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Medicaid Managed Care in New York: A Work in Progress



For the past 12 years, New York State has been trying to make the transition from a Medicaid fee-for-service delivery model to Medicaid managed care, which policymakers believe has the potential to control costs and improve care. A new report from the United Hospital Fund finds that, so far, managed care has not lived up to these promises, mainly because of frequent ""churning"" among the ranks of the insured. Yet, with more than 1 million Medicaid managed care beneficiaries in New York City and another 400,000 across the state, and with the Child Health Plus B and Family Health Plus public health insurance programs relying solely on managed care, it is important that policymakers and administrators learn from experience and develop strategies to maximize the potential of this health care delivery model.

Medicaid Managed Care in New York: A Work in Progress, by Kathryn Haslanger of the United Hospital Fund, draws on findings from a seven-year assessment of the program, which was supported by The Commonwealth Fund and others. The report examines Medicaid managed care from the perspectives of policymakers, managed care plans, ambulatory care providers, and advocates for beneficiaries.

Yet, the Medicaid managed care program has not been able to cut costs or provide high-quality care because beneficiaries experience frequent disruptions in coverage. Only about two-thirds of those who receive Medicaid and cash assistance retain their eligibility for a full year, and just over 40 percent of those on Medicaid alone have a year of uninterrupted coverage. Even among managed care enrollees who stay in a single plan for a year, more than a quarter of those ages 20 to 44 and nearly a fifth of those ages 45 to 64 had no record of a primary care visit. Most enrollees are dropped because of administrative problems, rather than changes in their eligibility status. This high turnover, Haslanger finds, ""renders financial incentives for prevention and early detection fairly meaningless.""

Service Use
While large-scale comparisons of health services utilization between fee-for-service and managed care enrollees were not possible, available data suggest that managed care has not greatly altered the way enrollees receive health services. Frequent disruptions to coverage mean that plans and providers have little time to educate members about health services and preventive care. Still, managed care has introduced many enrollees to the concept of a medical home, and some plans have initiated case management programs for their members.

Quality of Care
Managed care provides a framework for measuring the quality of care, and the state has begun to create incentives for plans to measure and improve quality.

Still, many quality improvement efforts require providers to change their behavior, and the report found that plans have limited influence over the way providers, who typically contract with many different plans, practice. As plans gain greater market penetration, they may have greater leverage to influence provider behavior.

Because the state focused on enrolling nondisabled children and working-age adults—the lowest-cost beneficiaries—overall savings to the Medicaid program were limited. Annual fee-for-service spending averaged $2,000 per child and $4,000 per adult during the study period, while average annual spending for the elderly and disabled was about $20,000 per beneficiary. Managed care would have to derive extraordinary savings from its low-expenditure base to affect overall program spending. In addition, Medicaid managed care plans have costs that are not incurred in fee-for-service plans, arising both from the additional quality measurement tasks and from the plans' administrative complexity.

Policy Implications
The report concludes that, although managed care has not fundamentally changed service delivery, it has taken important steps toward addressing the shortcomings of a fee-for-service approach. Additional actions are merited to fulfill managed care's vision of consistent and quality health care for vulnerable New Yorkers:

  • Assess and affirm Medicaid managed care's role in delivering services to a diverse low-income population. Increasingly, public programs are alone, rather than in the mainstream, in pursuing managed care. This assessment found no inclination on the part of interviewees to return to a fee-for-service model or pursue ""consumer-driven"" models of care. Therefore, government payers, managed care plans, health care providers, and consumers must achieve consensus in making managed care work.
  • Simplify and stabilize eligibility for coverage and managed care plan enrollment. Managed care depends on timely and continuous coverage, but the complex requirements for participation in public insurance result in a high level of instability. The administrative costs to implement application and renewal must be weighed against a realistic assessment of the fraud that they deter, as well as the costs of delaying health care for eligible beneficiaries.
  • Redesign primary care. Managed care plans and quality measures are not enough to ensure coordinated primary care. Policymakers can work with plans and ambulatory care providers to better understand the barriers to desired changes in service delivery. The state can assist hospitals in redesigning outpatient departments. Institutional providers need to embrace the agenda for change despite competing objectives.
  • Devise service strategies for high-cost cases that will improve the quality of care while controlling costs. The majority of Medicaid's most expensive beneficiaries are still excluded from enrolling in managed care. These complex cases present policymakers with an opportunity to test new approaches. Needed service changes must be identified and financial and regulatory policy changes made in order to successfully implement managed care for high-cost beneficiaries.
  • Rationalize the administrative structures and requirements for plans and providers. The system's reliance on incomplete encounter data and indirect quality measures is a major impediment to accurate assessment of managed care's achievements. This lack of information is the product of a complex maze of regulatory oversight and administration across programs. Participants need to standardize, rationalize, and simplify reporting requirements and processes.


Facts and Figures


  • Enrollment in Medicaid managed care plans in New York City grew from about 400,000 in 2001 to 1,000,000 in February 2003, representing 48 percent of all beneficiaries.
  • As of February 2003, there were 17 managed care plans enrolling Medicaid beneficiaries, including five HMOs.
  • By January 2003, two-thirds of the city's Medicaid managed care enrollees were in provider-sponsored, rather than commercial, plans.


This briefing note is based on a report published by the United Hospital Fund.


Publication Details



Medicaid Managed Care in New York: A Work in Progress, The Commonwealth Fund, December 2003