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State Medicaid Programs May Rely More Heavily on Managed Care, Survey Suggests

By John Reichard, CQ HealthBeat Editor

September 13, 2011 -- States are relying on a fairly heavy dose of managed care to control their Medicaid costs, a new survey says. And they may turn to such plans even more as cost pressures mount and an estimated 16 million more uninsured people get added to the program in 2014 under the health law.

The survey also found that the growing reliance on Medicaid managed care in some states is increasing access by poor populations to medical treatment, contrary to the stereotype that such plans cut off access to care.

The 50-state survey was conducted in late 2010 by the Kaiser Family Foundation and the consulting firm Health Management Associates.

According to the survey, the use of managed care in Medicaid has risen steadily in recent decades. "Nearly all states operate comprehensive Medicaid managed care programs, covering about 66 percent of all Medicaid beneficiaries," it found. Only three states—Alaska, New Hampshire and Wyoming—have no Medicaid managed care. But managed care penetration in Medicaid varies widely from state to state. For example, in nine states, fewer than half of their Medicaid enrollees are in comprehensive managed care plans and nine states have more than 80 percent in the plans.

"In all, 46 states mandate managed care for most children, and 44 do so for pregnant women, and parents and other caretaker adults," the survey said. Increasingly, states are looking to enroll more medically complex and fragile beneficiaries in managed care plans, with half the states reporting some form of managed care arrangement for their residents who qualify for both Medicare and Medicaid. That's a population dominated by the frail and chronically ill. But enrollment is low among the "duals" for now.

Managed care plans create networks of providers who agree to serve the Medicaid population. "Many but not all states with managed care organizations (25) reported that Medicaid enrollees sometimes face access problems," a summary of the survey said. "Gaps in access to dental care, pediatric specialists, psychiatrists and other mental health providers and other specialists were all cited. At the same time, the vast majority of state officials perceived managed care to improve access, relative to fee-for-service, significantly in some cases."

The summary also said that "managed care offers significant potential to improve access and care for Medicaid beneficiaries, it can fail as a strategy" if the "capitation" rates—fixed per capita payments doctors get per Medicaid patient they agree to treat—are too low. That also can happen if networks are too scanty to meet the needs of patients or the state maintains poor oversight of its managed care program, the study said.

The "high level of managed care activity in Medicaid programs is likely to continue or even build, given ongoing state budget pressures, focus on improving care for people with complex needs, the Medicaid expansion and industry interest in a growing Medicaid market," the study said.

Vernon Smith of Health Management Associates noted that managed care is a potential tool for holding providers accountable for the treatment they provide. During a briefing at Kaiser headquarters, Smith said that in some instances states require managed care plans to be accredited to take part in Medicaid. Every state with Medicaid managed care requires plans to be rated based on quality performance measures and 15 states prepare quality "report cards" for beneficiaries to be used in picking a plan, the survey found.

Jason Helgerson, Medicaid director for New York state, said that "amazing" cost growth in traditional fee-for-service medicine is pushing the state to sharply increase its use of managed care. As an example, he said that the Medicaid budget for home health care has doubled over the past five years while the number of people served has actually declined. Medicaid officials are "on a three-year glide path to ending fee for service in our state," he said. But managing care to meet treatment needs and control costs is difficult, he said. If managed care "is not done right, it can actually cost you more money," Helgerson warned.

The survey shed some light on how well states think they are prepared for the health law's expansion of Medicaid. Of the 30 states that responded to a question on whether their managed care plans can absorb an expanded Medicaid population, 20 said they could.

Joe Vesowate, an official with the Texas state government's Medicaid division, said that many plans are competing in his state for Medicaid business. Because of that dynamic he said he thinks they will be able to be able to absorb the big expected enrollment increase in the state. "The key for us is to make sure that the business relationships we have our adequate to meet the need," he said.

Kaiser survey (pdf)

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