Medicaid is one of the largest government health programs in the U.S, serving 74 million low-income individuals as of 2018. 38 states use Medicaid managed care organizations

(MCOs) to serve Medicaid enrollees. More than a dozen

states have at least 90% of their Medicaid enrollees in MCOs

Research shows that enrollee satisfaction with Medicaid

equals or exceeds that of private health insurance. People who receive their benefits through a Medicaid MCO had higher

satisfaction with their benefits (85%) than people enrolled in traditional Medicaid fee-for-

service programs (81%).

States rely on managed care to make budgeting more

predictable and use taxpayer funds more efficiently. But

managed Medicaid programs are complex. They require thoughtful and deliberate

planning and engagement, and commitment of ample time and resources to achieve success.

Achieving State Medicaid Goals through Managed Care

October 2018 /ahip @ahipcoverage AHIP | www.ahip.org

Achieving State Medicaid Goals through Managed Care 2

Executive SummaryMedicaid is one of the largest government health programs in the United States, serving 74 million low-income individuals as of 2018. The program is structured as a federal state partnership, with states administering the program within a federal framework and states and the federal government sharing the costs. States use one of two major structural models for their Medicaid programs: fee for service, in which providers bill the state or an administrative contractor directly for each service provided; and managed care, in which the state contracts with managed care health plans to administer benefits, arrange and coordinate care and services, and pay providers.

Medicaid managed care (MMC) has become an increasingly appealing option for states looking to improve beneficiary outcomes while controlling costs over time. There is growing evidence of its effectiveness in demonstrating value and addressing the challenges states face in caring for more complex populations. These and other advantages have led to steady growth in MMC over the past two decades. Today, over two-thirds of Medicaid beneficiaries are enrolled in MMC.i Of the 56 million Medicaid managed care enrollees, many receive all their clinical services through these capitated payment arrangements—providing states with a predictable and coordinated foundation for addressing the needs of vulnerable populations. Each year additional states adopt MMC, and more and more services are brought into these arrangements.

Managed care organizations (MCOs) provide state Medicaid agencies with essential tools and expertise in areas such as healthcare service delivery, care coordination, behavioral health services, and long-term services and supports (LTSS)1. Many MCOs also provide experience gained across different states and serving different populations. Successful MMC programs typically include strong state-MCO partnerships combined with state leadership in establishing a clear vision and goals.

THIS PAPER ADDRESSES THE FOLLOWING: 1. Evidence and examples of the advantages of MMC

in achieving program savings, better outcomes, and beneficiary satisfaction.

2. A summary of specific skills and assets of MCOs.

3. Examples of how MMC is evolving and pioneering advancements in caring for complex populations.

4. Key attributes of successful state/ MMC partnerships.

What is Medicaid Managed Care? Medicaid managed care (MMC) is an arrangement in which state Medicaid agencies contract with Medicaid managed care organizations (MCOs), also known as Medicaid health plans, to provide healthcare and supportive services to Medicaid beneficiaries for a set per-member rate. These payments are often referred to as “capitated” payments. MMC is risk-based, meaning the MCOs are responsible for arranging and paying for services even if their costs exceed the capitated rate. In other words, some of the financial risk associated with caring for these members is transferred from the state to the MCO. The state also determines the

1 Long-term services and supports (LTSS) are defined as the services and supports used by individuals of all ages with functional limitations, disabilities, and/or chronic illnesses who need assistance to perform routine daily activities such as bathing, dressing, preparing meals, and administering medications.

STATE SUCCESSES AND MANAGED CARE

Examples of state successes achieved through MMC:

Arizona achieved $29.5 billion in program savings across a recent 5-year period.ii

West Virginia saw improved access and care coordination for complex

populations.iii

Kentucky had substantial improvements in specific patient outcomes after

MCOs implemented targeted quality improvement programs.iv

HOW CAPITATION WORKS

An MCO’s capitation payment from the state is based on the average cost of providing services to a group of plan members. For example, a state estimates the average cost of providing services is $500 per member per month (PMPM). Some of the MCO’s individual enrollees may cost more on average—for instance, $615 per month—and others may cost less—for example, $470 per month. The MCO is responsible for paying for all services, but the state’s liability is limited to $500 PMPM.

