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GAO-12-872R: 

August 17, 2012: 

The Honorable John D. Rockefeller, IV: 
Chairman: 
Subcommittee on Health Care: 
Committee on Finance: 
United States Senate: 

The Honorable Henry A. Waxman: 
Ranking Member: 
Committee on Energy and Commerce: 
House of Representatives: 

Subject: Medicaid: States' Use of Managed Care: 

The Medicaid program, a joint federal-state program that finances 
health insurance coverage for certain categories of low-income 
individuals, is an important source of health care coverage for about 
67 million beneficiaries. As Medicaid enrollment and spending have 
increased significantly over the past decade, so too has states' use 
of managed care to provide services to Medicaid beneficiaries, and 
nearly all states enroll some Medicaid beneficiaries in a form of 
managed care. Within some general requirements set out by the Centers 
for Medicare & Medicaid Services (CMS), the federal agency responsible 
for overseeing the Medicaid program, states have broad flexibility to 
implement Medicaid managed care programs. As a result, states vary 
widely in terms of the scope of services they provide and the 
populations they enroll in managed care. For example, while states 
commonly contract with managed care organizations (MCO) to provide the 
full range of covered Medicaid services to certain enrollees,[Footnote 
1] they also frequently rely on other arrangements, such as limited 
benefit plans,[Footnote 2] which provide a limited set of services, 
such as dental care or behavioral health services, or primary care 
case management (PCCM) programs, in which enrollees are assigned a 
primary care provider (PCP) who is responsible for providing primary 
care services and for coordinating other needed health care services. 
[Footnote 3] States also vary in their use of managed care for other 
reasons, such as differences in the availability of certain providers 
or the concentration of program beneficiaries that live in urban or 
rural areas. 

The Patient Protection and Affordable Care Act(PPACA)[Footnote 4] of 
2010 requires that all states expand eligibility for Medicaid to 
nonelderly individuals whose income does not exceed 133 percent 
of the federal poverty level (FPL) and is estimated to enroll an additional 7 million individuals in 2014.[Footnote 5] As initially set forth in PPACA, states that did not fully implement this Medicaid expansion faced the potential loss of all federal Medicaid matching funds, including for the population already covered under existing program rules. However, the U.S. Supreme Court has ruled that states that choose not to expand Medicaid eligibility to these newly eligible individuals will forgo only the federal matching funds associated with such expanded coverage.[Footnote 6] States that choose to provide Medicaid services to newly eligible individuals may do so through managed care arrangements.[Footnote 7] 

Because of your interest in the potential increase in Medicaid managed 
care enrollment and related implications, you asked us to describe 
states' use of Medicaid managed care, including the type of managed 
care arrangements they have in place and their enrollment of 
populations with complex health care needs.[Footnote 8] Understanding 
how states use Medicaid managed care--and related similarities and 
differences among them--may be informative as states consider 
expanding their use of managed care to new geographic areas or new 
populations, such as disabled beneficiaries who traditionally have 
more complex health care needs. This report examines variation in 
states' use of Medicaid managed care and identifies groups of states 
that share similarities, such as program enrollment composition and 
general market characteristics. 

To examine variation in states' use of Medicaid managed care, we 
reviewed multiple data sources, such as CMS's Medicaid Statistical 
Information System (MSIS) and the Census Bureau's American Community 
Survey (ACS), and ultimately identified 12 indicators that were 
informative in understanding the context in which states use Medicaid 
managed care.[Footnote 9] The indicators are grouped into two broad 
categories: (1) population-based characteristics, such as state-
reported enrollment in MCOs and PCCM programs[Footnote 10] and the 
degree of potential Medicaid expansion that could occur in 2014 
[Footnote 11] and (2) state market and other characteristics, such as 
the health maintenance organization (HMO) penetration rate and the 
concentration of low-income individuals who lived in urban areas. 
[Footnote 12] We excluded other indicators, such as states' regulatory 
environment and use of limited benefit managed care plans due to the 
lack of available or reliable data. Specifically, we excluded data on 
oversight activities because they were not available in a format that 
was suitable for our analysis, and enrollment in limited benefit plans 
because of inconsistencies in state-reported data. 

We then conducted a cluster analysis, a statistical method that 
assessed these indicators simultaneously in an effort to cluster 
states into groups, which were as similar as possible on the 
indicators within groups and as different as possible among the 
groups. Cluster analysis is a technique that allows us to focus on 
broad, shared patterns among states and can yield insights that are 
difficult to discern just by looking at simple comparisons of data 
across states. States that are similar with respect to multiple 
indicators may be able to gain insights from each other in terms of 
administering or expanding their Medicaid managed care programs. We 
also interviewed officials from CMS and other national policy experts, 
including officials from the Medicaid and CHIP Payment and Access 
Commission and the National Association of Medicaid Directors, and 
reviewed published reports and surveys related to states' use of 
Medicaid managed care.[Footnote 13] (See enclosure I for more 
information on our scope and methodology and enclosure III for a 
detailed description of the indicators we examined.) 

