Explain how new managed care contracts impact reimbursement for the healthcare organization

Managed Care, Quality of Care

While much research has been conducted on whether managed care delivery systems result in better outcomes than traditional fee for service (FFS), there is no definitive conclusion as to whether managed care improves or worsens access to or quality of care for beneficiaries. Below we synthesize the existing literature on outcomes associated with Medicaid managed care delivery systems.

Medicaid managed care organizations (MCOs) are accountable for providing access to care for their enrollees; they are also required to implement initiatives to improve the quality of care delivery (42 CFR 438.330). However, certain aspects of managed care, including defined provider networks and incentives to contain costs, may counteract these objectives. Outcomes for access and quality of care not only vary by MCO but they also vary by service and are affected by a variety of factors, as discussed below (Sparer 2012).

Aspects of Medicaid managed care that may affect access to and quality of care

Economic incentives. Under the FFS model, the state pays providers directly for each covered service received by a Medicaid enrollee. Under managed care, the state pays a managed care plan a capitation rate—a fixed dollar amount per member per month—to cover a defined set of services for each person enrolled in the plan. In turn, the plan pays providers for all of the Medicaid services an enrollee may require that are included in the plan’s contract with the state. MCOs are at financial risk if spending on services and administration exceeds payments; conversely, they are permitted to retain any portion of payments not expended for covered services and other contractually required activities.

Some suggest that capitation does not provide incentives to overtreat patients as in FFS. Instead, managed care encourages providers to keep enrollees healthy in order to keep costs within the capitation rate, through preventive and appropriate care to avoid expensive hospital stays and emergency department visits. Capitation also provides more certainty when budgeting and encourages the efficient use of services.

Others argue that a capitated payment system that pays MCOs a set amount per enrollee and not on how much treatment is provided may create incentives to undertreat patients to minimize treatment costs (Green 2014; Sparer 2012;  Duggan and Hayford 2013; Berenson and Rich 2010). Capitated plans may also seek to enroll as many healthy patients as possible and discourage participation of disabled or high utilizing enrollees (Kuziemko et al. 2015; Glazer and McGuire 2000).

Incentives may also be influenced by capitation payment rates. For example, adequate payments should be able to provide access to coordinated and effective care while generating savings that can support additional medically necessary services. On the other hand, if capitation rates are set too low, they may create incentives to restrict services through use of gatekeepers, preauthorization policies, or limits on benefits.

Low rates may also motivate plans to pay less for services, which in turn may reduce the number of providers willing to treat enrollees thus impeding their access to care. In Illinois, for example, much of the traditional safety-net provider community boycotted the state’s managed care initiative when it was implemented, arguing that the payment rates were too low and the bureaucratic micromanagement was too high (Sparer 2012). Providers have also cited low payment rates in the California Medicaid managed care program as a barrier to their participation (Tater et al. 2016). A recent MACPAC study examining physician acceptance of Medicaid patients found that state penetration rates of managed care was not associated with physicians’ decision to accept new Medicaid patients (Holgash and Heberlein 2019).

Network composition. FFS Medicaid programs typically contract with any qualified provider willing to accept Medicaid payment rates, and Medicaid beneficiaries who receive services through FFS are entitled to freedom of choice among Medicaid providers. Managed care plans can establish their own provider network qualifications, contract terms, and payment rates (within parameters required by the terms of the contract with the state). They generally limit MCO enrollees to a network of providers. MCO provider networks must be sufficient to provide adequate access to all covered services, taking into account the number, type, and geographic distribution of providers, among other factors, but there are no universal metrics to determine sufficiency.

