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


Background/Overview - Over the first decade of the 21st century, the role of risk-based managed health care for publicly insured beneficiaries has expanded substantially. This report examines this form of health care delivery in 20 states for both Medicaid and CHIP nonelderly adults and children, including people with disabilities. The 20 states were chosen because they include over 80 percent of both Medicaid and CHIP beneficiaries who are enrolled in risk-based managed care.

Findings are based on interviews with state Medicaid and CHIP officials, as well as representatives from 40 Managed Care Organizations (MCOs) serving Medicaid and CHIP beneficiaries, and 40 health care providers or provider organizations. In addition, the report contains published data from various sources, including measures of access to care, quality of care, and satisfaction with care over the study period (2001–2010).

Program Features - Medicaid and CHIP risk-based managed care programs are highly integrated in most of the study states, with only seven states separating most of the important features of administration for their Medicaid and CHIP risk-based managed care programs, such as plan selection, rate setting, and quality monitoring. Enrollment growth in risk-based MCOs was substantial during the study period, with the largest group—non-SSI Medicaid children—growing by 53 percent and other Medicaid groups—particularly SSI adults and children—experiencing even faster growth rates. Data are not available to measure the rate of CHIP enrollment growth in MCOs.

In spite of this growth, there remained at the close of the decade a substantial number of Medicaid enrollees within the study states who are not mandatorily enrolled in risk-based managed care. For example, only half the states have mandatory enrollment for TANF-related groups statewide, and only six have mandatory enrollment for SSI-related Medicaid beneficiaries statewide. Rural areas are frequently excluded from mandatory risk-based managed care in the study states due to difficulties establishing provider networks and finding plans willing to serve areas with small populations. Most study states have gradually found ways to expand into new parts of the state, with a goal of statewide mandatory enrollment over time. The exception to this pattern among the study states is Connecticut, which eliminated risk-based managed care for Medicaid and CHIP shortly after the end of the study period, citing a preference for a non–risk-based administrative service organization approach with many managed care features.

The lower rate of mandatory enrollment of SSI beneficiaries is due to conflicting opinions across states about how well MCOs can serve vulnerable groups with high mental and physical health needs. Notably, several states have incorporated such groups into risk-based managed care successfully over the entire study period, and other study states are now expanding such enrollment. Still, at the end of the study period, risk-based managed care programs in most study states continued to exclude some of the highest cost groups entirely, including many SSI beneficiaries, the elderly, and the institutionalized.

In addition, it is common to exclude certain services from MCO contracts, either carving them out to separate limited benefit plans or keeping a fee-for-service reimbursement approach. Dental services are the most frequently carved out (15 of 20 study states), and in many states informants believe that special dental plans improve access and that it is less important to integrate such services with medical services. It is also common to carve out behavioral health services (13 study states). However, this carve out is more controversial. Advocacy groups and behavioral health providers are concerned with access and utilization restrictions, although others cite the benefits of integrating physical and behavioral health services. Other common carve outs are pharmacy benefits—often because of the desire to obtain rebates, but also for administrative reasons—and transportation, among other services. When such services are carved out, the state loses some of the benefits of risk-based managed care such as care coordination and the predictability of monthly and annual expenditures for the program.

There is tremendous variation in how states design and administer their risk-based managed care programs. Some of the biggest sources of variation include:

  • How states select plans. Most study states use solicitations for proposals and select a subset of bidders (although the periodicity varies), but some (8 states) use any-willing-provider contracting—whereby the state sets the terms and accepts any MCO that meets the terms (for either the Medicaid or CHIP programs, or both).
  • How states set rates.
  • Contractual requirements for ensuring access to adequate provider networks, with substantial variation across states in their standards, and between Medicaid and CHIP in some states.
  • How plans establish and monitor provider networks.
  • How states monitor plans’ provider networks.
  • The types of quality monitoring conducted by states and plans.

There are trade-offs for states in deciding how many plans to include in their programs, and among the study states this varies widely from only two in some of the smallest states to over 20 in the largest. In addition to the size of the state geographically and in population, another factor is the type of contracting, with any-willing-provider states generally having more plans. States indicate that having more plans can be good, since there is adequate capacity when one or more plans leave the program. It also provides for more leverage for negotiation (for example, to persuade MCOs to operate in rural areas). On the other hand, it is administratively simpler to have fewer plans, and it may enable more frequent communication between the state and the health plans. In addition, market dynamics and negotiations between plans and providers are influenced by the number of health plans that operate in a state or region. Spreading the number of enrollees across a greater number of plans may lead to smaller (in terms of enrollees) and more financially fragile plans, and such plans may be more likely to leave the program due to financial difficulties. This is an advantage of having fewer and larger (often national) plans in the Medicaid and CHIP risk-based managed programs in the study states.