To determine the reliability of data sources we identified, we 
reviewed related documentation and conducted electronic testing for 
missing data, outliers, and apparent errors, and determined that the 
data were sufficiently reliable for our purposes. We conducted this 
performance audit from March 2011 through July 2012 in accordance 
with generally accepted government auditing standards. Those standards 
require that we plan and perform the audit to obtain sufficient, 
appropriate evidence to provide a reasonable basis for our findings 
and conclusions based on our audit objectives. We believe that the 
evidence obtained provides a reasonable basis for our findings and 
conclusions based on our audit objectives. We completed our field work 
prior to the June 28, 2012 decision by the Supreme Court on certain 
aspects of PPACA, including the Medicaid expansion provision. 

In summary, we identified four groups of states that differed in their 
use of Medicaid managed care on the basis of the 12 indicators we 
included in our analysis. A handful of these indicators--namely 
Medicaid enrollment in MCOs and PCCM programs, HMO penetration rates, 
and the concentration of low-income individuals that lived in urban 
areas--had significant influence on how states grouped. In contrast, 
within the four groups, considerable variation existed among the other 
indicators we examined, such as states' primary care capacity and 
commercial HMO market index. For labeling purposes, we typically 
describe the four groups on the basis of states' enrollment of 
Medicaid beneficiaries in MCOs and PCCM programs--generally the 
predominant similarity among the states within each group (see figure 
1.) 

* Group 1 states were PCCM predominant, enrolling a high percentage of 
beneficiaries in PCCM programs, but typically not in MCOs; 

* Group 2 states typically enrolled beneficiaries in both MCOs and 
PCCM programs; 

* Group 3 states were MCO predominant, enrolling a high percentage of 
beneficiaries in MCOs, but typically not in PCCM programs; and: 

* Group 4 states were considered "other" states in that although their 
enrollment of beneficiaries was similar to Group 3, they were outliers 
on other indicators, which differentiated them from states in the 
other groups we identified.[Footnote 14] 

Enclosure II provides additional information on these groups of 
states, and enclosure III provides state-specific data related to each 
of the indicators. 

Figure 1: Summary of Selected Indicators by State Groups: 

[Refer to PDF for image: illustrated U.S. map] 

Group 1: PCCM Predominant States:  
* High primary care case management (PCCM) enrollment; 
* No or low managed care organization (MCO) enrollment; 
* Low concentration of low-income individuals in urban areas; 
* Low health maintenance organization (HMO) penetration; 
* 18 states: 
Alabama; 
Alaska; 
Arkansas; 
Idaho; 
Illinois; 
Iowa; 
Louisiana; 
Maine; 
Mississippi; 
Montana; 
New Hampshire; 
North Carolina; 
North Dakota; 
Oklahoma; 
South Dakota; 
Utah; 
Vermont; 
Wyoming. 

Group 2: States That Use Both MCOs and PCCM Programs: 
* Above average MCO enrollment; 
* Moderate PCCM enrollment; 
* Average concentration of low-income individuals in urban areas; 
* Average HMO penetration; 
* 16 states: 
Colorado; 
Connecticut; 
Florida; 
Georgia; 
Indiana; 
Kansas; 
Kentucky; 
Missouri; 
Nebraska; 
Nevada; 
Pennsylvania; 
South Carolina; 
Texas; 
Virginia; 
Washington; 
West Virginia. 

Group 3: MCO Predominant States: 
* High MCO enrollment; 
* No or low PCCM enrollment;  
* High concentration of low-income individuals in urban areas; 
* High HMO penetration; 
* 12 states: 
Arizona; 
California; 
Delaware; 
Maryland; 
Michigan; 
Minnesota; 
New Jersey; 
New Mexico; 
New York; 
Ohio; 
Rhode Island; 
Wisconsin. 

Group 4: Other States
* States were outliers on certain indicators, weakening the similarity 
of the states; 
* High MCO enrollment; 
* No or low PCCM enrollment; 
* High concentration of low-income individuals in urban areas; 
* 5 states: 
District of Columbia; 
Hawaii; 
Massachusetts; 
Oregon; 
Tennessee. 

Sources. GAO analysis; Map Resources (map). 

Note: GAO analysis of the Center for Medicare & Medicaid Services' 
2008 Medicaid Statistical Information System Annual Person Summary 
file, U.S. Census Bureau 2005-2009 American Community Survey, and 
Kaiser Family Foundation data. Some states in each group were 
exceptions to the general group descriptions presented in this figure. 

