Understanding Medicaid Home and Community Services: A Primer, 2010 Edition. Early Growth of Medicaid Managed Care


In the 1980s, many states were implementing Medicaid managed health care. Their efforts were focused on the largest groups of beneficiares: families and children who qualified for Medicaid based on their eligibility for cash assistance through Aid to Families with Dependent Children (now Temporary Assistance to Needy Families). Individuals eligible for Medicaid through Supplemental Security Income (SSI) typically were excluded from managed health care, or included on a voluntary basis.2 When SSI-related groups were included, their long-term care services were almost always “carved out” and continued to be delivered through the traditional fee-for-service system. This was in part because early Medicaid managed care programs were building on the experience of commercial managed care organizations (MCOs) that provided only primary and acute health care.

Growth of Medicaid managed health care accelerated in the 1990s. By 1998, state survey data showed that a majority of Medicaid beneficiaries were enrolled in some form of Medicaid managed care. About two-thirds of Medicaid managed care enrollment was in risk-based commercial or Medicaid-only MCOs.3 The remaining third were enrolled in primary care case management, which assigns primary care providers to members but does not capitate payments.

In the 1990s, a number of states began applying risk-based managed care strategies to the provision of long-term care services. These included both Medicaid-only models, which focused exclusively on Medicaid-funded services, and integrated models, which included both Medicaid and Medicare services for persons who were dually eligible. New integrated programs were implemented in two states: the Wisconsin Partnership Program (1995) and Minnesota Senior Health Options (1997). Three Medicaid-only programs were launched in the same period: New York Managed Long-Term Care (1997), Texas Star+Plus (1998), and Florida Diversion (1998).4

The Balanced Budget Act (BBA) of 1997 included significant changes to Federal Medicaid managed care policy. For the first time, Federal law allowed states under certain conditions to implement mandatory Medicaid managed care programs without the need for Federal waivers (i.e., a state could require certain Medicaid participants to enroll in a new managed care program). However, individuals eligible for both Medicaid and Medicare (hereafter called dually eligible persons) and children with special health and/or long-term care needs were specifically excluded from those provisions. The change in Federal policy recognized that managed care had become the dominant delivery system for families and children, but was still relatively untested among SSI-eligible groups.

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