There are 189 MCOs participating in either Medicaid or CHIP risk-based managed care in the 20 study states, with most (147) participating in both programs. These plans are divided across four types: public program only/nonprofit (32.2 percent of Medicaid plans and 42.5 percent of CHIP); public program only/for-profit (20.1 percent of Medicaid plans and 14.9 percent of CHIP); some commercial enrollees/nonprofit (21.8 percent of Medicaid plans and 25.9 percent of CHIP); and some commercial/for-profit (21.8 percent of Medicaid plans and 20.7 percent of CHIP). A mix of different plan types is common across most study states, with a few exceptions. This provides, for some Medicaid and CHIP enrollees, a choice of a variety of types of plans, each with different advantages. For example, we heard that plans that only serve public enrollees often have more experience with the particular needs of low-income beneficiaries, while those with commercial enrollees have more leverage in establishing wider provider networks, among other differences.

Provider Networks - Establishing adequate provider networks can be challenging, especially in rural areas and for rare provider types (such as specialists and hospitals). Some areas have particular shortages of either primary care or specialty providers, or both. Plans use various techniques to persuade providers to participate in their Medicaid and CHIP managed care provider networks. Many providers noted that Medicaid managed care plans may pay more than fee-for-service Medicaid, depending on the location and the market dynamics. In general, we heard that Medicaid MCOs usually pay at or above fee-for-service Medicaid rates, and that CHIP plans often pay somewhat more. In spite of this, providers are often dissatisfied with risk-based managed care programs, although the opinions are not uniform. For example, there is disagreement about whether risk-based managed care improves access for Medicaid and CHIP beneficiaries, and whether it improves quality of care.

Quality of Care - Techniques for monitoring quality of care for risk-based managed care have evolved substantially over the study period. The Balanced Budget Act of 1997and its regulations (released several years later) made it easier for states to expand risk-based managed care but at the same time added requirements for additional oversight of quality of care. The development of the Healthcare Effectiveness Data and Information Set (HEDIS) and Consumer Assessment of Healthcare Providers and Systems (CAHPS) during the decade provided tools for states and plans to use in monitoring quality and satisfaction. All study states mandate that plans collect and submit HEDIS data, and all but one also collect CAHPS data, but there is tremendous variation in the variables they require and the specifications for collecting and reporting those data. Most of the variables measure health care process (e.g., utilization of services) with fewer variables on health outcomes.

We requested HEDIS and CAHPS data from all study states, and we were able to analyze a small number of variables across most states. All are measures of either use of preventive care services or of satisfaction with care. While it is difficult to compare across states and over time due to reporting differences, our analysis shows that the study states with available data have substantially varying rates of preventive care service use, and that measures of preventive care use improved over the decade for Medicaid and CHIP enrollees in risk-based managed care. While we could not measure trends in CAHPS indicators since we collected fewer measures early in the decade, we found generally high satisfaction with care (higher for children than adults). Overall satisfaction with their health plan was higher among Medicaid adults than the national adult commercial benchmark during the last five years of the study period among the 15 reporting states.

Summary - This review of Medicaid and CHIP risk-based managed care over the first decade of the 21st century shows that well-established programs exist in 19 of the 20 study states (Connecticut being the exception) and that most states are seeking to expand their programs to cover more and higher-cost enrollees. While there is substantial variation across states in approaches, all the study states have developed ways to regularly select plans, define network requirements, and monitor access and quality. In contrast to the early years of development of Medicaid managed care, there is substantial stability in the number and types of plans participating in risk-based managed care. HEDIS and CAHPS data also suggest that preventive care use has improved under risk-based managed care and that beneficiaries are generally satisfied with their health plans. Thus, the risk-based managed care programs that currently exist provide a structure to absorb the newly covered adults under the Affordable Care Act and provide a learning laboratory and important lessons for other states in how to develop an effective risk-based managed care program for Medicaid and CHIP beneficiaries.

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