The High Cost of Standing Still: How Medicaid Modernization Drives Long-Term Savings

Medicaid spending grew 6.6% to $931.7 billion in 2024, according to CMS. As costs rise, agencies are looking for ways to control spending while maintaining access to high-quality care. Medicaid administrative spending totaled $41.3 billion in fiscal year 2024, according to the Medicaid and CHIP Payment and Access Commission.

Technology investments that reduce repetitive work, simplify processes, and improve operational efficiency can help agencies make better use of those resources.

For agencies facing tight budgets, the challenge is identifying investments that address specific operational needs and deliver measurable savings over time. Four areas offer opportunities: responding to policy changes faster, reducing duplication, automating routine work, and using infrastructure more efficiently.

Respond to Policy and Regulatory Changes Faster

Changes to eligibility rules, reimbursement models, and reporting requirements can require significant time and resources to implement. Rules-based configurability can allow agencies to make some updates without modifying underlying application code.

That flexibility can translate directly into savings.

Faster system changes can reduce rework and administrative costs associated with delayed implementation. When these delays happen, agencies may continue processing claims under outdated rules. Once the change is implemented, affected claims may need to be identified, recalculated, and reprocessed. Overpayments may also need to be recovered, adding staff time and administrative costs.

Delays can also put agencies at risk of missed regulatory deadlines, penalties, or delayed program funding. Federal interoperability and prior authorization requirements, for example, require Medicaid programs and related payers to meet new prior authorization time frames, provide specific reasons for denials, and report certain metrics beginning in 2026, with additional data exchange requirements scheduled for 2027.

Implementing changes sooner can also accelerate the intended benefits of new policies. More accurate eligibility determinations, streamlined reporting, and enhanced care management capabilities can begin delivering value earlier when systems can adapt on schedule.

Reduce Duplication and Complexity

Modernization can also reduce costs created when systems, data, and operational processes do not work well together.

Medicaid agencies often manage technology investments across multiple projects, vendors, and program functions. Coordinating those investments can help agencies identify opportunities to share capabilities and reduce repeated work.

Workflow tools, reporting capabilities, analytics, and operational services may serve similar needs across projects. Planning for those needs together can reduce duplication and make better use of available resources.

Foundational planning and design activities can be shared across projects. Shared infrastructure, consolidated licensing, and streamlined vendor management can further reduce technology and operational costs.

Better-connected systems also improve access to operational data, helping agencies identify opportunities to reduce costs, estimate their potential impact, and measure results.

Automate Repetitive Work

Modernization creates opportunities to automate work that otherwise consumes staff time.

Automated workflows can support routine tasks such as claims validation, eligibility verification, and provider enrollment, reducing manual processing and administrative workload. Artificial intelligence can extend automation to additional processes while allowing staff to focus their time on work that requires human judgment and expertise.

Automation is one contributor to broader operational savings. According to customer data from Gainwell Technologies, these changes can reduce ongoing maintenance and operations expenses by 20% to 25%, when combined with modernization and operational improvements, while improving system flexibility.

Use Infrastructure More Efficiently

Modernization is not simply about moving existing systems onto newer infrastructure. It creates an opportunity to simplify and redesign the technology environment itself.

States can consolidate infrastructure, eliminate unnecessary components, and use cloud resources rather than maintaining physical infrastructure themselves.

Cloud infrastructure can also allow computing and storage capacity to expand as needs change. Instead of purchasing physical infrastructure based on anticipated future or peak demand, agencies can use scalable capacity for appropriate workloads. This can reduce large upfront hardware investments as well as some of the ongoing costs associated with maintaining physical infrastructure.

Turn Modernization Costs into Long-Term Savings

For Medicaid agencies working to control costs, technology investments should be tied to clear operational goals. Faster policy implementation, less duplicated work, greater automation, and more efficient infrastructure use can each contribute to long-term savings.

Evaluating those opportunities against implementation costs can help agencies prioritize investments. Measuring results over time can show where changes are delivering value and guide future spending.

Technology modernization is one part of a broader strategy for reducing Medicaid total cost of care. Read our recent whitepaper to explore additional strategies for controlling costs while maintaining access to high-quality care.