States Could Save Money by Expanding Medicaid Managed Care

Les Masterson, for HealthLeaders Media , May 20, 2009

Medicaid managed care is providing a safety net of care coordination to millions of at-risk Americans and is improving patient outcomes and quality of care, while reducing states' healthcare costs, according to a recent Lewin Group report that was prepared for America's Health Insurance Plans.

A state looking to cut Medicaid costs should not reduce benefits or lower payment rates, but should instead expand its managed care program, according to the report.

The Lewin Group released a similar study five years ago and returned to the same subject, achieving similar results. In its latest report, The Lewin Group reported Medicaid managed care health plans improve beneficiaries' access to services and have earned high satisfaction ratings from enrollees, in addition to improving care and saving money.

The researchers pointed out that while nearly half of Medicaid beneficiaries are enrolled in managed care plans, more than 80% of national Medicaid spending is in the fee-for-service setting.

AHIP President and CEO Karen Ignagni says Medicaid managed care plans coordinate care, offer patient outreach not available in fee-for-service Medicaid, provide focused chronic care and disease management programs, offer preventive services, and give non-healthcare assistance to beneficiaries in areas such as finding alternatives to nursing home care.

"The bottom line of The Lewin Report is that we are providing high value and cost-effectiveness for states at this time of economic crisis," she says. "At this time, we are providing better quality, more access, and a higher degree of satisfaction to beneficiaries than traditional Medicaid programs. That's quite a legacy."

After analyzing 24 recent studies of Medicaid managed care programs, The Lewin Group reported that:

  • The studies strongly suggest that the Medicaid managed care model typically yields cost savings. The results ranged from 0.5 to 20% savings compared to FFS Medicaid.

  • The studies provide some evidence that Medicaid managed care savings are significant for the Supplemental Security Income and SSI-related population.

  • Various studies demonstrated that states' Medicaid managed care cost savings are largely attributed to decreases in inpatient utilization, which could be linked to care coordination.

  • Medicaid managed care plans yielded "noteworthy savings" in pharmacy. In comparing FFS programs' drugs costs versus Medicaid health plans, researchers found the costs per-member per-month were 10% to 15% lower for the private health plans.


James Carlson, president and CEO of AMERIGROUP Corporation, which covers 6.7 million Medicaid beneficiary lives in 14 states, says care coordination helps millions of Americans who would otherwise be lost in the healthcare system. He adds more states understand the benefits of Medicaid managed care.

"I do think that we as an industry have matured to the point that the states understand that these programs have to be reasonably well funded because it would cost more if they didn't have us ... More often than not, we're finding states that appreciate the involvement of the private sector," says Carlson.

Not every state has been satisfied with its Medicaid managed care program. This has been most notably the case in Florida. However, other states have experienced more positive results, which The Lewin Group highlighted.

The Lewin Group wrote, "It is clear that—through carefully crafted managed care program design that is tailored to the state's Medicaid populations and geographic landscape—real opportunities exist for states to benefit from expanding the Medicaid managed care model to eligibility categories and services heretofore largely excluded from managed care."

Rather than cutting eligibility, eliminating benefits, or reducing provider payments, The Lewin Group and Medicaid managed care supporters say states should instead look to expand these programs, given current budget pressures.

Given these positive results, Ignagni says AHIP supports a plan that would allow anyone under 100% poverty levels to be eligible for Medicaid. Those levels now vary by state and are not strictly based on income level.

Carlson also suggests that states change laws that would allow Medicaid beneficiaries to not have to recertify their eligibility every six months. 

Les Masterson is an editor for HealthLeaders Media.

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