Achieving State Medicaid Goals through Managed Care 3

range of functions for which MCOs are responsible, including establishing and managing an adequate provider network, paying providers and managing utilization, and coordinating beneficiary care.

In 2018, 38 states use managed care arrangements for at least some portion of their Medicaid programsv, and more than a dozen states have at least 90% of their Medicaid populations in MCOs.vi Initially MCOs focused on providing hospital and physician coverage to mothers and children. Over the last two decades, the managed care trend has expanded to more complex coverage designs for more complex populations, including older adults and people with disabilities. States have leveraged the successes of MCOs to further expand MMC to new populations and services. Today, over two-thirds of Medicaid beneficiaries enrolled in MMC arrangements.

Why Managed Care Has GrownIn fee-for-service (FFS) programs, providers are paid directly for individual services rendered to Medicaid enrollees. FFS programs were the predominant approach for much of Medicaid’s history, but the FFS approach incentivizes quantity of services over quality, and care is unmanaged and uncoordinated. And from the standpoint of state budgets, expenditures in FFS programs are unpredictable. Over the past two decades, however, states began refining their programs to better align with value and quality, and many turned to MMC as the best path to achieve these results.

Implementing or expanding MMC in states offers many advantages. Since several states have been conducting their programs for years, there is a growing body of evidence of these advantages over FFS programs. Table 1 below describes some of the key advantages of MMC.

Skills and Assets that Managed Care Organizations BringState Medicaid agencies come to view managed care organizations as key partners in their efforts to support, care for, and improve the lives of Medicaid enrollees. MCOs provide state leaders with essential tools and experiences that complement the mission and capacity of agency employees. As states look to transition to managed care and improve the effectiveness and performance of their programs, MCOs can facilitate more efficient and effective Medicaid operations for the state. Key MCO strengths and assets include resources that support innovation, infrastructure, and improvement.

Table 1. Key Advantages of Medicaid Managed Care (MMC)

Program Savings

MMC can result in savings to state Medicaid programs. When compared to FFS Medicaid, states have saved up to 20 percent.vii In Ohio, MMC saved taxpayers 9 to 11 percent from 2013 to 2015, or an estimated $2.5 to $3.2 billion.viii Overall, one report estimated that in total, states would realize savings over $6 billion in 2016.ix These studies found that MCOs achieved savings through practices such as care coordination and primary care medical homes, which led to decreased hospitalizations. Greater focus on use of generic drugs also increased savings on prescription drugs in MMC.

Budget PredictabilityAdditionally, states that move more of their programs into managed care can achieve greater stability and predictability in their Medicaid budgets from year to year. The predictability of PMPM capitation is an advantage over FFS.

Better Alignment with Value

Unmanaged, unfettered FFS systems drive increases in volume and utilization, and do not incentivize quality or overall health management. In contrast, capitated MMC payments encourage MCOs to keep beneficiaries healthy across the full spectrum of their care. MCO contracts with states typically extend over multiple years, which also encourages MCOs to think long-term about improving health status and consumer engagement in a more global, population-level manner.

Achieving State Medicaid Goals through Managed Care 4

Improved Outcomes

There is mounting evidence that managed care can and does improve value and outcomes in the Medicaid program. States have found that, by moving to MMC, they can implement programs that improve outcomes, like care coordination and utilization management that are more difficult or impossible to deploy and monitor in a fragmented FFS environment.

A detailed study of Medicaid managed care in 2015 provides clear evidence that care coordination by MCOs achieved reductions in hospitalizations, unnecessary emergency department visits, and prescribing errors.x Recently, additional evidence of success has emerged. For example:

• In Ohio, care coordination efforts by one Medicaid MCO improved rates of follow-up counseling for members following inpatient stays for behavioral health care. Direct outreach to behavioral health facilities and increased engagement with members led to a 53 percent increase in 7-day follow-up visits and a 47 percent increase in 30-day follow-up visits.xi

• Decreased circulation in the legs is a serious complication of advanced diabetes. After implementing MMC in Kentucky, the state saw a 17 percent decrease in amputations due to untreated diabetes.xii Care coordination and patient engagement measures used by MCOs can reduce hospital readmissions or emergency department use.

