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Managed care overview

Types of managed care arrangements

State Medicaid programs use three main types of managed care delivery systems:

  • Comprehensive risk-based managed care. In such arrangements, states contract with managed care organizations (MCOs) to cover all or most Medicaid-covered services for their Medicaid enrollees. Plans are paid a capitation rate—that is, a fixed dollar amount per member per month—to cover a defined set of services.
  • Primary care case management (PCCM). In a PCCM program, each enrollee has a designated primary care provider who is paid a monthly case management fee to assume responsibility for managing and coordinating his or her basic medical care. Individual providers are not at financial risk and continue to be paid on a fee-for-service basis for delivering services.
  • Limited-benefit plans. Some states contract with limited-benefit plans to manage specific benefits, such as inpatient mental health or substance abuse benefits, non-emergency transportation, oral health, or disease management.

MACStats includes state-level information on managed care including enrollment by eligibility group and enrollment by plan type.

Learn more about the major types of managed care arrangements.

Enrollment and spending on Medicaid managed care

While about 90 percent of Medicaid beneficiaries are enrolled in some form of managed care, the proportion of beneficiaries enrolled in managed care, the rate of enrollment growth, and spending on managed care varies among the major Medicaid eligibility groups (non-disabled children and adults, individuals with disabilities, and individuals age 65 and older).

Learn more about enrollment and spending on managed care among the four primary eligibility groups.

Federal authorities for Medicaid managed care

States can implement managed care in their Medicaid programs under multiple federal authorities (Box 1). The Social Security Act allows states to mandate managed care enrollment and to waive certain other federal Medicaid requirements through a program waiver, a demonstration waiver, or a state plan amendment, which have different features. Many states operate more than one managed care program, often under multiple authorities or through multiple waivers.

BOX 1. Federal Medicaid Managed Care Authorities¹

Section 1932(a) state plan authority Allows states to enroll Medicaid beneficiaries in managed care on a mandatory basis without obtaining a waiver. Certain groups are exempted from mandatory enrollment (for example, beneficiaries who are dually eligible for Medicare and Medicaid, Native Americans and children with special health care needs). The state must offer enrollees a choice of at least two managed care plans except in rural areas, where states can mandate enrollment into a single plan.
Section 1915(b) managed care/freedom of choice waivers Allows states to implement managed care and to limit individuals’ choice of providers under Medicaid. States can also:

  • waive statewideness requirements (e.g., provide primary care case management or comprehensive risk-based managed care in a limited geographic area); and
  • waive comparability requirements (e.g., provide enhanced benefits to managed care enrollees).
Section 1115 research and demonstration waivers Allows states to test an “experimental, pilot, or demonstration project likely to assist in promoting the objectives of the programs” covered by the Social Security Act, including:

  • waiving statewideness requirements related to eligibility, benefits, and service delivery and payment methods used by the state to administer the managed care program, and
  • identifying savings in the demonstrations to offset the cost of any program change, which can include managed care savings, to maintain budget neutrality.

¹ Additional details on features of federal Medicaid managed care authorities are available here.

Following approval of the managed care state plan amendment or waiver, the federal government conducts oversight of states to ensure that they comply with the program accountability requirements and that states hold managed care plans accountable for the services they have agreed to provide to enrollees. The requirements related to federal oversight can be found in Section 1932 of the Social Security Act as well as in implementing regulations at Part 438 of title 42 of the Code of Federal Regulations (42 CFR 438).

In 2016, CMS updated these federal rules to expand the federal oversight role, standardize the expectations for states across all managed care authorities, and update program standards to reflect the current scope of Medicaid managed care programs. In July 2015, MACPAC submitted comments on the proposed rule, which were incorporated into the final rule.

Learn more about federal program accountability requirements in Medicaid managed care.

Enrollment process for Medicaid managed care

States, with CMS approval, can require Medicaid beneficiaries to enroll in a managed care plan to obtain some or all Medicaid benefits, or they may make such enrollment voluntary. Many states mandate managed care enrollment for certain Medicaid beneficiaries and allow voluntary enrollment for others. States may also create mandatory programs in some geographic areas and voluntary programs in other areas, depending on the number of managed care organizations (MCOs) available.

