Medicaid Managed Care

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The Affordable Care Act encourages states to implement a major expansion in Medicaid eligibility. Many of the new beneficiaries will be enrolled in Medicaid managed care. At the same time, states increasingly are looking to managed care to cover more high-cost populations and services. In addition to potential savings, states value the budget predictability that comes from managed care. Consumer advocates and providers, however, have expressed concerns about network adequacy, access to care and quality of care, especially as states move more high-cost populations to managed care.

In a research synthesis report, the Robert Wood Johnson Foundation (RWJF) examined the evidence on whether states have saved money using managed care for their Medicaid populations and whether managed care beneficiaries have better access to services or receive higher quality care than their fee-for-service counterparts.

Key Findings:

  • There is little evidence of national savings from Medicaid managed care, but a few states have had some success. The states that did realize cost savings were more likely to be states with relatively high reimbursement rates under fee-for-service.
  • Medicaid managed care has had mixed success in improving access to care. There is some evidence of increased likelihood of a usual source of care and reduced emergency department visits, but pregnant women were generally no better off under managed care then in fee-for-service.
  • Quality of care in Medicaid managed care has not been well studied, making it difficult to compare quality in fee-for-service to managed care. This is surprising given that states require performance measures for all managed care plans.

The Evolution of Medicaid Managed Care

During the late 1980s, two developments prompted significant growth in state Medicaid managed care initiatives. First, there was extraordinary growth in the number of Medicaid enrollees and Medicaid costs, prompted in part by a series of new federal mandates on Medicaid eligibility. In 1989, for example, the federal government required states to cover pregnant women and children below age 6 in families with income below 133 percent of the federal poverty level.

The following year, federal law required states to phase in coverage of all children up to age 18 in families with income below 100 percent of the poverty level. These eligibility mandates added millions to the Medicaid rolls, at the same time that federal law was requiring more generous benefit coverage for children and higher reimbursement to community health centers and many safety-net hospitals.

Meanwhile, an economic recession meant states had far less tax revenue with which to finance the rapidly increasing Medicaid bill. State policy-makers began referring to Medicaid as the “Pac-Man” of state budgets, gobbling up nearly all available revenues.

In the midst of this economic and political crisis, state officials soon turned to Medicaid managed care, in the hope that it might provide a magic bullet (lower costs combined with better access and quality). By the early 2000s, managed care had become mainstream care in Medicaid, at least for children and young adults. By 2010, nearly 70 percent of the nation’s 60 million Medicaid beneficiaries were enrolled in some form of managed care.

Have states saved money through Medicaid managed care?

As of this examination, peer-reviewed studies had found wide variation in the success of managed care plans to contain costs, but the weight of the evidence suggested any potential savings will not be significant. The successful states appeared to be those with relatively high provider reimbursement rates in their fee-for-service program. The cost savings generally were due to reductions in provider reimbursement rates rather than managed care techniques.

Does Medicaid managed care improve access to care?

Medicaid managed care can provide beneficiaries with improved access, but the scope and extent of such improvements are often state-specific. As of this examination, studies from California, New York, Ohio and Wisconsin had found improved access under managed care relative to fee-for-service. The positive findings had come from studies measuring access by usual source of care, reduction in emergency department visits, and reduction in ambulatory sensitive care hospitalizations. Although there were a few exceptions, national studies generally had not found improved access to care under managed care.

Does Medicaid managed care improve quality of care?

Despite the performance measures required by state Medicaid programsfor managed care plans, the research using these measures to evaluate quality is slim. As of this examination, there had been no peer-reviewed studies on care management programs in Medicaid managed care, even though the programs were proliferating. Several small case studies had found improved clinical outcomes through the use of care management techniques.