And states can track and document their MCOs’ performance and performance improvement through performance and quality measures. All states require regular quality measurement and reporting from MCOs, using standard measurement tools as well as Medicaid specific benchmarks.

Consistent Enrollee Satisfaction

In addition to financial value and outcomes, research shows that beneficiary satisfaction with Medicaid matches or exceeds that of private health insurance.xiii Survey respondents cited provider choice as the most important factor in their satisfaction ratings. Another survey found that people who receive their Medicaid benefits through an MCO had higher satisfaction with their benefits (85 percent) in comparison to those enrolled in traditional Medicaid FFS programs (81 percent).xiv MCO enrollees are consistently getting access to the providers, the information, and the assistance they need from their MCOs to obtain necessary care. According to a survey of Florida Medicaid beneficiaries enrolled in managed LTSS plans, 76 percent indicated that their quality of life had improved since enrollment, and 60 percent said their overall health has improved since enrollment.xv

EXPERIENCE IN INNOVATIONThrough their work in multiple states and across multiple markets (which may include Medicaid, Medicare, individual and group health coverage), MCOs have implemented innovative ideas that can be translated into new environments. While Medicaid is unique in the healthcare landscape, innovative payment models, technologies, and consumer communication strategies from other programs adapt well to managed Medicaid programs. For example, many MCOs have experience innovating with prenatal care, diabetes prevention and management, and prescription drug utilization controls. Increasingly, states and MCOs are innovating in addressing certain social determinants of health (like housing and employment), which drive costs and poor health outcomes, but where clinical providers have little leverage.

FOUNDATIONAL INFRASTRUCTUREState Medicaid programs need to be sophisticated purchasers and administrators of a broad set of services for populations with varying needs. Medicaid MCOs offer several benefits to states, including:

Achieving State Medicaid Goals through Managed Care 5

1. Consolidated data collection infrastructure and data analytics to monitor quality and system performance;

2. Business process expertise and workflows to manage claims payment and provider service across the full range of clinical and supportive services providers; and

3. Boots on the ground for activities like provider network recruitment, screening and credentialing, and consumer and provider support and engagement.

Since many state agencies struggle with outdated systems and expensive IT procurements, they can leverage the analytical and data capacity of private MCOs in monitoring access, utilization, and quality in their Medicaid programs.

PLATFORMS FOR IMPROVEMENTCare coordination and management are imperative for ensuring value and good health outcomes. Many states are working to drive integration of behavioral and physical health, to integrate care for Medicare-Medicaid dual eligibles, or to improve the performance and effectiveness of their LTSS programs. States can also use their MCO contracts to align incentives and system tools to improve system integration and performance. Working through quality metrics and performance improvement projects, states can align physicians, hospitals, health plans and other components of the healthcare system to drive greater coordination and improved outcomes.

New Directions in MMCMMC is evolving and moving in new directions. MMC successes with providing care for children, parents, and pregnant women are being extended to more complex populations. Not long ago, LTSS were administered only through fee-for-service arrangements; today, the movement of LTSS into managed care is growing. Almost a quarter of states have transitioned to Managed LTSS (MLTSS) for people with functional impairments, disabilities or the elderly.xvi MMC is serving as a platform for integrated coverage and allowing individuals with special or complex needs to benefit from the quality, care coordination, and access that is available to other Medicaid beneficiaries.

MCOs are also using value-based incentives for providers that are models for improving the cost-effectiveness and quality of care.xvii In West Virginia, MCOs are partnering with the state Medicaid agency to implement alternative payment methodologies (APMs) in which MCO payments to providers will be tied to outcomes.xviii These strategies give managed care organizations new tools to identify and resolve barriers to improved healthcare.

MCOs also can begin to address certain social determinants of health with services that may fall outside of usual Medicaid benefits but support improvements in health. For example, MCOs may coordinate with community agencies to help enrollees access housing services, transportation, or child care.xix

Medicaid Managed Care is a PartnershipDeveloping and implementing an MMC program is a complex, multi-year process requiring a strong state-MCO partnership. These are large programs that involve improving the health care delivery system for tens or hundreds of thousands of people. To be successful and realize the benefits described in the preceding sections, it takes time and planning, open dialogue with stakeholders, and a deliberate and sustained effort on the parts of states and their MCO partners. Success in Medicaid managed care arrangements is based on a commitment by states and MCOs to an ongoing and complex process of planning, stakeholder engagement, implementation, evaluation, and quality improvement.