The size and scope of the network will affect the types, availability, and quality of services available to enrollees and access can vary substantially within a state, between urban and rural areas, and across states. Networks with a sufficient number of participating providers may help ensure access to services covered under the contract while narrow networks may deter specialty care or other referrals and inhibit beneficiary choice and access to high quality care. Consumer advocacy organizations worry about inadequate provider networks and breaks in long-standing patient-provider relationships, especially for the high-cost populations that have the most vulnerable health status (Sparer 2012; Corlette et al. 2014; AcademyHealth 2014). Researchers recently examined a sample of Medicaid MCOs across 14 states and found that on average 12 percent of primary care physicians left the network annually and 34 percent exited over five years.  Plans with narrow networks experienced a higher turnover rate than standard network plans (Ndumele et al. 2018). Geographic variation in provider access, which can be driven by both the breadth of an MCO’s network and the availability of providers in a given geographic area, can also affect the type, quality, and amount of services used by beneficiaries (GAO 2015).

Covered benefits. Contracts between the state and MCOs identify which state plan services are the responsibility of the MCO, which (if any) remain covered by the state, and which (if any) are provided by other vendors or through other delivery systems. In some cases, benefits that are unique to Medicaid and have not been traditionally delivered through managed care, such as long term services and supports or non-emergency transportation are carved out of the capitated benefit package in order to maintain access to these services. However, the provision of benefits through multiple delivery systems can introduce new challenges in coordination of care.

MCOs must provide all benefits offered under the state plan, but they can provide benefits additional to FFS using the so-called in lieu of policy. Under this policy, MCOs contracts may cover, for enrollees, cost-effective services that are in addition to those covered under the state plan, although the cost of these services cannot be included when determining the payment rates (42 CFR 438.6(c)). Because MCOs can provide services in addition to those offered under the state plan, access to them may be enhanced for their enrollees. These services are often enabling services that may contribute to ease of obtaining care such as, case management or transportation services not covered under the state plan, long-term services and supports, or social interventions such as education, equipment, or services provided with partnerships with other organizations.

Contracting specifications and oversight. Medicaid managed care plans are required to meet access and quality standards that do not apply to other Medicaid delivery systems. As described in greater detail in the following section, there are federal statutory and regulatory requirements, such as standards for access and capacity and a requirement for periodic external quality review, that only apply to MCOs. Further, states may impose additional access and quality requirements on Medicaid MCOs through the procurement and contracting process. States can require plans to meet certain standards (e.g., accreditation) in order to participate, provide payment or enrollment bonuses for the achievement of certain quality or access goals, and require MCOs to participate in quality improvement activities.

Studies of the relationship between managed care, access, and quality

Because managed care networks and organizations can be configured, staffed, and funded in many different ways, it is difficult to make general conclusions about their correlation with better or worse access to and quality of care. Studies examining this issue come to different and sometimes conflicting conclusions, again depending on the many factors described above.

Many but not all states report that Medicaid MCO enrollees sometimes face access problems. In a comprehensive synthesis of studies of the impact of Medicaid managed care, the author concluded that Medicaid managed care can and sometimes does provide beneficiaries with improved access, but the scope and extent of such improvements generally are state specific and variable (Sparer 2012). A synthesis of 16 studies on the potential impact of Medicaid managed care on access to and quality of care for children with special health care needs found no consistent set of findings regarding access to care (Wise et al. 2007). Many of the studies examined data prior to 2010, and because they are state- and program-specific and almost always lack a control group, it is difficult to make generalizations to more recent data, particularly in expansion states.

A 2015 study of Medicaid managed care in Texas concluded that overall, consumer satisfaction reflects that MCOs are meeting the healthcare needs of their members and satisfaction scores meet or exceed national and dashboard standards on a number of key measures (Sellers Dorsey 2015). Another study analyzed data from the Pediatric Health Information Systems database of the Children’s Hospital Association, including 42 hospitals across 25 states with discharges between 2008 and 2011 for 12,618 individual children who were receiving Medicaid at the time of service and who were diagnosed with Type 1 diabetes. The researchers concluded that children with Type 1 diabetes enrolled in Medicaid managed care plans were less likely to be readmitted within 90 days of discharge, possibly indicating greater access to services that helped them prevent readmissions (Healy-Collier et al. 2016). 

