ZIP Code and Race Shouldn’t Determine a Child’s Health: How Medicaid Must Lead the Shift to Outcomes-Based Pediatric Care

Chicago is a city of glaring health disparities. While it boasts world-class healthcare institutions and serves as the headquarters for the American Medical Association (AMA) and the American Academy of Pediatrics (AAP), its underserved neighborhoods tell a different story. The AMA’s recent study on maternal health in Chicago highlights how stark differences in health outcomes are shaped by ZIP code, race, and socioeconomic status (SES). Black women are six times more likely to die from pregnancy-related complications than white women, and their children often face delayed care, missed vaccinations, and preventable hospitalizations. In many low-income neighborhoods, Medicaid-dependent families struggle to find pediatricians, specialists, and preventive services. These areas are deserts for high-quality care, leaving children and families in a vicious cycle of poor health outcomes that begins at birth and extends throughout their lives. These disparities reflect a broader population health crisis: the social and economic conditions in which children live are among the most powerful predictors of their health, and yet our healthcare system remains unequipped to address them.

These population health challenges are not unique to Chicago. Across the country, Medicaid-dependent children from marginalized communities face far worse outcomes than their peers. States with high Medicaid enrollment, such as Mississippi and Louisiana, consistently report some of the worst maternal and pediatric health statistics. Racial and economic inequities are compounded by Medicaid’s outdated fee-for-service payment model, which rewards high volumes of care instead of meaningful improvements in health. Pediatricians are paid far less to care for children with complex needs tied to poverty, food insecurity, and housing instability, while systemic barriers like transportation challenges and health literacy gaps leave families unable to access or follow through with care. If Medicaid is to fulfill its mission, it must prioritize population health and lead the way in addressing these disparities by shifting its focus to outcomes-based payment, preventive care, and team-driven solutions that tackle the root causes of poor health.

The AMA Study: Exposing the Population Health Crisis in Pediatrics

The AMA’s recent study on maternal health in Chicago is a case study in how disparities rooted in race, geography, and socioeconomic status lead to worsening health outcomes. It shows that maternal morbidity and mortality rates are disproportionately high for Black women, even when insurance status and income are accounted for. Systemic racism in healthcare, including implicit bias and lack of investment in communities of color, results in higher rates of life-threatening complications during and after pregnancy. These failures in maternal care trickle down to their children, perpetuating cycles of poor health outcomes.

For children, these same systemic inequities manifest as chronic conditions that go untreated, preventable hospitalizations, and missed opportunities for early intervention. In neighborhoods with high Medicaid enrollment, pediatricians are scarce, and children often lack access to specialists or preventive services. These areas are population health deserts, where poor social conditions like inadequate housing, lack of transportation, and food insecurity further contribute to poor health. The AMA study highlights not only gaps in healthcare access but also the deeper failures to address the root causes of health disparities, leaving children in vulnerable communities at an enormous disadvantage.

This population health crisis is not confined to Chicago. Nationwide, Black and Hispanic children on Medicaid face disproportionately worse outcomes compared to white children. They are more likely to miss developmental screenings, have poorly managed asthma or diabetes, and experience preventable ER visits for conditions that could have been addressed earlier. Addressing these disparities requires more than insurance coverage; it demands a fundamental shift in how Medicaid structures payment and care delivery.

Medicaid’s RVU Model: Why It Perpetuates Poor Population Health Outcomes

At the heart of Medicaid’s failure to address population health is its reliance on the Relative Value Unit (RVU) system, which pays providers based on the volume of services delivered rather than the quality or outcomes of care. While the RVU model works well for transactional care, it is ill-suited to meeting the needs of Medicaid patients, who often require more time, coordination, and resources to address their complex health and social challenges.

Children on Medicaid, particularly those from marginalized communities, face significant barriers to accessing care. These include transportation challenges, low health literacy, and language barriers, as well as social determinants of health like food insecurity and housing instability. Pediatricians serving Medicaid patients must spend far more time coordinating care, educating families, and addressing these barriers, but they are paid, on average, fifty percent less than they would be for treating commercially insured patients with none of these challenges.

The RVU system also creates a perverse incentive for fragmented care. Instead of investing in preventive services and team-based approaches that tackle root causes, Medicaid’s payment structure rewards reactive, high-cost interventions such as emergency room visits and specialist referrals. This results in ballooning healthcare costs while failing to improve outcomes for the children who need care the most. The current system exacerbates population health disparities, ensuring that the children who require the most attention and resources are left behind.

Paying for Outcomes: A Path to Better Population Health

If Medicaid is to address the worsening population health crisis, it must fundamentally change how it pays for care. The answer is not more RVUs or even more Medicaid funding—it is paying for outcomes. By shifting to a payment model that incentivizes incremental improvements in health and invests in the teams needed to achieve them, Medicaid can begin to address the disparities driven by race, geography, and SES. Here’s how:

1. Reward Incremental Health Improvements

Medicaid should move away from fee-for-service payment and instead tie payments to key outcomes, such as reducing asthma-related hospitalizations, increasing vaccination rates, improving chronic disease management, and ensuring that developmental screenings are completed on time. Pediatricians and health systems should be incentivized to improve population health metrics rather than prioritize the number of appointments or procedures.

2. Fund Team-Based Care

Addressing the complex needs of Medicaid patients requires more than just a doctor. Pediatricians need teams that include care coordinators, social workers, behavioral health providers, and interpreters to support families and address the social determinants of health. Medicaid must explicitly fund team-based care models that empower providers to deliver comprehensive, culturally competent services that meet the needs of the whole child.

3. Shift Resources to Prevention

Medicaid spends an overwhelming percentage of its budget on hospitals, emergency rooms, and specialist care—services that are often required because preventive care was never adequately funded. By redirecting dollars to prevention, including well-child visits, chronic disease management, and nutrition programs, Medicaid can reduce the need for costly interventions down the line.

4. Engage Communities to Address Social Determinants of Health

Social determinants of health, such as housing instability, food insecurity, and lack of transportation, are some of the most powerful drivers of poor outcomes for Medicaid-insured children. However, addressing these issues requires more than just screening during a doctor’s visit. No amount of screening alone can solve local problems like unsafe housing, inadequate transportation systems, or food deserts. Only local healthcare systems, working in collaboration with community organizations, schools, and social services, can understand and address these barriers in ways that are relevant to the families they serve. Medicaid must fund programs that empower local communities to develop tailored solutions, such as partnerships with food banks, affordable housing initiatives, or transportation services that help caregivers access appointments. Pediatricians cannot tackle these challenges alone. Instead, local healthcare and community-based systems must work together to overcome these barriers and create healthier environments for children and their families.

5. Build and Use Data to Drive Accountability

Real progress in population health requires robust data systems that track outcomes and identify gaps. Medicaid should invest in tools that allow pediatricians to measure improvements, share best practices, and refine their care strategies. Data must also be used to monitor and address racial and socioeconomic disparities.

Why Medicaid Must Lead the Way

As the largest payer for children’s healthcare, Medicaid has an enormous opportunity—and responsibility—to lead the shift toward improving population health. By prioritizing outcomes-based payment, funding team-driven care, and addressing the root causes of health disparities, Medicaid can set a new standard for equitable pediatric care that serves all children, not just those in wealthier ZIP codes.

The AMA study shows us the stakes. In Chicago, as in much of the country, children’s health outcomes are defined by where they live, the color of their skin, and their family’s economic status. This is unacceptable. Medicaid must stop rewarding volume over value and instead invest in the infrastructure and care models needed to improve population health. Only then can we ensure that every child, regardless of their ZIP code or race, has the opportunity to thrive.