Medicaid Managed Care: Key Themes and Trends

Libby Hinton

Associate Director, Program on Medicaid and the Uninsured

KFF

Comprehensive, risk-based Medicaid managed care is the dominant delivery system across states.

• MCOs provide comprehensive acute care and in some cases long-term services and supports (LTSS)
• MCOs are paid a fixed monthly premium or “capitation rate” for each enrollee (payments must be “actuarially sound”)
• States decide which populations and services to include in MCO arrangements leading to considerable variation across states
• States may also use other delivery and payment reform models including patient-centered medical homes, ACA Health Homes, Accountable Care Organizations, or episodes of care

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Figure 1

States have pursued risk-based contracting with managed care plans for different purposes.

• Capitated payment increases predictability in state Medicaid spending
• Potential budget savings
• Potential to improve access to care
• Provides incentives for greater investment in preventive and primary care, management of chronic conditions, and care coordination
• Contracting enables states to measure, monitor, and drive performance, through plan and provider standards, requirements, incentives, penalties

Figure 2

Though risk-based managed care may offer potential benefits for enrollees, there are also potential risks.�

• Potential benefits:
• Improved care coordination and/or chronic disease management
• Improved access
• Additional benefits/services offered beyond those required by state
• Potential risks:
• Incentives for underservice by MCOs to maximize profits
• Inadequate or narrow plan networks
• Utilization management that may reduce access
• Gaps in beneficiaries’ understanding of managed care rules and systems

Figure 3

41 states used capitated managed care models to deliver services in Medicaid as of July 1, 2021.

NOTES: ID’s Medicaid-Medicare Coordinated Plan has been recategorized by CMS as an MCO but is not counted here as such since it is secondary to Medicare. AZ, CT, and SC use PCCMs but are not counted here as such. DC is included in count of states with MCO only. Publicly available data used to verify status of four states that did not respond to the 2021 survey (DE, MN, NM, and RI).

SOURCE: KFF survey of Medicaid officials in 50 states and DC conducted by HMA, October 2021.

Comprehensive Medicaid managed care models:

Figure 4

Most states that contract with MCOs, enroll at least 75% of beneficiaries in MCOs.

NOTES: ID’s Medicaid-Medicare Coordinated Plan has been recategorized by CMS as an MCO but is not counted here as such since it is secondary to Medicare. DC is included in the count of states with 50 - 75% of Medicaid beneficiaries in MCOs. �SOURCE: KFF analysis of Medicaid Managed Care Enrollment Reports, Centers for Medicare and Medicaid Services, U.S. Department of Health and Human Services, 2021.

Share of Medicaid beneficiaries in MCOs as of July 1, 2019:

Figure 5

MCO managed care penetration rates have grown across Medicaid eligibility groups.

NOTES: Limited to 41 states with MCOs in place on July 1, 2021. Of the 38 states that had implemented the ACA Medicaid expansion as of July 1, 2021, 31 had MCOs in operation. DE, MN, NM and RI did not respond to the 2021 survey; 2020 survey data used for MN and 2019 survey data used for DE, NM, and RI.

SOURCE: KFF survey of Medicaid officials in 50 states and DC conducted by HMA, October 2021.

Figure 6

Payments to comprehensive MCOs account for almost half of total national Medicaid spending.

NOTES: Data exclude administrative spending, adjustments, and payments to the territories. Spending is for FY 2020, which refers to the Federal Fiscal Year period of October 1, 2019 through September 30, 2020. Total Medicaid spending may not match other sources due to timing of data download.

SOURCE: KFF analysis of Urban Institute estimates based on FY 2020 data from the CMS-64, prepared for the Kaiser Program on Medicaid and the Uninsured.

FY 2020 Total Medicaid Spending: $662 Billion

Figure 7

In most MCO states, spending on MCOs makes up at least 40% of total Medicaid spending.

