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


In addition to great variety in the populations and geographies that are mandatorily and voluntarily enrolled in risk-based managed care, another way that state programs vary is in the services that are included in comprehensive risk-based MCOs.7 In particular, states may carve out services from their risk-based managed care contracts. These services are then either contracted out to a separate, limited benefit plan or provided through fee-for-service arrangements.

States may vary the geographies or populations for which these carve-outs apply. For example, a state may carve out dental services in certain regions of the state, while elsewhere dental services are "carved in" to MCO’s contracts. Or a state may carve out the pharmacy benefit for the SSI-related population but not for the TANF-related population. Also, the state may give the health plan the option of "carving in" a particular service to their contract or leaving it out (in which case the beneficiary usually receives the service through fee-for-service). Capitation rates are adjusted accordingly.

The most commonly carved out services in Medicaid managed care programs include dental services, behavioral health (mental health and substance abuse treatment), drugs, and transportation (Gifford et al., 2011). Among the 20 study states, for Medicaid:

  • Fifteen carve out dental services.
  • Thirteen carve out inpatient behavioral health (but only eight carve out detoxification).
  • Eleven carve out outpatient behavioral health.
  • Ten carve out non-emergency transportation.
  • Nine carve out prescription drugs.

Among the seven separate risk-based managed care CHIP programs in the study states:

  • Five carve out dental services.
  • One carves out behavioral health.

There are some other carve-outs that are more variable in definition and less common, such as for personal care services, therapies, and transplants. In addition to these carve-outs, some services (such as adult dental services) may be excluded from Medicaid coverage altogether. That is, an MCO may not include a benefit not because of a carve-out but simply because the state does not offer it as a covered Medicaid benefit. This applies to Early Periodic Screening, Diagnosis, and Testing (EPSDT)8 benefits, mandated for Medicaid but not for CHIP, which are excluded from separate CHIP MCO contracts but included for Medicaid MCO contracts.

Table 4: State Reasons Given for Carving Services In or Out of Medicaid and CHIP MCO Contracts in Study States
Service Reasons to Carve Out Reasons to Carve In
Source: Interviews with state officials.
  • Better care management and quality control
  • Improved access through dedicated dental network
  • "Not something that the managed care companies really do"
  • Administratively efficient
  • None given
  • MCOs cannot collect manufacturer’s drug rebates (prior to passage of ACA)
  • Single Preferred Drug List for the sole prescription drug contractor results in better efficiency and quality of care
  • Better care coordination and cost control
Behavioral Health
  • Perception (by advocacy community) of inappropriate capacity of MCOs to manage behavioral health
  • Strong county/regional political influence of traditional community health providers who want behavioral health carved out
  • Partial carve out enables MCOs to manage patients up to a point to get the benefits of integration, then carve out past that point
  • Increased access
  • Increased administrative efficiency
  • Easier to understand total cost of behavioral health services
  • Care coordination between mental and physical health
  • Better care management and incentive to minimize institutionalization

Table 4 summarizes some of the reasons cited in conversations with states regarding their decisions to carve in or carve out dental services, behavioral health, or pharmacy services. Many factors are considered by states deciding whether to carve services out of or into MCO contracts. Carving in services may facilitate better care coordination (for example, coordination between physical and mental health needs). On the other hand, when services are carved out to a separate plan, quality of care may improve when the organization has more experience providing the service.

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