States Reliance on Medicaid Managed Care Soars, Study Finds

Reprinted from MEDICARE ADVANTAGE NEWS, biweekly news and business strategies about Medicare Advantage plans, product design, marketing, enrollment, market expansions, CMS audits, and countless federal initiatives in MA and Medicaid managed care.

By Judy Packer Tursman, Contributing Editor

September 29, 2011Volume 17Issue 19

A new national survey shows dramatic growth in states’ reliance on Medicaid managed care plans even before federal health reform law changes take effect. Many states struggling to handle budgetary pressures say they intend to turn to Medicaid managed care organizations (MCOs) even more as cost pressures mount and as an estimated 16 million people — most of them now-uninsured adults — get added to Medicaid’s rolls between 2014 and 2019 under reform.

According to the report, released Sept. 14 by the Kaiser Commission on Medicaid and the Uninsured, 27 of 45 states responding to the survey expect to rely more heavily on Medicaid managed care in the near future. Ten states, including California, Florida and Texas, reported specific plans to expand Medicaid managed care to new geographic areas or populations, such as medically complex and fragile elderly. Also, New York says it intends to move Medicaid recipients with fee-for-service (FFS) coverage into managed care plans over the next few years.

Indeed, Charlotte Macbeth, president and CEO of MDwise, Indiana’s largest Medicaid managed care plan with roughly 300,000 members, asserts Medicaid no longer can afford an FFS approach to care. So it’s highly likely, Macbeth contends, that states’ remaining FFS Medicaid programs will convert to managed care for the general Medicaid population over the next few years. She says it is more complicated to carry out the shift for people dually eligible for Medicare and Medicaid — a focus for CMS now — but it will happen for them, too. “It’s just a matter of economics. They have to,” she tells MAN.

“I would say all states are on a three-year path [to Medicaid managed care],” Macbeth says. Indiana is “in the middle. We’ve implemented our traditional populations to managed care,” and will do so for the Aged, Blind & Disabled and dual-eligible populations down the road.

The Kaiser report warns that Medicaid managed care may fail as a strategy without a well-conceived transition from FFS to managed care, adequate capitated payment rates for plans, sufficient size of provider networks and proper state oversight. The survey found most states include a pay-for-performance feature in their payments to Medicaid plans, while 11 states have a minimum medical loss ratio requirement for such plans and three states intend to establish the requirement.

Among highlights of the study, done in conjunction with Health Management Associates:

• Nearly every state uses a comprehensive Medicaid managed care program, including primary care case management (PCCM), which together cover about 66% of all beneficiaries nationally as of October 2010. Only Alaska, New Hampshire and Wyoming reported not having any Medicaid managed care as of that date. Of the remainder, 36 states with comprehensive managed care programs contract with risk-based MCOs to cover 26 million-plus Medicaid recipients, and 31 states run a PCCM program for 8.8 million enrollees. A dozen states, including Alabama, Iowa and Vermont, use PCCM only; 17 states, including Arizona, California and Ohio, use MCOs only; and 19 states, including Colorado, New York and Virginia, use both.
• The majority of states (27 of 45 responding to the question) expect to rely on Medicaid managed care to a greater extent. Of these 27, six (California, Kentucky, Louisiana, Michigan, New Jersey and South Carolina) say they plan to mandate managed care enrollment for additional Medicaid populations.
• Increasingly, states are requiring managed care for those Medicaid recipients previously exempt or excluded from the program. This includes children with disabilities who are getting Supplemental Security Income (SSI), and disabled Americans who aren’t dual eligibles.
• Twenty states (of 30 responding) say they expect managed care plans to be able to handle the impending influx of new Medicaid enrollees under reform. Medicaid eligibility will expand to cover nearly all non-elderly Americans with annual incomes below 133% of the federal poverty level starting in 2014.

According to the report, researchers found more uncertainty with respect to Medicaid plans’ level of interest in joining state-based health insurance exchanges under reform, and on whether states will require Medicaid plans to participate in exchanges.

Meg Murray, CEO of the Association for Community Affiliated Plans (ACAP), a group of 58 not-for-profit Medicaid-focused plans covering 8 million lives, responds that the vast majority of ACAP’s member plans are interested in getting into exchanges. But ACAP doesn’t support states mandating plans’ involvement in exchanges “because it’s such a heavy lift with respect to reserves, accreditation and licensing as well as network development,” she adds.

Find the report at www.kff.org/medicaid/upload/8220.pdf.