A 2011 survey of state Medicaid programs found that over two-thirds of responding states with MCOs reported that Medicaid beneficiaries enrolled in MCOs sometimes experience access problems. Problems with access to dental care, pediatric specialists, psychiatrists and other behavioral health providers, and other specialists (e.g., dermatologists, ear-nose-throat doctors, orthopedists and other surgeons, neurologists, cancer and diabetes specialists) were all cited. At the same time, improved access to care – both primary and specialty care – was the most frequently cited perceived benefit of managed care relative to fee-for-service. Some states indicated that where an access problem existed, it usually paralleled a similar problem encountered by persons with other types of insurance, for example, due to provider shortages and other market factors. The survey, however, did not directly collect information on access problems in fee-for-service Medicaid (Gifford 2011).

A secret shopper study conducted by the Office of the Inspector General found that slightly more than half of Medicaid providers could not offer appointments to enrollees. Notably, 35 percent could not be found at the location listed by the plan and another 8 percent were at the location but said that they were not participating in the plan. An additional 8 percent were not accepting new patients. Among the providers who offered appointments, the median wait time was 2 weeks. However, over a quarter had wait times of more than 1 month, and 10 percent had wait times longer than 2 months. Finally, primary care providers were less likely to offer an appointment than specialists; however, specialists tended to have longer wait times (OIG 2014).

Inadequacies in access to specialist care, stemming from system-wide shortages of specialists and the maldistribution of the specialist workforce, can be worse in Medicaid than among privately insured individuals. Particularly in rural areas, long distances to reach providers and public transportation patterns can create barriers to adequate access; indeed, patients may have to travel 50 to 100 miles to see a specialist. Access to dental services is often especially challenging, and more so in rural areas. Gaps in access to specialty care may grow even wider if MCOs enroll more beneficiaries with complex needs, who may rely on specialists as their primary care providers or make more use of selected specialized services, such as mental health care (Gold and Paradise 2012).

It is not clear whether managed care provides better or worse access to care than FFS. The same synthesis of research on Medicaid managed care plans shows mixed success in improving access to care. There is some evidence of increased likelihood of a usual source of care and reduced emergency department visits (Sparer 2012). One study found that the transition to Medicaid managed care in Puerto Rico was associated with an increased use of prenatal care services (Marin et al. 2009). Another study in Mississippi concluded that the number of medications filled, number of office visits, intensity of office visits, total pharmacy costs and total outpatients costs, all of which are indicators of improved access, were found to increase after the shift to managed care. Days of inpatient stay, inpatient costs and emergency department costs all decreased, which is consistent with the incentives provided under a capitated payment system (Ramachandran et al.2015). Researchers also found that the transition from FFS to Medicaid managed care in South Carolina was associated with an 11.6 percent increase in attention-deficit hyperactivity disorder cases and an 8.2 percent increase in asthma cases, suggesting an increase in access to care and screenings (Chorniy et al. 2018).

Conversely, a study of the Florida Medicaid program found that Medicaid managed care patients are more likely to be hospitalized for ambulatory care sensitive conditions than were Medicaid FFS enrollees. These results suggest that Medicaid managed care enrollees faced greater barriers to accessing primary and preventive health care services than their FFS counterparts (Park and Lee 2014). A study of the shift from FFS to managed care in Texas concluded that Black-Hispanic mortality, pre-term, and low-birth-weight birth gaps increase by 69, 45, and 12 percent, respectively, after a county switches from FFS to managed care. Quality of prenatal care generally falls for Blacks relative to Hispanics, and Black birth rates show a small decline after the switch to managed care. Researchers raised concerns that private, capitated plans have incentives to retain healthy, low-cost patients and shift high-cost clients to competing insurer and, as such, will improve care for the former group relative to the latter (Kuziemko et al. 2015).

