Medicaid and CHIP Risk-Based Managed Care in 20 States. Experiences Over the Past Decade and Lessons for the Future.. Conclusions


Program Features - The past decade has seen rapid growth in risk-based managed care in public health insurance programs for low income nonelderly adults and children. In the 20 study states, comprising over 80 percent of the risk-based Medicaid managed care nationally, enrollment in risk-based MCOs rose substantially for all Medicaid groups. Rising from a small base early in the decade, growth was at a faster rate for the non-institutionalized SSI population than for TANF-related and poverty-related Medicaid beneficiaries (see Figure 4).

Medicaid and CHIP risk-based managed programs, even for separate programs, are highly integrated, with the exception of a few notable states. While data on trends in CHIP enrollment in risk-based managed care are not available, the CHIP risk-based managed care programs that are administered separately from Medicaid began early in the decade, so likely the growth rate for CHIP enrollment in risk-based managed care—which was already high early in the program—has not been as great as for Medicaid children during this period.

All of the study states have almost a decade of experience using risk-based managed care as a means of delivering care for Medicaid and CHIP beneficiaries, including for at least a portion of their SSI enrollees. As an indication of general political support for risk-based managed care as an alternative to fee-for-service Medicaid and CHIP care delivery, all the study states but one are on a path to expand their risk-based managed care programs to new populations and/or new parts of the state. The notable exception is Connecticut, which discontinued risk-based managed care just after the end of the study period. Reasons given were a perceived lack of cost savings from the program, and a preference for alternative models of care coordination and quality improvement. The two other study states that experienced disruptions in their risk-based managed care programs—Delaware and Tennessee—have returned to risk-based managed care enthusiastically.

In spite of this general trend toward expansion, there are still many populations and geographic areas that are not yet under mandatory risk-based managed care (see Figures 2 and 3). Almost no states included several high-cost groups, such as dual enrollees and institutionalized enrollees, during the study period. In addition, in most study states enrollment remains voluntary in some parts of the state, most often rural areas. The most important reason for this is that it has been difficult to establish a choice of plans with adequate provider networks in the most rural areas, where some counties do not have specialists of various types, for example. In contrast, some states have incorporated very rural areas without extreme difficulty (examples are Arizona and New Mexico).

Even when they have moved to mandatory enrollment for TANF- and poverty-related groups, some states have maintained voluntary enrollment for either SSI adults, children, or both. The continued use of voluntary enrollment means that there remains the possibility of "risk selection" into Medicaid MCOs by individuals who are in better health than those in fee-for-service.

CHIP programs, in contrast, have had less difficulty mandating statewide risk-based managed care enrollment. Until the passage of CHIPRA, there was no requirement for a choice of plans under CHIP risk-based managed care, so most study states have been able to recruit at least one plan for rural areas under separate CHIP programs.

In addition to variations in the populations covered by risk-based managed care, the study states vary widely in how they design and administer their programs. We learned from talking to state officials, plan representatives, and provider organizations that there is no one-size-fits-all way to design a risk-based managed care program.

One source of important variation is the degree to which states carve out certain services from the acute-care services MCOs are required to provide (almost none yet include long-term care). The most common carve-out is for dental services, and there is a general consensus that a dental carve-out is efficient, since traditionally commercial MCOs have not provided dental services. While pharmacy and behavioral health services are also common carve-outs, there is more controversy about whether these carve-outs are helpful for improving access or quality, or for reducing costs (see Table 4).

An additional source of variation across states is in the methods states use to select participating MCOs. A majority of states use a competitive RFP process for selecting plans (see Table 5 and Appendix B, Table 3). The RFP process gives a state more flexibility in meeting their goals for the number and type of plans to have in various parts of the state. The alternative to a competitive process is to use any-willing-provider contracting, which generally yields more participating plans. Having more plans can be good, since beneficiaries have more choice, and there is always back-up capacity for expansion or when plans drop out. However, this can result in numerous smaller plans which do not have the economies of scale of larger plans.

The number and type of MCOs in study states has stabilized in most places compared to the 1990s. We heard in interviews with states that a great advantage of such relative stability is that states have been able to establish more trust and a more a collaborative working relationship with their plans. Closer communication can be helpful when changes (for example, benefits changes) are needed that must be communicated to beneficiaries, or when there are any problems identified with quality or satisfaction. While we did not collect data on the number of plans by year, it appears that the number of plans has gone down over time due to consolidation through mergers, plans exiting the Medicaid managed care market, and states selecting fewer plans.16 In addition there is an apparent trend toward more participation in more states by several national MCOs, such as UnitedHealthcare, Aetna, and others. These plans bring large national enrollment and economies of scale, as well as experience from a variety of states in how to design programs and monitor quality. On the other hand they may lack a local presence. This has often been solved by acquiring a local plan.

