Medicaid Managed Care

Resource Center
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Welcome to MedeAnalytics’ Medicaid Managed Care Resource Center! This online resource provides a complimentary educational service to the healthcare industry.

Medicaid covers approximately 60 million low-income Americans. According to the Medicaid and CHIP Payment and Access Commission (MACPAC),1 Medicaid—along with CHIP—pays for 16 percent of the nation’s healthcare. Jointly funded by the federal government and the states, the program generally covers pregnant women and children under age six with family incomes at or below 133 percent of the federal poverty level (FPL), children ages six through 18 with family incomes at or below 100 percent of the FPL, and a few others. Individual states have taken varied approaches to Medicaid eligibility, with some states opting to cover additional citizens, but many states, especially those states with large populations of poor and uninsured such as Texas and Florida, limiting their Medicaid enrollment significantly.

Funding Medicaid consumes a very large proportion of states’ budgets—23.6 percent in 2011, including federal matching funds.2 The states have undertaken various strategies to alleviate this burden. One common approach is to transition beneficiaries from unmanaged Medicaid fee-for-service to managed care in order to benefit from increased access, improved quality and reduced cost. Nearly two-thirds of Medicaid beneficiaries are covered under a managed care arrangement.3 Medicaid managed care plans generally take the form of either multi-regional for-profit companies or regional, not-for-profit, mission-oriented organizations.

Medicaid managed care plans face special challenges and to an extent not experienced by the commercial market. Medicaid beneficiaries are mostly of low socio-economic status (SES). The poorer clinical outcomes and shorter life expectancies of low SES individuals have been well documented. Members tend to choose higher-acuity settings to receive care and ignore recommended preventive measures, and there is relatively little a Medicaid plan can do to change these practices. Providers are challenging to influence as well; plans must balance access to care with incentives and levers.

Extensive research has demonstrated that individuals with low SES experience disparities in health and healthcare delivery. The poor and ethnic minorities experience poorer health status, lower functional status, higher rates of obesity, poorer health outcomes related to major chronic disease, and higher mortality rates.4 These disparities increase the cost of providing healthcare to Medicaid populations. The federal government mandates that Medicaid plans report information that facilitates measurement of health disparities. The United States Department of Health and Human Services is currently implementing its Action Plan to Reduce Racial and Ethnic Health Disparities, as mandated by the Affordable Care Act.

Commercial health plans usually influence member behavior through education and economic incentives. When utilization of high-cost treatments is too high, they limit benefits, apply tenets of consumerism—that is, charge higher copayments or institute coinsurance—or they create narrow networks. When Medicaid members’ emergency room utilization is too high, however, either Medicaid managed care organizations lack these options (reducing benefits or charging copayments) or they are largely ineffective (education). The June 2012 MACPAC report confirms research findings that Medicaid beneficiaries are far more likely to seek care in the emergency room than either adults with employer-sponsored insurance or the uninsured. MACPAC suggests that this is “due in part to their perceived long wait times in the office to see their providers and the low Medicaid cost-sharing requirements for ED visits.”5

Medicaid plans must constantly balance access to care with attempts to influence provider behavior. Finding providers willing to accept reduced reimbursement rates, increased paperwork, and more troublesome patients is difficult in and of itself. Given these challenges to access to care, plans’ options are very limited, essentially ruling out any sort of punitive measures. Sandra Decker of the Centers for Disease Control and Prevention has pointed out the strong link between Medicaid physician payment rates and access to care.6 In other words, there is no tenable “stick.” Instead, Medicaid plans turn to pay-for-performance or performance-based contracting. Providers are able to earn incentive payments for meeting certain quality goals, such as reduced emergency room use by their panels.

1. http://www.macpac.gov/reports
2. http://www.nasbo.org/sites/default/files/2010%20State%20Expenditure%20Report.pdf
3. http://www.kff.org/medicaid/upload/8046-02.pdf
4. Department of Health and Human Services. HHS action plan to reduce racial and ethnic health disparities [Internet]. Washington (DC): HHS; 2011.
5. Medicaid and CHIP Payment and Access Commission (U.S.). (2012). MACPAC June 2012 Report to the Congress on Medicaid and CHIP. Washington, DC: MACPAC, Medicaid and CHIP Payment and Access Commission. http://www.macpac.gov/reports
6. Decker, Sandra L. 2009. “Medicaid Physician Fees and Ambulatory Care of Medicaid Patients,” Inquiry 46(3): 291-304.