more than double that of Medicaid Directors. For Fortune 1000 CEOs, average tenure was eight years in 2016, nearly quadruple the tenure of a Medicaid Director.
What are the consequences of accelerated turnover, particularly for the integrity and solvency of the Medicaid program? Data suggests that high turnover at publicly traded companies disrupts their ability to grow, maintain profitability, develop talent, retain employees, and manage risk in increasingly competitive and complex environments. Studies have shown that equity-return volatility increases significantly — between 2% to 10% — for voluntary CEO departure and inside succession. For forced turnover, which could be reasonably compared to when a candidate from a different party wins a Governorship and replaces a Medicaid Director, volatility increases between 17% and 24%.
The National Association of Medicaid Directors (NAMD), a professional organization bringing together Medicaid Directors from across the country, highlighted the challenges of Director turnover in their most recent annual report:
[High Director turnover] becomes particularly problematic when one considers the multi-year process of operationalizing strategic plans, investing in relationships, communicating a common vision, and implementing systems and infrastructure, not to mention workforce culture and morale.
Turnover represents an existential threat to the integrity and efficiency of the Medicaid program, and is particularly challenging at a time when Medicaid reconfiguration and expansion has made strong leadership capabilities a necessity.
There are a multitude of factors driving the high rate of Medicaid Director turnover. Beyond involuntary change (for example, through elections of new Governors), Directors are faced with resource constraints, high staff turnover, and increased politicization of the program. Compensation has also not kept pace with the growing responsibilities and scope of the program. The average salary for a Medicaid Director is $155,000 — well below the average of Corporate CEOs, Health System CEOs, or even public University Presidents who average $520,000. While many Medicaid Directors are fundamentally mission-driven and service-oriented, retention becomes exceedingly challenging, particularly with the threat of compelling private sector offers.
There are ongoing efforts to combat Medicaid Director turnover at the national and state level. Several national organizations, including NAMD, have created leadership development programs in an attempt to improve leadership continuity and promote best practices. Individual states like Florida and California have initiatives within their own programs to better educate staff and develop internal leaders.
While these programs may begin to address the challenge of turnover, there is more work that can be done. Healthcare stakeholders should understand how to partner with Medicaid programs and build relationships with Medicaid Directors in their joint aims to lower healthcare costs and improve quality. Awareness of the turnover issue is also relevant in states that have had more stability in the Medicaid Director position, as states often draw on experiences and ideas generated by peer Directors.
While Medicaid design, eligibility, and purpose will continue to be politicized for the foreseeable future, one area where there should be agreement by all parties is the need to generate more continuity and longevity among the leaders of these critical programs.
Special thanks to Tom Betlach, former Director of the Arizona Health Care Cost Containment System and Matt Salo, Executive Director of the National Association of Medicaid Directors for their input and feedback.