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


Figure 4 shows the growth in comprehensive risk-based Medicaid managed care enrollment in the 20 study states from 2001 to 2010 for children and nonelderly adults, separately for TANF-related and SSI-related enrollees. Since there are no uniform nationally available published statistics on enrollment in MCOs for these four groups, we estimated enrollment using data from the Medicaid Statistical Information System, which provides an annual estimate of spending on managed care services for individuals. Enrollment in comprehensive risk-based managed care is estimated by counting everyone enrolled in Medicaid in the year, according to their age and eligibility group, who had managed care expenditures of $2006 or greater for the year.

Figure 4: Enrollment in comprehesive Risk-Based Managed Care
in Study States, 2001-2010 (in millions)

Source: Medical Statistical Information System.

Note: Excludes M-CHIP. More information on enrollment is contained in appendix B, table 2.

Enrollment in risk-based Medicaid managed care grew throughout the study period. The largest group is TANF-related children, with 8.1 million enrollees at the beginning of the period and 12.4 million by 2008, a 53 percent increase (in contrast to only a 29 percent increase in children’s enrollment in Medicaid overall—data not shown). The increase for TANF-related adults was even greater, 64 percent, and especially high for the SSI- related groups at 82 percent for children and 73 percent for adults. However, the increases for SSI-related groups are from a small base and their enrollment remains small relative to TANF-related enrollment.

In each of the study states, Medicaid mandatory risk-based managed care enrollment began in the 1990s or before but generally only in certain parts of the state, and it most often was mandatory only for TANF-related groups initially. There were exceptions, however. For example, Arizona, Delaware, New Mexico, and Tennessee operated statewide programs and enrolled the disabled on a mandatory basis from the beginning. Several other states (Maryland, Minnesota, Pennsylvania, and Virginia) began only in selected geographic areas, but they included the disabled in mandatory risk-based managed care from the beginning of the program.

Study informants observed that one reason their state began with the TANF-related population is that these groups of adults and children tend to have fewer and more predictable health needs, and thus it is easier to set capitation rates correctly, which leads to fewer problems financially for the plans. Informants noted that early on in Medicaid managed care, plans generally did not have the right types and mix of providers to adequately care for individuals with more complex mental and physical health needs. One state (Tennessee) noted that it is also more politically palatable to begin managed care with a TANF-related population. The main reason for not beginning statewide was that it was difficult to find plans willing to serve in rural areas. Informants in some states reported that this is still a problem.

While the SSI-related population enrolled in Medicaid risk-based managed care remains very small relative to TANF-related and poverty-related groups—even by the end of the study period—it is a group that is of high policy interest because of high health needs, high needs for care coordination, and high cost. Informants noted that early on in Medicaid managed care, plans generally did not have the right types and mix of providers to adequately care for individuals with more complex mental and physical health needs, but gradually plans have learned how better to address those needs. We also heard that the care coordination functions that MCOs adopt often improve the care process for SSI enrollees, over and above the fee-for-service delivery system. It is notable that we did not hear of any serious problems concerning incorporating SSI groups into Medicaid managed care in the 20 study states during the study period, although we did not interview beneficiaries or advocacy groups.

Most state officials indicated that they began at a small scale and gradually expanded their Medicaid risk-based managed care programs. Most state officials expressed a goal of expanding their programs statewide. For example, in New York mandatory risk-based managed care enrollment began in New York City and spread upstate, first for TANF-related and then for SSI-related groups. The state is nowin the process of moving to statewide mandatory risk-based managed care for all program enrollees including those dually eligible for Medicare and Medicaid and those receiving institutional services, both groups that generally have been excluded from Medicaid managed care nationwide in the past.

