10 Issues to Know About Medicaid Managed Care

Managed care is the dominant supply system for individuals enrolled in Medicaid. The most recent nationwide Medicaid managed care enrollment knowledge (from 2022) present 75% of Medicaid beneficiaries have been enrolled in complete managed care organizations (MCOs). Whereas managed care is the dominant Medicaid supply system, states determine which populations and companies to incorporate in managed care preparations, which ends up in appreciable variation throughout states. Moreover, whereas state necessities for Medicaid managed care plans may be tracked, plans have flexibility in sure areas, together with in setting supplier fee charges, and plans might select to supply further advantages past these required by the state.

Early in 2025, there are a lot of components at play that would have implications for Medicaid managed care plans and the individuals they serve. On the state degree, states and plans have confronted appreciable price setting uncertainty after thousands and thousands of individuals have been disenrolled in the course of the unwinding of the pandemic-era Medicaid steady enrollment provision. Some companies report that present capitation charges don’t align with greater member threat and utilization patterns. Many states have sought federal approval to regulate charges to handle these modifications amid shifts and uncertainty in state fiscal circumstances. On the federal degree, talks in Congress about chopping federal Medicaid spending may have implications for protection in addition to plans and suppliers. Lastly, main Medicaid rules designed to advertise high quality of care and advance entry to care for Medicaid enrollees finalized beneath the Biden administration could possibly be repealed by Congress or delayed or rewritten by the Trump administration. On this context, this temporary describes 10 themes associated to using complete, risk-based managed care within the Medicaid program.

1. As we speak, capitated managed care is the dominant manner during which states ship companies to Medicaid enrollees.

States design and administer their very own Medicaid packages inside federal guidelines. States decide how they may ship and pay for take care of Medicaid beneficiaries. Practically all states have some type of managed care in place – complete risk-based managed care and/or main care case administration (PCCM) packages.^, As of July 2024, 42 states (together with DC) contract with complete, risk-based managed care plans to offer care to at the least a few of their Medicaid beneficiaries (Determine 1). Health-plans-launch-apr-1-what-members-need-to-know.html”>Oklahoma is the most recent state to be included on this depend, having carried out capitated, complete Medicaid managed care (for most kids and adults) on April 1, 2024. Medicaid MCOs present complete acute care (i.e., most doctor and hospital companies) and, in some circumstances, long-term care to Medicaid beneficiaries and are paid a set per member per 30 days fee for these companies. For greater than three many years, states have elevated their reliance on managed care supply programs with the goal of bettering entry to sure companies, enhancing care coordination and administration, and making future prices extra predictable. Whereas the shift to MCOs has elevated funds predictability for states, the proof concerning the influence of managed care on entry to care and prices is each restricted and blended.^,,

2. In FY 2023, funds to complete risk-based MCOs accounted for over half of Medicaid spending.

In FY 2023, state and federal spending on Medicaid companies totaled over $880 billion. Funds made to MCOs accounted for about 52% of whole Medicaid spending (Determine 2), unchanged from the earlier fiscal yr. The share of Medicaid spending on MCOs varies by state, however over three-quarters of MCO states directed at the least 40% of whole Medicaid {dollars} to funds to MCOs (Determine 3). State-to-state variation displays many components, together with the proportion of the state Medicaid inhabitants enrolled in MCOs, the Health profile of the Medicaid inhabitants, whether or not high-risk/high-cost beneficiaries (e.g., individuals with disabilities, twin eligible beneficiaries) are included in or excluded from MCO enrollment, and whether or not long-term care companies are included in MCO contracts. As states develop Medicaid managed care to incorporate higher-need, higher-cost beneficiaries, costly long-term care, and adults newly eligible for Medicaid beneath the ACA, the share of Medicaid {dollars} going to MCOs may proceed to extend.

3. Three-quarters (75%) of all Medicaid beneficiaries obtained their care via complete risk-based MCOs.

As of July 2022, almost 72 million Medicaid enrollees obtained their care via risk-based MCOs. Thirty MCO states coated at the least 75% of Medicaid beneficiaries in MCOs (Determine 4).

Though 2022 knowledge are essentially the most present nationwide knowledge accessible, enrollment in Medicaid total grew considerably in the course of the COVID public Health emergency when states paused disenrollments, leading to progress in MCO enrollment as properly. In the beginning of the “unwinding” interval, in April 2023, Medicaid enrollment (total) peaked at 94.5 million, a rise of 23 million or 32% from earlier than the pandemic. Regardless of thousands and thousands of disenrollments in the course of the unwinding, nationally, almost 8 million extra individuals have been enrolled in Medicaid/CHIP in October 2024 than in February 2020 (pre-pandemic).

4. Youngsters and adults are teams probably to be enrolled in MCOs; nevertheless, states are more and more together with enrollees with advanced wants in MCOs.

