By Deirdre Kennedy, J.D.
The Congressional Budget Office (CBO) has released a report presenting information on Medicaid managed care’s enrollment and spending and analyzes the various factors that affect them. The CBO identified several factors contributing to the lower spending rates for managed care (CBO Report, August 7, 2018).
FFS vs. managed care. States typically use two types of payment systems to provide Medicaid benefits: fee for service (FFS) and managed care. Under the FFS system, states reimburse health care providers for the services that they deliver to beneficiaries. By contrast, under Medicaid managed care, states pay a fixed per capita fee, or capitation payment, to private health insurance plans or to provider groups, known as managed care organizations (MCOs). States often cite a desire to increase the predictability of spending and to improve the coordination of care when implementing a managed care system.
The findings of this CBO report are intended to aid policymakers considering proposals to change the role of managed care in Medicaid and the analysts charged with evaluating those proposals.
Plan types. CBO found that the majority of Medicaid beneficiaries received benefits through multiple payment arrangements: Some beneficiaries were enrolled in comprehensive (covering a wide range of services) and noncomprehensive (covering only a narrow set of services) MCOs simultaneously, and others received services through traditional Medicaid as well as through MCOs. In 2012, enrollment in managed care—particularly comprehensive managed care—was much more common among nonelderly, nondisabled adults and children than it was among other beneficiaries.
Spending discrepancies. The report noted that although the vast majority of Medicaid beneficiaries are enrolled in managed care, spending on Medicaid managed care is significantly less than spending on FFS Medicaid. The CBO pointed to several factors that contribute to that discrepancy:
- Many beneficiaries who are enrolled in a comprehensive MCO still receive benefits through the FFS program.
- Beneficiaries enrolled in noncomprehensive MCOs must receive most of their services through FFS Medicaid.
- Beneficiaries in eligibility groups whose average Medicaid spending is lower (namely, nonelderly, nondisabled adults and children) are more likely than other beneficiaries to be enrolled in comprehensive MCOs.
- Even within an eligibility group, beneficiaries whose Medicaid spending is lower, on average, are more likely to be enrolled in managed care.
Spending by state. The CBO found that from 1999 to 2014, the share of Medicaid spending that went to managed care increased in most states. During that period, the number of states in which managed care accounted for more than 25 percent of Medicaid spending grew from 5 to 30, and the number of states in which it accounted for more than 50 percent of Medicaid spending grew from 2 to 13. Not all states embraced managed care, however. The share of Medicaid spending that went to managed care declined in 6 states over that period, and in 2014, managed care accounted for less than 5 percent of Medicaid spending in 11 states.
States’ changes to programs. Between 1999 and 2014 states made changes to their comprehensive managed care programs that, on the whole, increased the number of people and the types of services covered by those programs. Although some states were increasing their use of managed care prior to the implementation of the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148), but Medicaid expansion under the ACA often took the form of managed care.
- Many states expanded their comprehensive managed care programs to cover their entire jurisdiction rather than only certain counties, cities, or regions.
- In general, states made enrollment in comprehensive MCOs mandatory for more Medicaid beneficiaries, especially those who are elderly, disabled, or enrolled in Medicare.
- Many states negotiated contracts with MCOs to increase the scope of services that the MCOs would cover, expanding coverage for long-term services and supports in particular.
ReportsLetters: CBOReports AgencyNews ManagedCareNews MedicaidNews MedicaidExpansionNews NewsFeed
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