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 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.
Study states have experimented with a variety of arrangements for behavioral health. For example, it is common to use a "partial carve-out." In that circumstance, a certain number of visits or inpatient days are included in the risk-based managed care contract, and the rest are carved out to a special plan or to fee-for-service. For example, in the state of Washington, 20 outpatient mental health visits may be covered by the MCO, and any use beyond that is carved out. In several states (e.g., California and Michigan) the behavioral carve out is diagnosis driven, with conditions that can be treated in a primary care office being carved in, but other more serious conditions (e.g., Serious Emotional Disturbance) being carved out to a limited-benefit behavioral health plan. The advantages of this are expressed by a state official below concerning children’s mental health needs.
If there are mental health needs that the plan physician determines may not be seriously emotionally disturbed (SED), the plan provides the service. If the child is SED, then they send the child to county mental health services. (State Official)
According to those with whom we spoke, carving in some mental health services can improve access to mental health services for those with mild and moderate conditions.
One of the major reasons for having SSI-related adults in managed care for mental health services is that there was such a paucity of access in fee-for-service. There was no access for people who didn’t have serious mental health needs. When we carved mental health in, that became one of the big winners. (State Official)
On the other hand, we heard the countervailing opinion that carving in mental health services could restrict access, especially for those with intensive needs.
I think that historically there has been concern with the plans’ ability to treat more vulnerable, high-intense behavioral health populations. There are some [local] facilities that feel that managed care and their process of authorizing and denying care is not conducive to these populations and their needs. They have lobbied very strongly for these populations to be carved out. (State Official)
This opinion is associated with political pressure by state and local authorities who are concerned that their behavioral health programs may lose clients and potential funding.
We’re trying to get over the political hurdles of those in the community who want to make sure all the dollars go to behavioral health authorities. (State Official)
The political will has not been there to expand behavioral health as a managed care model because the community mental health centers want to get fee-for-service patients. (State Official)
However, carving out behavioral health, especially when it is paid fee-for-service, is another factor in limiting a state’s ability to use risk-based managed care as a cost-control mechanism, according to study informants.
I want to put the incentive on the plan for them to manage people that are high cost and high need who are going in and out of hospitals and institutions. (State Official)
Another common carve-out from risk-based managed care is prescription drugs. Until this year, states have carved out prescription drugs to fee-for-service to collect the manufacturers’ drug rebates. Pre–Affordable Care Act federal law stipulates that drug manufacturers that want their drugs covered by Medicaid must give rebates to federal and state governments. At the state level, these rebates were previously only allowed to be collected for drugs purchased on a fee-for-service basis; drugs covered by Medicaid managed care organizations were not eligible for rebates. The Affordable Care Act authorizes Medicaid Drug Rebate Equalization, which became effective in April 2010. This provision potentially extends drug rebates to MCOs. State officials in several states (e.g., Delaware, New Jersey, New York, Ohio, and Texas) indicated that consequently they are considering carving pharmacy back into their contracts with MCOs and adjusting capitation rates accordingly.
When pharmacy is carved out, it is frequently carved out to a pharmacy benefits manager (which may or may not take on risk) or to fee-for-service. In addition, certain specific types of drugs may be carved out from MCO contracts; examples include behavioral health drugs and HIV/AIDS drugs. Another reason to carve out pharmacy services is to have a single preferred drug list for the state’s Medicaid program. This simplifies the prescribing process for providers, who then only have to refer to a single list of preferred drugs.