Below in Table 2 is an illustrative timeline for implementing new managed care arrangements or expanding managed care programs to new populations or service areas. This timeline, based on observational experience, identifies the necessary milestones and regulatory steps in the process. While every state is different, troubled program launches and expansions tend to result when states attempt to achieve savings more quickly than is reasonable, or stakeholder engagement by the state and MCOs is too limited. This high-level timeline identifies key steps to ensuring a successful implementation.

Achieving State Medicaid Goals through Managed Care 6

Table 2. Example of MMC Program Development and Implementation Timeline

Year 1 Year 2 Year 3 Year 4 Year 5

Pre Go-Live Post Go-Live

• State decision• Enabling legislation/

resolutions• Stakeholder

comments discussions

• Provider education and preparation

• Develop RFP (request for proposal)

• CMS waiver application and approval

• Publish RFP and conduct procurement

• Publish actuarial data, payment rates, and assumptions

• Review RFP responses

• Select MCOs

• Contract award and negotiation

• Enrollee notification and engagement

• Resolution of any procurement disputes

• Prepare state and MCO data systems

• CMS contract approval

• MCO network provider contracting

• Readiness review

• Enrollment ramp up or phase-in

• Implementation monitoring

• Quality Baselines• Dispute resolution

with providers and consumers

• Quality reporting• Quality

Improvement projects

• CMS waiver renewal• Begin RFP

development for re-procurement

Post Go-Live

• Go live and enrollment commences

• Consumers gradually enrolled and continuity of care managed

It is important not to underestimate the time and effort involved in transitioning to managed care. From adapting and implementing new information and claims systems, to negotiating and executing contracts with Medicaid providers, to educating and incentivizing new behavior patterns among enrollees, the benefits of managed care take time and hard work to achieve, particularly in the early years.

Furthermore, MCOs are not passive players in this transition. While the state is engaged in ensuring a successful implementation, MCOs are likewise investing considerable time and resources into preparing for, launching, and transitioning stakeholders to the new system. Here are some of the key actions MCOs take before and after being awarded a contract:

1. Planning. MCOs meet with provider groups, consumer advocates, and others to understand the state’s Medicaid enrollee and provider environments, and the concerns and values of different stakeholders. The MCOs gather data on shortage areas and analyze patterns of care, population health and other factors. They may hire key positions to begin to build a strong local presence.

2. Procurement responses. Often, states competitively bid for MCOs. MCOs invest considerable time and effort in producing proposals for a state.

3. Program launch. MCOs selected to participate in a state must negotiate contracts with all the necessary providers, demonstrate adequate provider networks, develop enrollee transition plans and procedures, hire and train staff, and modify internal systems and operations. Just prior to launch, MCOs undergo readiness reviews with the state to identify and fix any implementation problems.

4. Ongoing improvement. Once the program is launched, MCOs must quickly deploy and continuously monitor and adjust their care and quality improvement programs. They must identify and defuse trouble-spots and work regularly with the state to resolve issues, improve outcomes, and ensure the kind of partnership that is so vital to success.

Achieving State Medicaid Goals through Managed Care 7

Building Successful PartnershipsLike all partnerships, there are key elements in building a foundation for Medicaid managed care that translates into future success. The best partnerships are founded on the following elements:

• The state articulates to stakeholders a clear vision and defined expectations for the program.

• MCOs commit to invest in the substantial developmental work and implementation tasks for the long-haul.

• All stakeholders understand the time required to launch a new program and achieve results.

• There are shared efforts among stakeholders to work together and cultivate change.

Managed care will continue to grow and become the preferred model across the nation’s Medicaid programs because it achieves value. Managed care offers considerable potential to improve the outcomes and performance of Medicaid programs for the people they serve, and to help states and the Federal government achieve value for their investments. As MCOs and states work in partnership to evolve their approaches to MMC, its effectiveness and performance will continue to improve.