As of July 2022, 36 MCO states reported protecting 75% or extra of all kids via MCOs (Determine 5). Of the 39 states that had carried out the ACA Medicaid enlargement as of July 2022, 32 states have been utilizing MCOs to cowl newly eligible adults and most coated greater than 75% of beneficiaries on this group via MCOs. Thirty-five MCO states reported protecting 75% or extra of low-income adults in pre-ACA enlargement teams (e.g., dad and mom, pregnant ladies) via MCOs. Fewer MCO states reported protecting 75% or extra adults ages 65+ and folks eligible via incapacity. Though this group remains to be much less more likely to be enrolled in MCOs than kids and adults, over time, states have been shifting to incorporate adults ages 65+ and folks eligible via incapacity in MCOs.

5. 5 publicly traded companies account for half of MCO enrollment.

States contracted with a complete of 282 Medicaid MCOs as of July 2022. MCOs symbolize a mixture of non-public for-profit, non-public non-profit, and authorities plans. As of July 2022, a complete of 16 companies operated Medicaid MCOs in two or extra states (referred to as “mum or dad” companies), and these companies accounted for over 63% of enrollment in 2022 (Determine 6). Of the 16 mum or dad companies, six are publicly traded, for-profit companies whereas the remaining ten are non-profit corporations. 5 companies – Centene, UnitedHealth Group, Elevance (previously Anthem), Molina, and Aetna/CVS – account for 50% of all Medicaid MCO enrollment (Determine 6). All 5 are publicly traded corporations ranked within the Fortune 500, and 4 are ranked within the prime 100.

6. States make choices about which companies to carve out and in of MCO contracts.

Though MCOs present complete companies to beneficiaries, states might carve particular companies out of MCO contracts to fee-for-service programs or restricted profit plans. Providers regularly carved out embrace behavioral Health, pharmacy, dental, and long-term care companies. Nonetheless, there was important motion throughout states to carve these companies into MCO contracts. Whereas the overwhelming majority of states that contract with MCOs report that the pharmacy profit is carved into managed care (31 of 42), eight states report that pharmacy advantages are carved out of MCO contracts as of July 2024 (Determine 7). A further three states (Kentucky, Louisiana, and Mississippi) now contract with a single PBM for the managed care inhabitants as an alternative of implementing a standard carve-out of pharmacy from managed care. (Below this “hybrid” mannequin, MCOs stay in danger for the pharmacy profit however should contract with the state’s pharmacy profit supervisor to course of pharmacy claims and pharmacy prior authorizations based on a single formulary and most well-liked drug record.)

7. Annually, states develop MCO capitation charges that should be actuarially sound and should embrace threat mitigation methods.

States pay Medicaid managed care organizations a set per member per 30 days fee for the Medicaid companies specified of their contracts. Whereas plans set charges within the business and Medicare Benefit markets, Medicaid managed care charges are developed by states and their actuaries and reviewed and accredited by CMS. Below federal legislation, funds to Medicaid MCOs should be actuarially sound. Actuarial soundness implies that “the capitation charges are projected to offer for all cheap, acceptable, and attainable prices which are required beneath the phrases of the contract and for the operation of the managed care plan for the time interval and the inhabitants coated beneath the phrases of the contract.” In contrast to fee-for-service (FFS), capitation offers upfront fastened funds to plans for anticipated utilization of coated companies, administrative prices, and revenue. Plan charges are often set for a 12-month ranking interval. States might use a wide range of mechanisms to regulate plan threat, incentivize plan efficiency, and guarantee funds usually are not too excessive or too low, together with threat sharing preparations, threat and acuity changes, medical loss ratios (MLRs, which replicate the proportion of whole capitation funds obtained by an MCO spent on scientific companies and high quality enchancment), or incentive and withhold preparations.

To restrict the quantity that plans can spend on administration and hold as revenue, states are required to develop capitation charges for Medicaid to realize an MLR of at the least 85% within the price yr; nevertheless, there is no such thing as a federal requirement for Medicaid plans to pay remittances to the state in the event that they fail to satisfy the MLR commonplace. As of July 2024, 34 MCO states reported they at all times require remittance funds when an MCO doesn’t meet state minimal MLR necessities, whereas two states indicated they often require MCOs to pay remittances (Determine 8).

8. In 2024, CMS finalized guidelines to strengthen entry requirements, however the way forward for the principles is unsure.

The Biden administration finalized main Medicaid rules designed to advertise high quality of care and advance entry to take care of Medicaid enrollees. The 2024 Health-insurance-program-managed-care-access-Finance-and-quality-final-rule”>Managed Care rule addresses Medicaid managed care entry, financing, and high quality, together with strengthening requirements for well timed entry to care (e.g., via the institution of nationwide most wait time requirements for sure “routine” appointments) and states’ monitoring and enforcement efforts. These guidelines are advanced and are set to be carried out over a number of years. Nonetheless, Congress might search to overturn these guidelines, or the Trump administration may delay implementation or challenge new rules that might undo them. Throughout the first Trump administration, CMS took motion to vary Medicaid managed care guidelines, together with stress-free guidelines round community adequacy and beneficiary protections.

