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Types of managed care arrangements

State Medicaid programs use three main types of managed care arrangements: comprehensive risk-based managed care, primary care case management (PCCM), and limited-benefit plans. Within these categories, however, there is wide variation across states (Table 1).

Comprehensive risk-based managed care. In 2016, 68 percent of Medicaid enrollees across 49 states were enrolled in a comprehensive risk-based plan (CMS 2016). A comprehensive risk contract in Medicaid must cover inpatient hospital services plus any one of the following services, or at least three of the following services: outpatient hospital; rural health clinic; federally qualified health center; lab and X-ray; nursing facility; early and periodic screening, diagnostic, and treatment (EPSDT); family planning; physician; or home health services. States can choose to exclude certain benefits, such as behavioral health services, oral health services, or non-emergency transportation from the capitated benefit package and provide these separately through fee for service (FFS) or through limited-benefit plans. While plans are responsible for providing or arranging for a majority of an enrollee’s medical needs, the state’s obligation to Medicaid enrollees still exists.

Plans receive a monthly capitation payment, that is, a premium paid by the state to the MCO on behalf of each enrollee to cover the cost of providing covered services. The state makes the payment regardless of whether the particular beneficiary receives services during the period covered by the payment. Plans are at financial risk for losses if they spend more on services and health plan administration than they are paid by the state; conversely, they are permitted to retain a portion of any excess payments for profit or reinvestment, assuming that they spend at least a certain amount, known as the medical loss ratio, on medical care and other activities that improve quality.

States can also choose to contract with MCOs for a portion of the comprehensive Medicaid benefit package, and carve out or exclude certain benefits to be provided through fee for service or through a limited-benefit plan. There is substantial variation among states in which services are included and excluded from comprehensive managed care. Behavioral health services tend to be the most commonly carved out services in Medicaid programs. Other common carve outs include dental services, pharmacy, and non-emergency transportation benefits. When services are carved out of the managed care benefit package, the health plan does not have the responsibility to provide nor does it receive payment for these services. However, states and health plans are responsible for coordinating care among delivery systems and ensuring compliance with federal behavioral health parity rules. States must also consider the effects of a carve out on economies of scale and state administration.

Managed long-term services and supports (MLTSS) programs experienced growth. Twenty states had managed LTSS (MLTSS) programs in operation as of July 1, 2016, up from 19 states in 2015. As of July 1, 2016, there were over 1 million (1,041,899) LTSS users, excluding a subset of 142,882 enrollees in Delaware, Florida, Idaho, Illinois, and Rhode Island, some of whom may not be LTSS users (these states cannot report just LTSS users). Fourteen of the 19 states reporting LTSS users among MLTSS enrollees in both years reported an increase in the number of LTSS users from 2015 to 2016 (CMS 2016).

Some states have also used comprehensive managed care programs to better integrate Medicaid and Medicare coverage for individuals who are eligible for both programs. The Federal Coordinated Health Care Office within the Centers for Medicare & Medicaid Services (CMS) has implemented the Financial Alignment Initiative, a demonstration project to improve care, reduce program costs, and improve coordination between the programs. Part of this initiative is a capitated model in which CMS, a state, and an MCO enter into a three-way contract that includes a blended capitated rate for the full continuum of Medicaid and Medicare benefits for dually eligible beneficiaries. As of December 2017, 13 states operated demonstration programs that enrolled approximately 404,000 individuals.

Learn more about the Financial Alignment Initiative for Beneficiaries Dually Eligible for Medicaid and Medicare.

PCCM. Sixteen states operated PCCM programs in 2016, with a total enrollment of 5.4 million beneficiaries (MACPAC 2018). PCCM incorporates aspects of both managed care and FFS. In a PCCM program, each enrollee is assigned to a designated primary care provider (PCP) who is paid a monthly case management fee to assume responsibility for care management and coordination. Individual providers are not at financial risk and continue to be paid on an FFS basis for covered services. States can determine which types of providers can serve as PCPs for example, a general practitioner, family physician, internist, obstetrician gynecologist, pediatrician or, at state option, physician assistant, nurse practitioner, or certified nurse-midwife. Many states use PCCM as an alternative to comprehensive managed care in areas where plans do not operate (e.g., rural areas) or for Medicaid populations with complex health care needs.

Several states have enhanced their PCCM programs by adding additional coordinated care management features to provide intensive support for enrollees with high levels of need, increase their use of performance and quality measures, and provide practice support for individual providers (Verdier et al. 2009). States may contract with organizations to perform a variety of functions in addition to primary care case management services. These include provision of intensive telephonic or face-to-face case management; operation of a nurse triage advice line; development of enrollee care plans; provision of enrollee outreach and education activities; operation of a customer service call center; review of provider claims; utilization and practice patterns to conduct provider profiling and practice improvement; implementation of quality improvement activities; and coordination with behavioral health systems and providers or long-term services and supports systems and providers.