[End of figure] 

The cluster analysis results provide perspectives on how states have 
implemented Medicaid managed care and highlight strong similarities 
shared among states within each of the groups, particularly with 
regard to MCO and PCCM enrollment. States within each of these groups 
could look to one another as a resource as they consider expanding 
their Medicaid managed care programs. 

The results also provide specific information about challenges states 
may face in expanding their use of Medicaid managed care. For example, 
each of the groups emerging from our analysis included states that may 
face greater than average Medicaid program expansions in 2014 if they 
fully implement PPACA's eligibility expansion, and it is likely that 
many of these states will look to managed care to provide services to 
their newly eligible population. Specifically, 10 of the 12 states 
with the greatest potential Medicaid expansion are in Groups 1 and 2--
states with high enrollment in PCCM programs only or using a mix of 
MCOs and PCCM programs. However, 8 of these 10 states have a below 
average primary care capacity, and 9 of the 10 states had a 
comparatively small concentration of low-income individuals that lived 
in urban areas or a low HMO penetration rate, which may affect the 
states' capacity to expand their managed care programs to serve 
additional beneficiaries. For example, these states may face 
challenges attracting MCOs that may have concerns about the 
availability of adequate provider networks or the sufficiency of 
enrollment, and thus may not have a strong business case for entering 
the state's Medicaid managed care market. Similarly, states with low 
primary care capacity may not have enough providers to expand their 
PCCM programs further, or MCOs that the state contracts with may have 
challenges building an adequate network of PCPs. Therefore, in 
determining whether to implement or expand the use of Medicaid managed 
care and related challenges, these states will need to consider these 
indicators as well as other contextual factors that may affect their 
capacity to do so and may look to similarly situated states for 
guidance. 

Despite the robustness of our analysis, it provides an incomplete 
picture because data on additional indicators that affect states' 
implementation of Medicaid managed care were not available or were 
unreliable. For example, data on states' Medicaid program oversight 
capacity and activities could provide a more complete picture of 
states' Medicaid managed care programs and related challenges, and 
could provide insight on resources and expertise they may need to 
expand their managed care programs. Similarly, reliable enrollment 
data for limited benefit plans would provide a more comprehensive 
picture of states' use of Medicaid managed care. A cluster analysis 
that includes these data would offer even more robust groupings of 
states, which could be more useful for states that are considering 
Medicaid managed care expansions. Ensuring the availability of more 
complete and reliable data and conducting research on additional 
indicators will be important to developing a more comprehensive 
picture of how states use Medicaid managed care. 

Agency Comments: 

We provided a draft of this report to HHS for comment. HHS responded that it did not have any comments on the draft report. 

As we agreed with your offices, unless you publicly announce the 
contents of this report earlier, we plan no further distribution of it 
until 30 days from its date. We are sending copies of this report to 
the Secretary of Health and Human Services and other interested 
parties. In addition, the report is available at no charge on the GAO 
website at [hyperlink, http://www.gao.gov]. 

If you or your staff have any questions about this report, please 
contact me at (202) 512-7114 or yocomc@gao.gov. Contact points for our 
Offices of Congressional Relations and Public Affairs may be found on 
the last page of this report. GAO staff who made major contributions 
to this report are listed in enclosure IV. 

Signed by: 

Carolyn L. Yocom: 
Director, Health Care: 

Enclosures - 4: 

[End of section] 

Scope and Methodology: 

To examine how states used managed care to provide services to their 
Medicaid beneficiaries, we conducted a cluster analysis, a statistical 
method that allowed us to identify groups of states that were similar 
across multiple characteristics simultaneously. As a first step, we 
identified the following data sources to collect specific information 
related to states' use of managed care and other related 
characteristics: 

* The Centers for Medicare & Medicaid Services' (CMS) Medicaid 
Statistical Information System (MSIS) Annual Person Summary File 
(APS): The MSIS APS file contains individual-level demographic, 
enrollment, and service utilization data summarized for each 
beneficiary at an annual level from quarterly MSIS files submitted by 
states.[Footnote 15] 

* CMS's Medicaid Managed Care Data Collection System (MMCDCS): The 
MMCDCS includes state-reported information on states' Medicaid managed 
care programs, including enrollment by type of managed care plan; 
program characteristics, such as the types of providers states permit 
to act as a primary care provider (PCP) in their Medicaid managed care 
programs; and state program management activities.[Footnote 16] 

* Census Bureau's American Community Survey (ACS): The ACS provides 
data annually on population demographics, income, health insurance, 
education, employment, and other characteristics. We used information 
from the ACS to determine the concentration of low-income individuals 
that lived in urban areas in each state.[Footnote 17] 

* Kaiser Family Foundation data sources on states: The foundation's 
website included information compiled by another organization on 
health maintenance organization (HMO) penetration rates, and the 
results of the foundation's 50-state survey on states' use and future 
planned uses of Medicaid managed care.[Footnote 18] 

* American Medical Association (AMA) data: A recent AMA report on 
competition in the health insurance industry included measures of 
state-level competition among commercial HMO plans based on data from 
another organization. 

