What Is Managed Care?
Whether you’re looking at new bids or examining different options for your public health care, you may be unfamiliar with the concept of managed care, or what it can do for your state.
Depending on the needs and resources of your state, managed care can offer more cost-effective, predictable, streamlined care than the traditional government-administered, fee-for-service model.
Managed care versus fee-for-service care
In a fee-for-service model, providers submit claims directly to the state for their patients’ care. This system puts the burden on the state to implement and maintain health programs.
In a managed care system, states contract with managed care organizations (MCOs) to run these programs for them. The state pays a set amount per member per month (known as capitation), and the MCOs take on the responsibility of delivering covered health care benefits.
Managed care most commonly involves Medicaid, where it’s known as Medicaid managed care. But MCO offerings can also include Medicare and the Children’s Health Insurance Program (CHIP), as well as specialty solutions, like long-term services and supports (LTSS), pharmacy benefits, and behavioral health programs.
Managed care is not a new concept, but it’s rapidly becoming the most popular way for states to deliver Medicaid. From 1999 to 2012, enrollment in Medicaid managed care increased by 26 percent.1 Today, more than two-thirds of all Medicaid beneficiaries are enrolled in a managed care plan.2
The benefits of managed care
This growth in managed care enrollment is no accident. MCOs can offer states a health care model that is oftentimes more efficient, stable, and comprehensive than what the state can provide.
Increased resources and expertise
Your state may not have the ability or the budget to effectively operate a public health care program. MCOs, by contrast, are specifically in the business of managing Medicaid and similar programs. It’s their core competency, and they know it better than almost anyone.
Predictability of cost
You negotiate a contract rate with an MCO, and that is the full amount you pay. The MCO is at risk for additional costs above and beyond the contract rate — not the state. Freedom from surprise or variable health care costs allows states to produce a more stable, predictable state budget year after year.
Extra services for members
MCOs are encouraged to offer additional services beyond what Medicaid contracts require, so your citizens can benefit from value-added programs like GED attainment/educational support, job training, nutrition counseling, free transportation to appointments, and more.
Coordination of care
With MCO case managers, you don’t need to worry about your citizens falling through the cracks. Strong case management ensures that members make their needed appointments and helps coordinate provider services for treating the whole person — not just individual symptoms.
Focus on non-medical needs
Up to 90 percent of a person’s health is based on factors other than care, such as food, housing, employment, and community supports. By focusing on these social determinants of health, MCOs can help produce better health outcomes and lower health care costs at the same time.
The results speak for themselves. A recent survey shows that Medicaid managed care recipients had higher satisfaction rates (85 percent) than those in traditional fee-for-service programs.3
- Congressional Budget Office (CBO), “Exploring the Growth of Medicaid Managed Care,” August 2018, https://www.cbo.gov/system/files?file=2018-08/54235-MMC_chartbook.pdf.
- America’s Health Insurance Plans (AHIP), “Achieving State Medicaid Goals Through Managed Care,” October 2018, https://www.ahip.org/achieving-state-medicaid-goals-through-managed-care/.