NOTES: ID’s Medicaid-Medicare Coordinated Plan has been recategorized by CMS as an MCO but is not counted here as such since it is secondary to Medicare. DC is included in the count of states with 1 - 40% of Medicaid spending on MCOs. Spending is for FY 2020, which refers to the Feder Fiscal Year period of October 1, 2019 through September 30, 2020.

SOURCE: KFF analysis of Urban Institute estimates based on FY 2020 data from the CMS-64, prepared for the Kaiser Program on Medicaid and the Uninsured.

Percent of Medicaid spending on MCOs in FY 2020:

Figure 8

As of 2019, states contracted with over 280 Medicaid MCOs.

• MCOs represent a mix of private for-profit, private non-profit, and government plans
• States can choose to contract with only certain types of health plans 
• The Medicaid market is served by a large number of plans that focus on government programs
• Some states may limit the number of health plan entrants while in other states many plans may compete for Medicaid business

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Figure 9

Six fortune 500 firms have just over half of the Medicaid MCO market.

NOTES: Data are as of July 1, 2019. A parent firm is a firm that owns Medicaid MCOs in two or more states. * = WellCare was acquired by Centene in January 2020.

SOURCE: KFF analysis of Medicaid Managed Care Enrollment Reports, Centers for Medicare and Medicaid Services, U.S. Department of Health and Human Services, 2021.

Figure 10

Six firms have a wide geographic reach in Medicaid, each with MCOs in 12 or more of the 40 MCO states.

NOTES: A parent firm is a firm that owns Medicaid MCOs in two or more states. * =WellCare was acquired by Centene in January 2020.

SOURCE: KFF analysis of Medicaid Managed Care Enrollment Reports, Centers for Medicare and Medicaid Services, U.S. Department of Health and Human Services, 2021.

Number of states in which firm offers Medicaid MCOs as of July 1, 2019:

Figure 11

About two-thirds of states that contract with managed care plans have a directed minimum fee schedule for one or more specified provider types.

NOTES: Data are among 40 states with MCOs and/or pre-paid health plans (PHPs). HCBS = Home and Community Based Services. DE, MN, NM, and RI did not respond to the 2021 survey.

SOURCE: KFF survey of Medicaid officials in 50 states and DC conducted by HMA, October 2021.

Number of states in directed minimum fee schedules for specified provider types as of July 1, 2021:

Figure 12

States incorporate quality metrics into the ongoing monitoring of their programs, including linking MCO financial incentives to quality measures.�

NOTES: Data are as of July 1, 2021. There were 37 responding MCO states. DE, MN, NM, and RI did not respond to the 2021 survey.

SOURCE: KFF survey of Medicaid officials in 50 states and DC conducted by HMA, October 2021.

Figure 13

States leverage managed care plan contracts to advance provider payment and delivery system reform.

SOURCE: KFF survey of Medicaid officials in 50 states and DC conducted by HMA, October 2021.

Figure 14

States are looking to Medicaid MCOs to develop strategies to identify and address social determinants of health.�

NOTES: Data are as of July 1, 2021. Response rates per policy varied. States planning to require any MCO requirement related to SDOH in FY 2022 include all states that indicated plans to require at least one specific MCO policy. BH = behavioral health. CBOs = community-based organizations. CHWs = community health workers. *ICD-10 Z codes are a subset of the ICD-10 diagnosis codes that reflect patient social characteristics. DE, MN, NM, and RI did not respond to the 2021 survey.

SOURCE: KFF survey of Medicaid officials in 50 states and DC conducted by HMA, October 2021.

Figure 15

Wrap up / Looking Ahead

• Federal statutes and regulations define state and federal oversight responsibilities for full-risk Medicaid managed care programs, but states have considerable flexibility in how they operationalize requirements.
• Over time, states have become much more sophisticated purchasers.
• Many decision points / considerations for states thinking about moving populations to risk-based managed care.
• Moving forward, Medicaid MCOs may play important role in assisting Medicaid agencies with PHE unwinding / improving coverage retention.

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Figure 16

Thank you.