Medicaid Managed Care Grew Substantially From 1999 to 2012

Between 1999 and 2012, Medicaid managed care has grown substantially. The enrollment rate in Medicaid managed care increased from 63% to 89% of all Medicaid beneficiaries eligible for full benefits, and the share of total Medicaid spending that went to managed care increased from 15% to 37%.

A new report from the Congressional Budget Office (CBO) explored Medicaid managed care’s enrollment and spending and factors that affect both.

Read more about addressing nonmedical determinants of health in Medicaid managed care.

States use 2 types of payment systems to provide benefits: fee-for-service and managed care. Under managed care, they pay a fixed per capita fee to managed care organizations (MCOs) that provide services to enrollees.

With the large percentage of beneficiaries already enrolled in Medicaid managed care, there is some speculation that “there is limited capacity for further expansion of the program,” according to the CBO report.

From 1999 to 2014, the share of Medicaid spending that went to managed care has varied greatly by state. Overall, the number of states spending more than 25% of Medicaid dollars on managed care grew from 5 to 30 and the number spending more than 50% of Medicaid money grew from 2 to 13.

However, 6 states—Alabama, Colorado, Connecticut, Montana, South Dakota, and Vermont—did decrease their Medicaid managed care spending during that time. In 11 states in 2014, managed care accounted for less than 5% of their Medicaid spending.

During the time studied, the scope of managed care coverage expanded overall. Most states made enrollment in comprehensive MCOs mandatory for larger numbers of beneficiaries, such as the elderly or disabled. States also negotiated contracts that increased the scope of services MCOs covered. For instance, coverage of long-term services and home- and community-based services expanded the most from 1999 to 2014.

According to the report, the implementation of the Affordable Care Act (ACA) accelerated states’ expansion of managed care.

“The law gave the states the option to expand Medicaid eligibility, and many of the states that chose to do so covered the newly eligible population with managed care,” according to the report. Enrollment also increased in states that didn’t expand Medicaid because the ACA brought increased awareness of Medicaid.

Only 3 states—Alaska, Connecticut, and Montana—that expanded Medicaid under the ACA did so through fee-for-service. The remaining expanded using managed care or an alternative model. Arkansas provided subsidies for newly eligible beneficiaries to purchase nongroup coverage through the marketplace, Colorado expanded through its Accountable Care Collaborative program, and Vermont created a program that delivered services through a model similar to managed care.