Executive summary
State Medicaid agencies oversee one of the largest public investments in healthcare, accounting for almost 30% of state expenditures.1 In fiscal year 2024, Medicaid spending reached $919 billion, including administrative costs and programs across the U.S. and its territories.2 These dollars support care for more than 70 million people, among them 40% of all children and 60% of all nursing home residents.3
Federal agencies and Congress have recently introduced new policies to expand member access to Medicaid providers, improve care quality, and increase accountability for Medicaid-funded services.4 New federal regulations from the 2024 Centers for Medicare & Medicaid Services (CMS) final rule mandate that, by 2028, states that contract with managed care organizations (MCOs) to deliver Medicaid and Children’s Health Insurance Program (CHIP) services must implement a quality rating system (QRS). Each state’s QRS must provide a publicly accessible state-run website displaying standardized quality information (stratified by race and ethnicity) about managed care plans. The goal of the QRS is to significantly increase transparency, equity, and fiscal accountability in managed care.5
As Medicaid programs become more complex and federal regulations intensify, agencies may be looking for ways to improve how they oversee managed care and use data to guide their decisions. Performance management refers to the improved use of data, performance measures, targets, and feedback loops to closely monitor program operations, assess whether desired outcomes are being achieved, and inform decision making and continuous improvement. In the context of Medicaid managed care, performance management goes beyond compliance and can be used to drive measurable improvements in access, quality, and value. This whitepaper outlines current challenges agencies may face in Medicaid management; explains why performance management matters; and offers strategic considerations and potential mitigation strategies to help states strengthen oversight, work toward measurable improvements, build stronger partnerships with MCOs, and improve outcomes for members they serve.
Introduction: The evolving expectations for state Medicaid agencies
State Medicaid agencies manage one of the nation’s largest and most complex public health benefit programs. They play a critical role in their oversight to help millions of residents receive high-quality, equitable care while also demonstrating how these public funds are being used to achieve a tangible, measurable impact. But traditional oversight models—focused mainly on compliance, documentation, and meeting basic reporting requirements—may not be enough to address the evolving expectations of Medicaid.
Today, states need a more proactive, performance-driven, and results-focused approach. This means using and leveraging existing data, implementing stronger analytics, and using real-time monitoring to not only comply with regulatory requirements but also drive real improvements in outcomes, reduce disparities, and maximize value from Medicaid spending.
To do this effectively, agencies may consider several key questions:
- How well are MCOs meeting the needs of diverse populations across the state?
- Do current contracts and systems enable the state to achieve the best value in healthcare purchasing and improve health outcomes for Medicaid members?
- Can the agency clearly demonstrate the impact of the Medicaid program to policymakers, stakeholders, and the public?
Answering these questions may be difficult for many state agencies due to staffing challenges, complex roles and responsibilities, fragmented data systems, and limited analytic capability. Yet, with performance management tools and strategies grounded in timely, actionable data, agencies can turn oversight into a powerful driver for continuous improvement, stronger partnerships with MCOs, and better results across the Medicaid program.
Common challenges state Medicaid agencies face in performance management
Medicaid agencies work in an increasingly complex environment where they are expected to be more accountable and achieve better results, but often have limited resources and capacity. Some common challenges that make it hard for these agencies to focus on optimizing performance management include the following.
- Increased federal requirements: Expanding federal reporting requirements and evolving regulations require substantial time and effort from agency staff.
- Staffing constraints: Staff shortages and frequent turnover in a complex work environment can make it difficult to maintain oversight and improve programs.
- Evolving management expectations: Agencies are increasingly encouraged to move beyond compliance, and shift to proactively managing performance and seeking measurable improvements. This shift may require new skills and a culture that supports continuous improvement.
- Limited data tools: Many agencies lack the tools and capacity to translate raw data into actionable information, with reporting often completed to meet federal requirements rather than used for oversight and monitoring to drive improvement.
- Fragmented systems: Data is often siloed and stored differently across state agencies and programs, making it difficult to share information or understand the full picture of overall performance. Moreover, while multiple state agencies often work toward similar goals, they may not always be aware of opportunities to collaborate or do so often.
