How Does Medicaid Managed Care Affect Health Outcomes?

More than 70 percent of Medicaid beneficiaries receive their benefits through a managed care program.  According to a Kaiser Family Foundation survey, states have moved increasingly from demonstration projects in limited areas to statewide programs and from voluntary to mandatory participation. More recently, state agencies have sought waivers to move  previously exempt groups, such as elderly and disabled beneficiaries, to mandatory managed care.

State managed care programs may be based on several organizational models.  Most provide comprehensive managed care. In primary care case management,  a medical professional or group assumes responsibility for locating, coordinating and monitoring a beneficiary’s services under contract with the Medicaid agency. Most commonly, managed care organizations (MCO) contract with the agency to provide comprehensive services to beneficiaries through a network of providers, usually through contracts with professionals and facilities. The MCOs may be either not-for-profit or for-profit entities, and they may offer plans to other consumers or limit their memberships to Medicaid beneficiaries.

The availability of information about beneficiaries’ health outcomes and satisfaction with their care varies widely, depending on each state’s criteria for Medicaid , the extent of data required to be reported and the enforcement of the requirements.  According to a report by the National Committee for Quality Assurance (NCQA), 25 states either require or recognize NCQA accreditation, and  nearly 40 percent of the accreditation score comes from the Healthcare Effectiveness Data and Information Set (HEDIS®) measures that plans report to NCQA.

A report released by the the Commonwealth Fund in June, 2011 compared the  fiscal health and performance on  quality measures of Medicaid MCOs according to whether they were publicly traded and whether they were “Medicaid focused”.  A plan was Medicaid-focused if at least 75 percent of its members were Medicaid beneficiaries.  Publicly traded MCOs with multiple products, i.e., those serving more than 25 percent  commercial members, were distinguished from “pure play” publicly traded plans, and both were compared to provider-sponsored plans. Provider-sponsored plans included both not-for-profit and for-profit entities.The study was limited to plans with 5,000 or more members. To compare quality, the researchers combined several measures to reach  composite scores for preventive care and chronic care. The also used the consumer assessment of health plans to measure customer satisfaction.

The “pure play” publicly traded plans had the lowest average medical loss ratio, 84 percent, compared with 90 percent among those that were not publicly graded. Their administrative costs also were high,  14 percent compared with 10 percent for those that were not publicly traded.Their scores on the preventive measures was 11 percent lower, and the chronic care 13 percent lower, than the scores of the privately held or nonprofit. On measures of consumer satisfaction, the pure play plans were rated 7 percent lower overall and 4 percent lower on getting care.

The plans that were not publicly traded performed significantly better than the multiple product, publicly traded plans on both measures of quality; the difference was 8 percent for preventive care and 11 percent for chronic care. The administrative loss ratio was 12 percent for the multiproduct plans compared to 10 percent for those that were not publicly traded.

Provider-sponsored plans had significantly lower administrative cost ratios than the plans not sponsored by providers, 8 percent vs. 12 percent. The provider-sponsored plans also scored significantly percent higher on the quality measures, 64 percent vs. 56 percent for chronic percent vs. 63 percent for chronic care. Their customer service scores were 1 percent higher, as well.

Medicaid-focused plans had both lower medical loss ratios (87 percent)  and higher administrative cost ratios  (12 percent) than the plans not focused on Medicaid (91 percent and 10 percent, respectively). However, the non-Medicaid focused plans operated at a loss of 2 percent and could pay off only 79 percent of unpaid claims.

The authors found that the most significant differences in quality were between the publicly traded plans compared to those not publicly traded.  In addition, the pure-play publicly traded plans compared somewhat unfavorably to the non-publicly traded plans on measures of consumer satisfaction.  They found it “worth noting” that plans with lower medical costs and higher administrative costs performed worse on  measures of clinical quality and consumer experience.

Since 2004, the portion of the Medicaid managed care market served by provider-sponsored MCOs has dropped while the share  of for-profit, publicly traded companies has grown. A few large companies use subsidiaries to bid successfully when states seek to outsource the management and stabilize the cost of their Medicaid programs, so that the same players appear in controversies over managed care implementation in many states.  For example, as we discussed last week, the firms that won the contracts to implement Kentucky’s mandatory managed care program have bid on the Kansas contracts. And Kentucky’s auditor general has set up an office to oversee the program after finding that the three MCOs “are sitting on a quarter of a billion taxpayer dollars while small-town hospitals and doctors … struggl[e]” to pay their employees.

There is plenty of anecdotal evidence that poor communication and lack of coordination in moving to managed care can be harmful, as when patients go without needed medication while a formulary and exceptions are implemented. Planning for the transition, as Louisiana seems to be doing, can help.