Another study examined county-level Medicaid managed care penetration and health care outcomes among nonelderly disabled and nondisabled enrollees. Results for nondisabled adults show that increased Medicaid managed care penetration is associated with increased probability of an emergency department visit, difficulty seeing a specialist, and unmet need for prescription drugs, and is not associated with reduced expenditures. This study found no association between Medicaid managed care penetration and health care outcomes for disabled adults (Caswell and Long 2015).

Findings on Medicaid managed care quality outcomes are scarce and have mixed results. Based on a review of the literature prior to 2012, there is also limited evidence that managed care improves quality of care relative to Medicaid FFS (Sparer 2012). A 2019 study examined the effect of Medicaid managed care on disabled beneficiaries across several Texas counties who had previously been enrolled in Medicaid FFS. The authors found that this county-level mandate to enroll in managed care resulted in increased prescription drug utilization (including medications for chronic conditions), decreased rates of avoidable hospitalization, and higher spending. The study suggests that these changes were largely attributable to the ability of MCOs to allow beneficiaries to obtain more prescriptions than were allowed in FFS, which strictly limited beneficiaries to three per month (Layton et al. 2019). A study examining the transition to Medicaid managed care in South Carolina found that managed care had no statistically significant effect on hospitalization among children, but was associated with an increase in preventable ER visits driven by asthma (Chorniy et al. 2018).  Another study of youths with type 1 diabetes enrolled in Medicaid managed care found that they were less likely to be readmitted within 90 days of discharge that similar patients in FFS, a sign of improved quality (Healy-Collier et al. 2016).

A number of studies that examine whether enrollment in a managed care delivery system improves the likelihood that a pregnant beneficiary will have a healthy child. Most such studies prior to 2012 find that there is no impact on either birthweight or infant mortality rates. This seems to be true whether the managed care initiative improved access to prenatal care or resulted in reduced access to prenatal care (Sparer 2012). However, a recent study of the transition from FFS to Medicaid managed care found that Black-Hispanic infant health disparities widened among Black infants (mortality increases by 12 percent) while the Hispanic mortality rate decreased by 22 percent (Kuziemko et al. 2015).

There are several reasons why it is difficult to evaluate the effect of managed care on quality of care. Quality is a somewhat subjective concept and can be evaluated using both process measures (e.g., if certain protocols were correctly followed) or outcomes (e.g., if treatments resulted in positive results). Health outcomes are produced by a complex combination of factors including various social determinants such as education, housing and culture, making it hard to identify the impact of any particular intervention, including Medicaid managed care.

NCQA publishes an annual report comparing quality measures for enrollees in Medicaid managed care plans, individuals with commercial coverage enrolled in a health maintenance organization (HMO), and enrollees in Medicare Advantage plans (NCQA 2021) (Table 1). The national average scores on all of these measures are lower for Medicaid managed care enrollees than for individuals in other types of plans. For example, the rate of high blood pressure control for Medicaid enrollees is lower than the rate for individuals with commercial insurance (60.8 percent compared to 62.1 percent). However, important differences between the commercial and Medicaid populations such as health status and income may affect the results. In addition, data are only reported for individuals who are continuously enrolled for 12 months, so they may not be representative of the entire Medicaid managed care population. Therefore, comparisons among the populations should be viewed with caution.

TABLE 1. Select Measures of Health Care Quality, 2019

NCQA also publishes data from the CAHPS survey which measures enrollee perceptions of their health plans, providers, overall health, and their ability to access care (Table 2). These data show that enrollees in Medicaid managed care plans gave their health plan a higher overall rating but their health care a lower overall rating compared to privately insured patients (NCQA 2021). They also show that enrollee perceptions of some measures of access and quality are lower for enrollees in Medicaid health plans compared to commercial enrollees.

TABLE 2. Consumer and Patient Engagement and Experience Scores, 2019

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