While these challenges are reality, they can be overcome with the right tools and support.
Why improving state Medicaid performance management matters
Agencies have an important job—not just following rules, but making smart decisions, managing risks, and building strong partnerships with MCOs. Information-driven performance management helps agencies spot problems and concerns early on, gain more value from contracts, and focus attention where it can have the biggest impact. Improving performance management is critical for the following reasons.
- Changing requirements: New federal rules mean states must report more clearly on how Medicaid funds are spent and what results are achieved.
- Better use of data: When agencies use data effectively, leaders can make more informed decisions and measure real improvements.
- Greater transparency: Medicaid programs may face greater scrutiny with more public reporting, making it important to show efficient spending and strong outcomes.
- Better oversight: For states with managed care, MCOs play a major role in delivering care, and their contracts make up a significant portion of most state budgets. States need to actively monitor these contracts to review access, quality, and equity. It is critical to provide oversight for these large contracts.
By using data and analytics in everyday operations, agencies can move beyond meeting federal reporting expectations. They can show measurable results, improve access, and make their programs more efficient. With modern performance management, agencies can turn today’s challenges into real, lasting improvements that state leaders can proudly champion.
Potential strategies for mitigating challenges in managed care oversight
Challenge: Staffing constraints
Potential mitigation strategy: Understand the federal shift—the rules are changing for state Medicaid agencies
The landscape of Medicaid managed care is entering a period of accelerated change driven by a wave of new federal regulations that will fundamentally redefine how states oversee health plans, assess quality, and communicate program performance to the public. These new requirements represent a major shift in how Medicaid programs are expected to collect, analyze, and publish data. As federal expectations evolve, agencies must be prepared to address the heavier administrative burden that will be required by these new data analytics. States may need to build the infrastructure, workforce capacity, and analytic rigor needed to meet a much higher standard of transparency and accountability.
A central element of this federal shift is the establishment of a core set of standardized performance measures. Fifteen adult and child core quality measures6 will anchor national comparison and reinforce consistency across states.7 For many Medicaid agencies, this could represent a substantial expansion in analytic work, requiring cleaner data, improved interoperability across systems, and deeper collaboration with MCOs and providers.
Another transformative requirement is the implementation of the Medicaid and CHIP QRS, which must be made available on public-facing interactive dashboards.8 These dashboards will give beneficiaries, advocates, legislators, and other stakeholders direct visibility into how MCOs perform on key metrics. To support this level of transparency, states must ensure they are producing timely, accurate, and meaningful data, which may require modernizing legacy data systems, purchasing new systems, enhancing data validation processes, and improving coordination with external partners.
In addition, states will be expected to exercise more rigorous oversight of MCO operations. This includes maintaining accurate and up-to-date provider directories; monitoring plan performance across required quality measures; and using comparative quality data to identify disparities, target improvement efforts, and hold plans accountable for outcomes.7 These requirements move states beyond compliance-based oversight into a more sophisticated purchasing role, with an emphasis on value, access, and measurable outcomes.
Taken together, these federal changes signal a new era of performance management centered on quality and transparency. States that invest in analytics, system modernization, and cross-agency alignment could be better positioned to meet regulatory expectations while driving meaningful improvements in care for Medicaid enrollees. Those that do not may struggle to keep pace with the increasing expectations for managed care programs. By modernizing performance management now, states can strengthen their role as prudent purchasers; enhance the value of public investment; and build a more transparent, equitable, efficient, and effective Medicaid system.
Challenge: Increased federal requirements
Potential mitigation strategy: Prepare for transparency—the public is paying attention to state Medicaid agencies and federal requirements
As federal requirements push Medicaid programs toward greater transparency, agencies must prepare for a new era in which program performance is increasingly visible to beneficiaries, policymakers, and the public. Public-facing dashboards and a QRS bring a level of scrutiny that has not generally been a part of Medicaid oversight. These tools are designed to illuminate how well MCOs are performing and how effectively states are ensuring access, equity, and quality across their programs.
