Medicaid Expansion and Managed Care Organizations Explained

There are almost 54 million people enrolled in Medicaid, making it the largest health insurer in the United States. In fact, Medicaid beneficiaries are the fastest-growing class of health plan members. 

Not only does Medicaid reduce poverty rates more than any other type of health insurance, it also correlates with multiple positive health behaviors and outcomes, including increased access to care, improved self-reported health status, higher rates of preventive health screenings, lower likelihood of delaying care because of costs, decreased hospital and emergency department utilization, and decreased infant, child and adult mortality rates.

The Effect of the Affordable Care Act

The healthcare industry has seen many changes since the enactment of the Affordable Care Act. For Medicaid, it has increased enrollment and expanded coverage for many low-income adults and children, particularly in states that expanded Medicaid eligibility. A 2012 Supreme Court Ruling, however, made this expansion optional for states.

Your ability to qualify for Medicaid largely depends on the state in which you reside. If you live in a state that has expanded the program, you qualify solely based on our income. In the remaining states, qualification is based on multiple factors, including income, household size, family status and others. According to the Medicaid and CHIP Payment and Access Commission (MACPAC), states that expanded Medicaid experienced an enrollment increase between July and September 2013 and April 2019 of 34.4 percent (13.1 million) compared to 9.1 percent (1.69 million) in non-expansion states.

A total of 37 states have adopted the ACA Medicaid expansion. More states joining the expansion could mean Medicaid eligibility for millions more adults. States with expanded Medicaid have experienced positive effects on coverage, access to care, service utilization and state budgets and economies. Plus, research has shown that the expansion of Medicaid generates savings and revenue which can be used to finance other state spending priorities or offset much of the state costs of expansion.

Many expansion states have noticed patients seeking care earlier, increased access to behavioral health services and primary care appointments, increased spending for opioid treatment and larger decreases in one-year mortality from end-stage renal disease. After expanding their Medicaid eligibility levels for adults, Arizona, Maine and New York experienced an aggregate 6 percent decrease in all-cause mortality rates for 20 to 64-year-olds. A study that compared non-expansion state Texas to Arkansas and Kentucky, both expansion states, found that those who procured Medicaid coverage during the first three years of the expansion were 41 percent more likely to have a usual source of care and 23 percent more likely to self-report being in excellent health.

MCOs Making a Mark

Another more recent change to Medicaid has been the integration with managed care, which the Academy of Managed Care Pharmacy defines as “a structured approach to financing and delivering covered health care benefits designed to provide affordable access to improve the quality of care in a cost-effective manner.” Many states utilize managed care organizations (MCOs) – think Health Maintenance Organizations (HMOs), Preferred Provider Organizations (PPOs) and Point-of-Service Plans (POSs) – to manage and deliver services in Medicaid. The following numbers and statistics show just how prevalent MCOs are in Medicaid:

• As of July 2019, 40 states used capitated managed care models to deliver services in Medicaid.
• Nearly all MCO states reported using at least one select Medicaid managed care quality initiative in FY 2019.
• In FY 2018, payments to comprehensive risk-based MCOs accounted for the largest share – 45 percent - of Medicaid spending.
• As of July 2017, 1 million Medicaid enrollees received their care through risk-based MCOs.
• Children and adults are more likely to be enrolled in MCOs than seniors or persons with disabilities.
• MCO managed care penetration rates have grown across Medicaid eligibility groups.
• States that contract out their programs through MCOs have lower average administrative overhead (4.9 percent) than states that directly contract with providers (5.8 percent).
• Over time, the expansion of risk-based managed care in Medicaid has been accompanied by greater attention to measuring quality and outcomes.

MCOs help streamline Medicaid by contracting with providers, processing claims, attempting to reduce inappropriate service use, review provider credential, provide member outreach and patient education and conduct care coordination and disease management. As noted by the Centers for Medicare & Medicaid Services (CMS), states that contract with MCOs to deliver Medicaid health benefits and services can reduce program costs and better manage utilization of health services.

Medicaid in 2020

The state of Medicaid is changing already in 2020. Many states are now using MCO contracts to develop initiatives to address social determinants of health (SDOH), while others have reported strategies to improve birth outcomes and/or reduce maternal mortality. A total of 26 states have reported new or expanded initiatives to contain prescription drug costs.

At Advanced Medical Reviews, Medicaid expansion has affected the scope of medical review types clients are requesting and, in turn, created opportunities for optimizing our services for managed care organizations. Dan Perlow, VP of Strategic Partnerships, explains, “By providing timely and dependable independent medical reviews, AMR works together as an additional partner with Medicaid and Managed Care Organizations to ensure the proper delivery of appropriate benefits, while at the same time solidifying the cost effectiveness of delivering those benefits.”

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