Achieving State Medicaid Goals through Managed Care 8

Endnotesi Centers for Medicare and Medicaid Services, Winter 2016, Medicaid Managed Care Enrollment and Program Characteristics, https://www.medicaid.

gov/medicaid/managed-care/downloads/enrollment/2015-medicaid-managed-care-enrollment-report.pdf

ii Chicago Business Journal, March 3, 2017, Big savings. Painful lessons. In Medicaid revamp, Rauner tries to learn from other states, http://www.chicagobusiness.com/article/20170303/ISSUE01/170309924/big-savings-painful-lessons-in-medicaid-revamp-rauner-tries-to-learn-from-other-states?X-IgnoreUserAgent=1

iii West Virginia Medicaid, Mountain Health Trust Annual Report: State Fiscal Year 2017, https://dhhr.wv.gov/bms/BMSPUB/Documents/WV%20MHT%20Annual%20Report%20-%20FY2017%20Final.pdf

iv The Stephen Group, March 2016, State of Kentucky Experience with Full Risk Managed Care. TSG Task Force Update prepared for the Arkansas Health Reform Task Force. http://www.arkleg.state.ar.us/assembly/2015/Meeting%20Attachments/836/I14348/KY%20Managed%20Care%20Update%20.pdf Lit review

v Health Management Associates Information Service data (internal subscription database at HMA). https://hmais.healthmanagement.com/

vi Kaiser Family Foundation’s Medicaid Managed Care Market Tracker. https://www.kff.org/data-collection/medicaid-managed-care-market-tracker/

vii AHIP, June 2016, The Medicaid Program and Health Plans’ Role in Improving Care for Beneficiaries: What You Need to Know, https://www.ahip.org/wp-content/uploads/2016/06/Mcd101_IssueBrief_6.1.16.pdf

viii Modern Medicaid Alliance, 2017 Year End Report, February 2018, http://modernmedicaid.org/wp-content/uploads/2018/03/MMACapstoneReport_02.26.18_Print.pdf

ix The Value of Medicaid Managed Care. White Paper prepared for United Health Care. November 2015. https://www.healthmanagement.com/knowledge-share/briefs-reports/the-value-of-medicaid-managed-care/

x Ibid.

xi Sellers Dorsey, January 2017, The Impact of Private Industry on Public Health Care: How Managed Care is Reshaping Medicaid in Ohio (Prepared for the Ohio Association of Health Plans)

xii The Stephen Group, March 2016, State of Kentucky Experience with Full Risk Managed Care. TSG Task Force Update prepared for the Arkansas Health Reform Task Force. http://www.arkleg.state.ar.us/assembly/2015/Meeting%20Attachments/836/I14348/KY%20Managed%20Care%20Update%20.pdf

xiii J.D. Power, July 2017, http://www.jdpower.com/press-releases/jd-power-2017-managed-medicaid-special-report

xiv Morning Consult, June 23-July 1, 2016, https://www.ahip.org/wp-content/uploads/2016/08/Medicaid-Poll-Topline_Final.pdf

xv Florida Agency for Health Care Administration, 2017, Comprehensive Quality Strategy 2017, https://ahca.myflorida.com/ medicaid/Policy_and_Quality/Quality/docs/CQS_Final_Draft_2017_03-02-2017.pdf

xvi Centers for Medicare and Medicaid Services, Winter 2016, Medicaid Managed Care Enrollment and Program Characteristics, https://www.medicaid.gov/medicaid/managed-care/downloads/enrollment/2015-medicaid-managed-care-enrollment-report.pdf

xvii AHIP, June 2016, The Medicaid Program and Health Plans’ Role in Improving Care for Beneficiaries: What You Need to Know, https://www.ahip.org/wp-content/uploads/2016/06/Mcd101_IssueBrief_6.1.16.pdf

xviii West Virginia Medicaid, Mountain Health Trust Annual Report: State Fiscal Year 2017, https://dhhr.wv.gov/bms/BMSPUB/Documents/WV%20MHT%20Annual%20Report%20-%20FY2017%20Final.pdf

xix S. Rosenbaum, R. Gunsalus, M. Velasquez et al., Commonwealth Fund, March 2018, Medicaid payment and Delivery Reform: Insights from Managed Care Plan Leaders in Medicaid Expansion States, http://www.commonwealthfund.org/~/media/files/publications/issue-brief/2018/mar/rosenbaum_insights_from_medicaid_plan_leaders_ib.pdf