This new transparency introduces both risks and opportunities. On one hand, inaccurate, incomplete, or delayed reporting can undermine public trust—especially when dashboards or websites reveal inconsistencies across plans or regions. For example, the accuracy and timeliness of published information may affect the credibility of the agency. States that roll out public-facing performance tools without investing in data integrity, validation processes, and clear communication run the risk of escalating issues rather than building confidence.
On the other hand, transparency can serve as a powerful catalyst for improvement. When performance data is made public, it could encourage healthy competition between MCOs, motivate internal improvements, and demonstrate the state’s commitment to accountability. In addition, public reporting aligns with CMS’ priorities regarding access, equity, and fiscal stewardship, allowing leaders to demonstrate progress to state legislatures, federal partners, and the communities they serve. By shining a light on areas that need attention, transparency may help states to focus resources on the populations and services that need them most.
States that embrace transparency thoughtfully, and invest in comprehensive reporting systems and user-friendly public tools will set a new standard for accountable Medicaid governance. Transparency can become a strategic asset by strengthening public trust.
Challenge: Staffing constraints
Potential mitigation strategy: Recognize the core challenges facing state Medicaid agencies
Heavy administrative workloads—increased by new reporting requirements, more documentation standards, and more data analytics—further strain an already short-staffed system. While federal expectations are changing quickly, many agencies may be operating with the same resources, staffing levels, and system constraints that make it difficult to meet these demands. Before states can improve performance management, they must confront a set of structural challenges within their agencies. Understanding these barriers is essential to designing solutions that are both effective and sustainable.
One of the most pressing challenges is often limited staffing capacity. Medicaid teams are generally responsible for a vast range of operational and oversight duties, including contract management, rate development, eligibility, quality reporting, and federal compliance. With constrained bandwidth and employee turnover, agencies may struggle to maintain continuity, let alone shift toward a more strategic and data-driven mindset. Performance management can easily become a secondary priority when day-to-day operational demands consume most available resources.
A second challenge lies in analytic capability. While Medicaid generates extensive data across programs and service areas, and agencies submit required reports annually, they may lack the time and tools needed to integrate, interpret, and act upon existing data. Skills in predictive analytics and quality measurement are essential for information-driven oversight, but staff with these skills might be unevenly distributed across agencies. This challenge can become exacerbated by fragmented program responsibilities, where critical data and insights are scattered across divisions, teams, and even external partners or vendors.
Agencies may not have the ability to fully address staff capacity challenges through additional hiring. One strategy to increase capacity without adding staff is to improve efficiency through internal process improvement. This could include improved data collection and review processes, which may allow states to synthesize data more efficiently.
Challenge: Evolving management expectations
Potential mitigation strategy: Move beyond compliance toward performance leadership
Traditionally, many agencies have focused on making sure MCOs follow contract requirements: submitting reports, meeting contract terms, and sticking to federal guidelines. While compliance is necessary and important, it may not lead to better care or real improvements for Medicaid members. As expectations grow, states will need to shift from compliance to identifying measurable improvements, determining strategic action, and requiring accountability at the heart of oversight.
To become performance leaders, agencies could link oversight activities directly to outcomes that matter. Instead of focusing solely on whether MCOs complied with their contracts, states may examine whether those contractual provisions are translating to improved member access, better clinical results, enhanced member experience, more efficient costs, and reductions in disparities. This focus requires reframing oversight as identifying continuous improvement, not just monitoring for problems. Key strategies for performance leadership could include the following.
- Aligning contracts with clear goals and outcomes: Contracts with MCOs could include specific results that states expect, such as better health for a specific population or age group, increased equity, or cost savings. These goals can be supported by performance measures that reflect the needs of members and communities.
- Use performance incentives: Consider linking part of MCO payments to achieving key outcomes. Incentives that are challenging can motivate MCOs to go beyond basic requirements and strive for excellence.
- Establish a regular performance review cycle: Set up a structured process for reviewing MCO performance on a regular basis to assess progress, identify challenges, and adjust goals as needed.
- Create dedicated oversight teams: Form teams focused on monitoring contracts and analyzing data. These teams can foster collaboration with MCOs and encourage ongoing dialogue and regular feedback loops that help all parties work together to solve problems and raise standards.
- Leverage advanced data analytics: Use data not just for tracking compliance, but to guide program strategy. Data can help uncover issues, compare performance across regions or groups, and target interventions where they are needed most.