States are typically prohibited from contractually directing how a managed care plan pays its suppliers. Topic to CMS approval, nevertheless, states might implement sure “state directed funds” (SDPs) that require managed care plans to undertake minimal or most supplier fee payment schedules, present uniform greenback or proportion will increase to suppliers (above base fee charges), or implement value-based supplier (VBP) fee preparations. In creating state directed funds (in 2016), CMS aimed to assist states guarantee entry to satisfactory supplier networks and to extend use of VBP preparations. Many states that contract with MCOs use SDPs to make uniform price will increase which are like FFS supplemental funds. State directed funds should meet federal necessities (e.g., should be tied to utilization and supply of companies, be distributed equally to specified suppliers, and never be conditioned on participation in intergovernmental switch (IGT) agreements). The managed care guidelines finalized in Health-insurance-program-chip-managed-care-access-Finance#h-20″>2024 allow states to pay hospitals and nursing amenities on the common business fee price (ACR) when utilizing directed funds (greater than the Medicare fee ceiling used for different Medicaid FFS supplemental funds). The 2024 guidelines additionally tightened SDP necessities to enhance oversight, analysis, and transparency (e.g., states might be required to report supplier degree directed fee knowledge) and to make sure state directed funds are tied to precise utilization. Latest reports point out state directed funds have been a significant driver of Medicaid expenditure progress in recent times, and CBO Medicaid projections for 2025-2034 attribute additional will increase in SDPs (partially tied to the modifications in rule) as an element rising spending.

In 2024, CMS additionally finalized a Health–Information-and-improve-prior-authorization-process”>rule targeted on bettering the prior authorization course of together with lowering approval wait instances and bettering transparency. A 2023 KFF survey of client experiences with Health insurance coverage discovered that about one in 5 Medicaid enrollees say they’ve had issues with prior authorization—greater than for many different varieties of insurance coverage. A July 2023 OIG report discovered that Medicaid MCOs had an total prior authorization denial price of 12.5%–greater than 2 instances greater than the Medicare Benefit price (Determine 9), elevating issues about prior authorization and entry in Medicaid managed care. OIG suggestions (to CMS) embrace strengthening state monitoring of denials. Latest MACPAC evaluation of denials and appeals in Medicaid managed care resulted within the inclusion of seven suggestions within the March 2024 Report to Congress targeted on bettering the appeals course of and enhancing monitoring and oversight of MCOs.

9. States hyperlink monetary incentives to high quality measures and use contract necessities to advance priorities, together with addressing social determinants of Health.

States incorporate high quality metrics into the continuing monitoring of their packages, together with linking monetary incentives like efficiency bonuses or penalties, capitation withholds, or value-based state directed funds to high quality measures. Over three quarters of MCO states reported utilizing at the least one monetary incentive to advertise high quality of care as of July 2021 (Determine 10). Monetary incentive efficiency areas most regularly focused by MCO states embrace behavioral Health, persistent illness administration, and perinatal/beginning outcomes. Regardless of exercise on this space, detailed efficiency Information on the plan-level regularly has not been made publicly accessible by state Medicaid businesses, limiting transparency and the power of Medicaid beneficiaries (and different stakeholders) to evaluate how plans are acting on key indicators associated to entry, high quality, and so on.

In FY 2024, most MCO states reported leveraging Medicaid MCO contracts to advertise at the least one specified technique to handle social determinants of Health (Determine 11). States may leverage managed care contracts to assist scale back Health disparities.

10. CMS has taken steps to enhance managed care program monitoring and transparency.

The 2016 Medicaid managed care closing rule created new managed care reporting necessities for states. CMS, beneath the Biden administration, developed commonplace reporting templates (Desk 1) and a wide range of toolkits and launched a collection of informational bulletins (2021, 2022, 2023, 2024) to assist states enhance their monitoring and oversight of managed care packages. Transparency has the potential to advertise accountability. To enhance transparency, CMS started publicly posting the Managed Care Program Annual Report (MCPAR) and the MLR Abstract Experiences on Medicaid.gov in 2024. Managed care guidelines finalized in 2024 embrace provisions aimed toward additional strengthening managed care transparency and monitoring, although the destiny of those guidelines stays unsure.

Posting knowledge regarding the efficiency of particular person MCOs might permit for comparability inside and throughout states. Nonetheless, limitations and challenges might exist together with posting lags and incomplete knowledge (e.g., GAO discovered 6 states had not submitted required MCPARs for 2022, OIG discovered MLR reviews ready by plans have been lacking required knowledge). (States are required to submit the MCPAR and Community Adequacy and Entry Assurances Report on their web sites however some states might not but be in compliance with these necessities.) IT is unclear whether or not the Trump administration will proceed efforts to strengthen managed care oversight and transparency.