This process of expansion of risk-based Medicaid managed care is continuing today in each of the study states but one (Connecticut), a major exception to the pattern of continued expansion of Medicaid risk-based managed care. Connecticut gradually dismantled its Medicaid risk-based managed care program over the past few years by carving out more and more services (beginning with behavioral health in 2006, then pharmacy and dental services in 2008) and has completely replaced risk-based managed care with an Administrative Services Organization (ASO) model as of January 2012. Under this new approach, Connecticut outsources claims processing and contracts with a health plan on a non-risk basis for utilization management, disease management, and member services functions. The state is also planning to establish medical homes, and eventually accountable care organizations, as part of its approach. According to informants, many factors were at play in the state’s decision. These included a desire to achieve cost savings through administrative efficiencies, criticism of the risk-based managed care program’s ability to coordinate care for beneficiaries with complex needs, a strong advocacy community that viewed the program as a means for MCOs to profit by denying care, and a weak relationship between providers and MCOs. Moreover, the state had already adopted the ASO model for carved-out services (e.g., behavioral health) and described that move as very successful.

Two states that implemented mandatory statewide risk-based managed care for both TANF- and SSI-related Medicaid enrollees from the beginning of their program, Arizona and Tennessee, have had contrasting experiences. Arizona has a long-running risk-based Medicaid managed care program dating back to 1982 (McCall, 1997). The state has sustained the original program structure for over 25 years, and state officials attribute its continuity to a collaborative approach with plans and the availability of good data to be used for rate setting and monitoring, among other factors.

In contrast, Tennessee began statewide enrollment in risk-based Medicaid managed care for all Medicaid enrollees in 1994. While an early evaluation showed some positive outcomes for enrollees at the start of the program (Ku, Ellwood, Hoag, Ormond, & Wooldridge, 2000), according to state officials, by the late 1990s the program began to experience financial difficulties, caused by a higher cost per person than budgeted. There were other factors leading to problems retaining plans, including the state’s and the health plans’ lack of experience with managed care and numerous legal actions. Consequently, Tennessee discontinued the risk-based component of their Medicaid program for five years from 2002 to 2007, gradually moving from full-risk to partial-risk, then no-risk, and back to partial- and full-risk; the program is now reinstituted statewide as of January 2009. State officials express the opinion now that it would have been better to start implementation more slowly, which they did when they began to phase risk-based managed care back to Medicaid, beginning with Tennessee’s middle region in 2007.

Even when a state fully intends to move to statewide mandatory enrollment in risk-based managed care, there are several groups that present particular difficulty according to study informants, including the following:

  • The rural population: States have struggled to develop an interest on the part of plans in including residents of very rural areas. Many states have areas that are not served by an MCO. This is because it is difficult to develop an adequate provider network there, especially for specialists. Some states—e.g., Arizona, California (CHIP), Florida (CHIP), Michigan, New Mexico, and Tennessee—have succeeded in including such areas, but most other states are not yet doing so.
  • Children with special health care needs: Often, seriously emotionally disturbed and other disabled children, as well as foster care children, are excluded because of their specialized needs.
  • Dual enrollees: Those entitled to both Medicare and Medicaid are difficult to include because their primary payer is Medicare for most acute-care services, so it is more difficult to establish an accurate capitation rate for Medicaid services only.
  • Long-term institutionalized enrollees: It is hard to reap the benefits of risk-based managed care through deinstitutionalization and home-based services once someone has been in an institution and has given up their home.
  • Spend-down enrollees: These individuals must spend a certain amount per month before they are eligible for Medicaid to cover their remaining health expenses in the month. Because of the way they obtain Medicaid coverage, it can be difficult to develop an appropriate capitation rate for such individuals.
  • New enrollees: For a short period of time just after enrolling in Medicaid but before plan enrollment, it is necessary to pay for services for these individuals on a fee-for-service basis, unless the state has a waiver of retroactive eligibility and enrolls persons into plans as soon as they become eligible.
  • Pregnant women: Pregnancy is a high-cost, short-term condition. Also, many women are enrolled only for their pregnancy. Many states have chosen to pay for such services on a fee-for-service basis or with a special capitated fee.
  • American Indians: Many American Indians are entitled to services from the Indian Health Service and typically are not included in states’ Medicaid managed care efforts.

Most of these excluded groups have high average costs to Medicaid. Generally (but with some exceptions), these small but high-cost groups remain excluded, even in these 20 states with the most experience with risk-based managed care. This, combined with the lack of mandatory enrollment of the SSI-related groups in many states, has meant that states have yet to bring most of the highest cost groups into risk-based managed care.

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