Health care reform paves way for managed care

Medicaid managed care plans currently serve 21.6 million people, and this number is expected to increase significantly as a result of the health care reform legislation. One reason is newly available drug rebates. "This is just one more reason that states might want to put more people into managed care," says Margaret A. Murray, chief executive officer of the Association for Community Affiliated Plans in Washington, DC, which represents nonprofit Medicaid managed care health plans.

"States that want to do the expansion early will have to do that under the regular FMAP. So, they will be looking for savings." For this reason, Ms. Murray says she expects states to look at moving additional populations into managed care, despite certain obstacles.

"Change is frightening for people, so that is one issue," says Ms. Murray. "Secondly, health plans can't always negotiate better rates in rural areas, because there is only one provider to begin with. So managed care has typically not been as prevalent in rural areas, both in Medicaid and the commercial world."

With dual-eligibles, states are only responsible for a small part of their overall health costs. "So, in some cases, states have been reluctant to put their duals in," says Ms. Murray. "But we've been seeing every year that more states [are] putting more populations into managed care. That is definitely the trend."

The drug rebate program and resulting managed care expansion is a "win-win" for the states, the health plans, and the beneficiaries, according to Ms. Murray. Whereas states don't always measure the quality of fee-for-service programs, managed care programs must meet quality metrics to avoid penalties.

"There are access provisions for the networks that they have to meet," says Ms. Murray. "States hold their Medicaid managed care programs to a much higher standard than their fee-for-service programs. The preponderance of evidence shows that the quality of managed care is better."

Most of the estimated 16 million people coming onto Medicaid are expected to go into Medicaid managed care. "That is certainly what we saw with the Children's Health Insurance Program. Most of those kids are in managed care today," says Ms. Murray.

In 1990, only 9% of Medicaid enrollees were in managed care. Today, more than 70% are enrolled in managed care. "We believe the growth of Medicaid managed care programs will be substantial," says Thomas L. Johnson, president and CEO, Medicaid Health Plans of America in Washington, DC. "States were already finding value with the coordinated care provided by Medicaid health plans. This will only increase with the new health care law."

Mr. Johnson notes that significant Medicaid managed care expansion is already under way, pointing to examples in several states. Florida, for example, is currently considering implementing statewide Medicaid managed care using fully capitated at-risk health plans, expanding the current five-county pilot there.

"Texas currently has an RFP out for 13 new counties in the Dallas area, and Illinois will issue a new RFP in the next two months for their aged, blind, and disabled population," says Mr. Johnson. Louisiana wants to use health plans to create a coordinated care delivery system in Medicaid and has submitted a waiver to the Centers for Medicare & Medicaid Services for approval.

"The overwhelming factors right now are state budget shortfalls and escalating health care costs," says Mr. Johnson. "Medicaid health plans offer predictable costs, higher quality care, and better outcomes than traditional Medicaid. This makes managed care programs a better value for states."

Medicaid health plans are looking at new cost-containment strategies and care delivery models to help control entitlement spending. "There is substantial potential for savings by looking at what managed care can do for the dual-eligible, senior, and disabled populations," says Mr. Johnson. "I would expect states to explore managed care expansions in these areas."

Contact Mr. Johnson at (202) 364-8134 or