By adopting these strategies and focusing on outcomes, agencies can move from a compliance-driven approach to performance-centered leadership. This shift could help Medicaid investments deliver measurable results and yield measurable impacts.
Potential mitigation strategy: Follow a strategic road map for implementation
Rethinking performance management strategies in Medicaid requires a deliberate, phased approach that balances ambition with the practical realities of agency capacity. A strategic road map may help states make meaningful progress without overextending resources or overwhelming staff. By creating manageable steps, agencies can build sustainable systems while demonstrating early success that reinforces progress and momentum.
States could begin with a comprehensive needs assessment to evaluate existing systems, as well as understand staffing levels and capacity, how and when data flows, and current performance levels. This foundation may enable agencies to understand where resources are most needed and which areas will have the greatest impact if strengthened.
Once gaps and priorities are clear, states may define strategic measures and improvement targets as goals to provide clear direction for the agency, its partners, and the MCOs. Goals that are measurable and actionable with clear benchmarks can create accountability and a shared understanding of how to define success.
Action planning may follow, with goals translated into an operational framework. This may include establishing communication protocols, determining a reporting cadence, and developing dashboards and scorecards. Effective planning is critical to capture, analyze, and use performance data to drive decisions at all levels of the agency.
States could then use this information for ongoing monitoring and improvement. States must continuously track performance, refine strategic goals based on results, and further scale practices that demonstrate high impact. By embedding a feedback loop into operations management, SMAs may be better able to foster a culture of continuous improvement.
Finally, performance expectations may be integrated into future MCO contracts and procurement cycles. By aligning contractual obligations with strategic performance goals, states can ensure that oversight is not only proactive but also embedded into the ongoing operations of managed care. Following a systematic, phased road map may transform the daunting task of performance management into small, manageable steps toward success.
Challenge: Limited data tools
Potential mitigation strategy: Build a data-driven performance management system that incorporates measurement into a Medicaid agency management tool
Performance management must do more than collect data; it must transform the data into meaningful insights that guide decision making, identify gaps and disparities, and drive improvement. Improved oversight relies on enhanced analytics, timely information, and tools that help agencies interpret the data. But data collection alone is not enough; measurement must become a central management tool. Metrics can be designed to prompt action, not simply populate static reports.
Dashboards, interactive scorecards, automated reporting systems, and integrated data platforms could create the infrastructure needed for states to quickly and effectively monitor trends, track progress, and identify emerging issues before they escalate. When used effectively, data enables agencies to quickly identify gaps in access, reveal disparities across populations and locations, and pinpoint where there is room for improvement. These insights can help states differentiate between isolated issues and systemic patterns, allowing them to prioritize efforts and deploy resources more strategically.
Incorporating measurement into a management tool also strengthens continuous quality improvement. When performance results are regularly analyzed, shared, and discussed, a feedback loop is created that drives more effective oversight that could lead to more responsive policymaking. Furthermore, staff across the agency—from clinical quality teams to contract managers to executive leadership—would be able to access timely, relevant data that informs their work and the overall Medicaid program. Embedding performance data into routine workflows allows decisions at every level to be grounded in evidence, aligned with overall program goals, and responsive to the needs of Medicaid beneficiaries.
By integrating advanced analytics with actionable measurement, agencies can evolve into a dynamic, data-informed model of governance. This approach not only enhances accountability but also positions states to elevate the overall value of Medicaid managed care.
Challenge: Fragmented systems
Potential mitigation strategy: Strengthen interagency and MCO collaboration
Effective performance management in Medicaid cannot happen in isolation. Agencies operate within a broader ecosystem of public health, behavioral health, social services, and workforce agencies, all of which shape the health and well-being of beneficiaries. As Medicaid populations grow increasingly complex, coordination with other state agencies becomes essential. Shared governance structures, interagency work groups, and joint initiatives help break down silos and create a unified approach to improve health outcomes. Cross-agency data sharing, when done securely and strategically, enables states to paint a more complete picture of member needs and target interventions more precisely.