Limited-benefit plans. Some states contract with plans to manage a subset of benefits (e.g., transportation, oral health services) or services for a particular subpopulation (e.g., individuals in need of inpatient mental health services). These limited-benefit plans are generally paid on a capitated basis and may or may not be at risk (generally, plans are only at risk if the covered benefits include inpatient services, which some behavioral health limited benefit plans do include). Limited benefit plans may be used to provide services to FFS enrollees, managed care enrollees, or both. Limited-benefit plans can include prepaid inpatient health plans (PIHPs) and prepaid ambulatory health plans (PAHPs):

  • PIHPs cover, among other services, inpatient hospital and institutional services. Such plans most frequently focus on providing inpatient mental health or combined mental health and substance abuse inpatient benefits. PIHPs provide services on the basis of capitation payments or payment arrangements other than state plan payment rates but do not have a comprehensive risk contract.
  • PAHPs are generally very narrow in service scope, typically covering just one type of service such as transportation benefits, oral health services, non-institutional mental health benefits, or disease management. PAHPs do not provide or arrange for any inpatient hospital or institutional services.

Thirty-three states and the District of Columbia have limited-benefit plan arrangements. As of 2016, 15 states contracted with behavioral health limited-benefit plans, 15 states contracted with non-emergency transportation vendors, 10 states contracted with dental plans, and 4 states contracted with MLTSS limited-benefit plans (MACPAC 2018).

According to CMS, about 11.2 million Medicaid enrollees (about 14 percent) are enrolled in behavioral health plans (PIHPs and PAHPs). About 305,000 enrollees receive managed LTSS only, which is about 0.4 percent of the total Medicaid population. Enrollment in dental plans is approximately 6.7 million enrollees, about 9.7 percent of the total Medicaid population. Around 13.4 million enrollees or 17 percent of the total are in a transportation limited-benefit plan. Limited-benefit plans labeled as “other” account for 1.8 percent of the total Medicaid population (MACPAC 2018).

TABLE 1. Overview of Medicaid FFS and Medicaid Managed Care Arrangements

Key system features

FFS Comprehensive risk-based plans PCCM

Limited-benefit plans

Provider participation requirements Any willing provider licensed by the state who agrees to accept Medicaid rates as payment in full can participate. Plans must meet network size and location standards. Plans are permitted to limit the number of providers in their network and generally must credential providers before accepting them into the network. PCCM programs may have to meet additional state requirements and agree to certain service policies. Plans contract with a network of providers, similar to the process for comprehensive risk-based managed care plans, and may also need to meet network requirements.
Enrollee care-seeking rules Typically, enrollees may receive care from any participating provider. Plans set the rules on non-emergency referrals and care management, subject to state requirements and oversight. Services must be received from participating network providers, except in emergencies. Enrollees may need referral by the PCP to see various kinds of specialists, except in emergencies. Plans set the rules on non-emergency referrals and care management, subject to state requirements and oversight. Services typically must be received from participating network providers, except in emergencies.
Navigation support for enrollees Open access; enrollees may or may not have rules or guidance on how or where to seek appropriate available services.  Plans typically must provide enrollees with a member handbook and conduct an initial health assessment to determine enrollee needs. Many also provide disease management and care coordination services. PCCM programs may provide additional navigation support and ways of identifying appropriate providers.  Depending on the type of services provided, plans may provide navigation support for enrollees similar to comprehensive risk-based plans. 
Performance monitoring and quality oversight Provider accountability for outcomes for individual enrollees is not typically formalized. For example, most states do not require providers to report HEDIS data. Plans must conduct external quality reviews and must report specific performance data (e.g., HEDIS) and undertake specific quality improvement activities. Some states require external accreditation (e.g., NCQA and URAC). Same as FFS; potentially specific metrics associated with monitoring PCCM performance. PIHPs must conduct annual external quality reviews, may be required to report performance data applicable to the services delivered, and undertake specific quality improvement activities. External accreditation may be required.
Notes: FFS is fee for service. HEDIS is Healthcare Effectiveness Data and Information Set. NCQA is National Committee for Quality Assurance. PCCM is primary care case management. PCP is primary care provider. URAC, originally known as the Utilization Review Accreditation Commission, has been referred to solely by its acronym since 1996.Some states have contracted with vendors to administer elements of their programs. Known as administrative services organizations (ASOs), these vendors are typically paid a non-risk-based fee to provide administrative services. While not defined within federal statute or regulations, depending on how they are structured, ASOs may or may not be classified as a managed care arrangement. Limited-benefit plans may have all, some, or none of the elements of the key system features listed above, depending on the benefits covered and type of contracting arrangement with a state. For example, state contracts with limited-benefit plans for providing behavioral health or oral health services may include requirements regarding network development, assistance to enrollees seeking services and development of member materials. PAHPs are not required to conduct an external quality review.
Source: MACPAC analysis

Learn more about the characteristics of managed care plans, including managed care firms’ Medicaid managed care enrollment market share.