The processes for enrolling beneficiaries in full-risk managed care programs are regulated through 42 CFR 438. In 2016, CMS updated these and established stricter standards to create more consistency among states, while still allowing states flexibility in designing enrollment processes within the federal guidelines.

Learn more about the Medicaid managed care enrollment process and related policies.

Characteristics of Medicaid managed care plans

States increasingly rely on comprehensive risk-based managed care to deliver care to Medicaid enrollees, and today over two-thirds of Medicaid beneficiaries are enrolled in MCOs. Each state contracts separately with MCOs, although many MCOs operate in multiple states.

Learn more about the characteristics of Medicaid managed care organizations, including their geographic scope, ownership, and participation in other coverage markets.

Medicaid managed care payment

States typically pay managed care organizations for risk-based managed care services through fixed periodic payments for a defined package of benefits. These capitation payments are typically made on a per member per month (PMPM) basis. Managed care organizations negotiate with providers to provide services to their enrollees, either on a fee-for-service basis, or through arrangements under which they pay providers a fixed periodic amount to provide services.

Learn more about Medicaid managed care payment.

Managed care program integrity

Program integrity activities are meant to ensure that taxpayer dollars are spent appropriately on delivering accessible, quality, necessary care and preventing fraud, waste, and abuse. Both the federal and state agencies that oversee Medicaid are statutorily responsible for ensuring program integrity. While states that contract with Medicaid MCOs cannot delegate their federally mandated responsibilities, under managed care, MCOs generally conduct many of the traditional program integrity activities such as monitoring for false or improper claims submission by providers, while states assume responsibility for oversight of the MCOs.

Learn more about the specific managed care program integrity responsibilities of managed care organizations, states, and the federal government.

Data for program accountability and policy development

Data reported by states and managed care plans provide important information for answering key policy and program accountability questions. For example, data are necessary to monitor trends and make projections on spending, service use, and the quality and appropriateness of care. However, data submitted by managed care plans to states and by states to CMS have varied in their consistency, availability, and timeliness. In addition, there are many different types of data on managed care programs including encounter data, enrollment data, and program information. This creates challenges for analyzing and monitoring managed care programs and limits the ability to compare states.

Learn more about the data used for program accountability and the limitations of those data.

Monitoring managed care access

Federal and state policymakers alike want to ensure that Medicaid beneficiaries have sufficient access to necessary care. That is, are providers available, to what extent do beneficiaries receive appropriate care, and barriers to receiving services. Efforts to monitor access can inform assessment of the program’s value, serve as a means of accountability, help identify problems, and guide program improvement.

There is no single federally mandated method for states to monitor and evaluate access to Medicaid-covered services. However, rules promulgated in 2016 require states to include network adequacy requirements in their managed care contracts. These new network adequacy standards went into effect on July 1, 2018.

Learn more about the managed care access requirements and current monitoring practices.

Managed care’s effect on outcomes

As enrollment and spending on Medicaid managed care grow, it is important for federal and state governments to know whether they are paying appropriately for adequate quality care and whether enrollees have sufficient access to necessary care.

Managed care offers states the opportunity to improve access to appropriate services, better coordinate care for Medicaid enrollees, and measure performance with regard to quality. Medicaid managed care plans link each enrollee with regular source of primary care, provide access to a contracted network of providers, and provide support services such as care coordination and health education. However, other features of managed care plans may limit their ability to address the needs of certain populations or geographic areas. The same financial incentives that encourage plans to direct enrollees to preventive care can also discourage utilization of expensive services. States may also lack the data and tools to effectively monitor quality and access outcomes.

Learn more about findings on program outcomes in Medicaid managed care.

In 2012 the Robert Wood Johnson Foundation published a synthesis of external research on the effects of Medicaid managed care on cost savings, access to care, and quality of care.