Collaboration is equally important when working with MCOs. While MCOs are contracted vendors, they also serve as key partners in implementing the state’s vision for access, quality, equity, and cost stewardship. Viewing MCOs solely through a compliance lens limits the potential for innovation and collective problem-solving. Instead, regular communication, shared performance goals, and co-developed improvement strategies can strengthen alignment and accelerate results. When states and MCOs work together toward common priorities like improving care transitions or enhancing maternal healthcare, performance management becomes a lever for system transformation rather than oversight.
By fostering collaboration across agencies and MCOs, states can create a stronger, more integrated framework for addressing complex challenges. This approach allows Medicaid programs to pool expertise, coordinate resources, and respond effectively to the needs of the population. Collaboration is foundational to achieving sustainable improvements in managed care.
Conclusion: Why state Medicaid agencies must focus on performance management
Medicaid represents a large portion of state expenditures, and state Medicaid agencies must ensure that program oversight and MCO contracts deliver meaningful outcomes. Even incremental improvements in performance can influence spending, health outcomes, and equitable care delivery. A modernized performance management system enables states to demonstrate measurable return on investment, strengthen accountability, and achieve tangible results for executive leadership and the public alike.
In today’s environment of rising costs, evolving federal requirements, and heightened public scrutiny, performance management is no longer optional; it is a strategic imperative to mitigate risk for the state. By shifting from compliance-focused to information-driven oversight, states can improve transparency, address disparities, and help ensure that every dollar invested yields measurable value.
With the right tools, clear priorities, and strategic partnerships, agencies can transform oversight into an engine for continuous improvement and innovation. At a time when Medicaid represents nearly one-third of state budgets nationwide, the question is not whether to evolve, but how to evolve quickly and effectively to maximize valuable impacts.
Agencies interested in learning more about strengthening performance management in Medicaid managed care can contact their Milliman consultant or the authors of this whitepaper for more information.
1 National Association of State Budgets. (2024). 2024 state expenditure report, fiscal years 2022–2024. Retrieved January 16, 2026, from https://higherlogicdownload.s3.amazonaws.com/NASBO/9d2d2db1-c943-4f1b-b750-0fca152d64c2/UploadedImages/SER%20Archive/2024_SER/2024_State_Expenditure_Report_S.pdf.
2 KFF. (n.d.). Total Medicaid spending. Retrieved January 16, 2026, from https://www.kff.org/medicaid/state-indicator/total-medicaid-spending/?currentTimeframe=0&sortModel=%7B.
3 American Hospital Association. (February 2025). Fact sheet: Medicaid. Retrieved January 16, 2026, from https://www.aha.org/fact-sheets/2025-02-07-fact-sheet-medicaid#:~:text=Medicaid%20is%20a%20joint%20federal,of%20all%20nursing%20home%20residents.
4 National Association of Medicaid Directors. (May 27, 2024). New requirements for all state and territory Medicaid programs. Retrieved January 16, 2026, from https://medicaiddirectors.org/resource/new-requirements-for-all-state-and-territory-medicaid-programs/.
5 Centers for Medicare & Medicaid Services. (April 22, 2024). Medicaid and Children’s Health Insurance Program Managed Care Access, Finance, and Quality Final Rule (CMS-2439-F). CMS.gov. Retrieved January 16, 2026, from https://www.cms.gov/newsroom/fact-sheets/medicaid-and-childrens-health-insurance-program-managed-care-access-finance-and-quality-final-rule.
6 CMS officially treats CAHPS as one grouped measure in the mandatory measure set.
7 Center for Medicaid and CHIP Services. (Updated August 27, 2025). Medicaid and Children’s Health Insurance Program (CHIP) Quality Rating System (MAC QRS) Measurement Year (MY) 2026 Initial Technical Resource Manual. Medicaid.gov. Retrieved January 16, 2026, from https://www.medicaid.gov/medicaid/quality-of-care/downloads/my2026-tech-res-manual.pdf.
8 Centers for Medicaid & Medicare Services. (n.d.). Medicaid and CHIP Quality Rating System. Medicare.gov. Retrieved January 16, 2026, from https://www.medicaid.gov/medicaid/quality-of-care/medicaid-managed-care-quality/quality-rating-system.