Provider Networks - Another source of variation across and within states is the way that plans select and maintain their provider networks. All study states have requirements concerning the size and other characteristics of networks, but these standards vary widely across states, as does the enforcement of standards by states and plans (see Table 6). Larger plans, particularly those with commercial enrollees, have more market power in negotiations with individual providers. In contrast, rarer providers (such as hospitals and specialists but not primary care as often) have substantial market power in negotiating with plans. This means that such providers likely have higher reimbursement rates, at least in some geographic areas, than they did under fee-for-service arrangements, while the general pattern seems to be a norm of provider reimbursement at approximately the level of state fee-for-service rates in most places. Thus it is not clear that providers are substantially worse off under Medicaid and CHIP risk-based managed care than under fee-for-service, at least financially, although they are subject to more scrutiny and have some additional administrative burden.

An important factor in how risk-based managed care programs can be designed and implemented has to do with scale. Small states, with fewer enrollees, have more difficulty attracting as many health plans, and the plans inevitably have smaller enrollment in those states. This can also transfer to the plans themselves, who in turn (if they are small) may have trouble attracting participating providers. These difficulties are compounded in rural areas where few Medicaid/CHIP enrollees live, and which have very few providers. This in large measure explains the growth of national plans, which span the borders of states and can spread risk over a larger number of covered lives. In addition, commercial plans have a greater ability to attract providers because of a larger enrollment base, among other reasons. While the commercial and Medicaid/CHIP networks differ to some extent, there is usually substantial overlap. The larger plans also bring a broader experience base, particularly with information systems. It remains to be seen whether the trend toward larger and fewer plans might lead to higher cost for states (through the increased bargaining power of plans), to less innovation, or to poorer quality.

Quality Monitoring - Due to concerns by policymakers that risk-based managed care might affect access, quality, and satisfaction, there has been a pronounced trend during the study period (2001–2010) toward more intensive monitoring of health plans. The BBA required such monitoring but did not provide much specific guidance. This gap has to a large extent been filled by the NCQA, with help from the AHRQ in the design of the CAHPS survey. This has led to a reliance on HEDIS and CAHPS measures as the backbone of Medicaid/CHIP monitoring of quality and satisfaction. This greater uniformity in methods, and particularly the outside scrutiny brought in by NCQA when plans are required to obtain accreditation, likely has standardized access, quality, and satisfaction measurement with positive consequences for beneficiaries.

In spite of this pattern, we have documented a continued diversity in how quality monitoring is implemented across states. In addition, most of the measures that have been used most heavily by states to date are measures of the health care process (e.g., utilization of preventive care services) rather than measures of health outcomes. Some study informants—especially providers—expressed skepticism about the effectiveness of the quality improvement processes that have been used to date for Medicaid/CHIP risk-based managed care programs. It is perhaps best to consider these programs as still under development, with the many states and plans around the country functioning as a laboratory for new methods. In the meantime, the limited data we were able to collect suggests that preventive care use has improved for adults and children under risk-based Medicaid managed care during the study period, but that there is substantial variation across states in these patterns.

The recent recession and states’ needs to save money through reduced capitation rates have brought increased financial pressures on plans and their providers. We heard that the requirement for actuarial soundness of rates mitigates this to some extent. For example, the legislature cannot make an across-the-board capitation rate reduction. (This is not a factor when CHIP rates are set separately from Medicaid, since there is no actuarial soundness requirement.) Budget stringency also affects the size of state staff and so can have an impact on, for example, the quality monitoring process. We did not speak with beneficiaries or measure changes in beneficiary access or satisfaction during the recession, so it is not possible to know whether recent budget pressure has resulted in negative beneficiary experiences under Medicaid/CHIP risk-based managed care. We can only state that there was no evidence from our study of such changes, but that more research is needed, and that most states and plans feel strongly that risk-based managed care provides a more cost-effective approach to care delivery.

All respondents are looking to the implementation of the Affordable Care Act as a major milestone for risk-based Medicaid managed care because of the large number of new Medicaid enrollees who will enter MCOs. There is already change under way in many states, particularly around issues of establishing an exchange, although this varies according, in large part, to the political party of the governor and legislative majority. This expected enrollment growth has led to concerns about whether the number of plans, and especially the number of providers, is adequate to maintain access and quality. Without a large number of new participating providers, it seems inevitable that some states will relax the standards (or enforcement) they impose on plans for the size of their networks. This is another important area for additional research as ACA implementation approaches.

The medical home and Accountable Care Organization provisions of the ACA were highlighted by some state officials as providing opportunities for enhancing care co-ordination and quality of care for people with disabilities. As an example, New Mexico, which has mandatory statewide enrollment for SSI groups, is encouraging health plans to obtain NCQA certification as a medical home.

Summary - Risk-based managed care has grown, and study states are poised to continue the expansion as the implementation of the ACA approaches (with the notable exception of Connecticut). The results of this study suggest that the risk-based managed care infrastructure is in place to absorb these new beneficiaries in 19 of the 20 study states, but that expansion of the provider supply is necessary in some places. The development of more refined techniques for monitoring access, quality, and satisfaction should continue in order to assure that Medicaid and CHIP enrollees’ care does not suffer under the expansion.

View full report


"rpt.pdf" (pdf, 1.42Mb)

Note: Documents in PDF format require the Adobe Acrobat Reader®. If you experience problems with PDF documents, please download the latest version of the Reader®