* Leighton Ku and colleagues' data published in the New England 
Journal of Medicine: A 2010 journal article on states' capacity to 
meet expanded demand for health care services if states fully 
implement the Medicaid eligibility expansions under PPACA included 
measures of state-level primary care capacity and potential increases 
in Medicaid enrollment.[Footnote 19] 

From these sources, we identified 12 indicators in two general 
categories of states' use of Medicaid managed care: (1) population-
based characteristics, such as enrollment in managed care 
organizations (MCO) and primary care case management (PCCM) programs 
and (2) state market characteristics. (Table 1 and enclosure III 
provide a detailed description of the indicators we examined.) 

Table 1: Description of Indicators Included In the Cluster Analysis: 

Population-based Characteristics: 

Indicator name: Percent of Medicaid beneficiaries enrolled in managed 
care organizations (MCO); 
Description of indicator: Percentage of Medicaid beneficiaries that 
were enrolled in an MCO and had a capitated payment made on their 
behalf to an MCO[A]; 
Year of data: Fiscal year 2008; 
Source: Medicaid Statistical Information System (MSIS) Annual Person 
Summary (APS) file. 

Indicator name: Percent of Medicaid beneficiaries with complex health 
care needs enrolled in MCOs; 
Description of indicator: Percentage of Medicaid beneficiaries with 
complex health care needs that were enrolled in an MCO and had a 
capitated payment made on their behalf to an MCO[A,B]; 
Year of data: Fiscal year 2008; 
Source: MSIS APS file. 

Indicator name: Percent of Medicaid beneficiaries enrolled in primary 
care case management (PCCM) programs; 
Description of indicator: Percentage of Medicaid beneficiaries that 
were enrolled in a PCCM program and had a per member per month case 
management fee made on their behalf to a PCCM provider[C]; 
Year of data: Fiscal year 2008; 
Source: MSIS APS file. 

Indicator name: Percent of Medicaid beneficiaries with complex health 
care needs enrolled in PCCM programs; 
Description of indicator: Percentage of Medicaid beneficiaries with 
complex health care needs who were enrolled in PCCM programs and had 
a per member per month case management fee made on their behalf to a 
PCCM provider[B,C]; 
Year of data: Fiscal year 2008; 
Source: MSIS APS file. 

Indicator name: Medicaid Expansion Index; 
Description of indicator: Index based on the number of uninsured, 
nonelderly adults with incomes below 138 percent of the federal 
poverty level (FPL) who are either currently eligible for Medicaid 
but not insured or who could become eligible for Medicaid if states 
fully implement PPACA's Medicaid expansion requirements in 2014[D]; 
Year of data: Calendar years 2007-2009[D]; 
Source: Ku et al., 2010[E]. 

State Market and Other Characteristics: 

Indicator name: Concentration of low-income individuals in urban areas; 
Description of indicator: Percentage of the population earning less 
than 125 percent of the FPL that lived in urban areas; 
Year of data: Calendar years 2005-2009; 
Source: American Community Survey. 

Indicator name: Health maintenance organization (HMO) penetration rate; 
Description of indicator: Percentage of the total population enrolled 
in an HMO plan, such as a commercial HMO plan or a Medicaid or 
Medicare managed care plan; 
Year of data: July 2010; 
Source: Kaiser Family Foundation. 

Indicator name: Commercial HMO market competition index; 
Description of indicator: A Herfindahl-Hirschman Index (HHI) of the 
competitiveness of the statewide commercial HMO market. The index is 
the sum of the squared market share of all HMO plans in a state[F]; 
Year of data: January 2009; 
Source: American Medical Association (AMA). 

Indicator name: Number of MCOs per 100,000 Medicaid beneficiaries; 
Description of indicator: Number of MCOs that each state contracts 
with per 100,000 Medicaid beneficiaries; 
Year of data: October 2010; 
Source: Kaiser Family Foundation. 

Indicator name: Primary Care Capacity Index; 
Description of indicator: Index based on the number of primary care 
providers (PCP) and the number of unduplicated patients seen at 
federally qualified health centers in the state[G]; 
Year of data: Calendar years 2008-2009[G]; 
Source: Ku et al., 2010[E]. 

Indicator name: Allowable PCPs: MCO; 
Description of indicator: Average number of different types of 
providers that a state allows MCOs to consider as PCPs; 
Year of data: June 2009; 
Source: Medicaid Managed Care Data Collection System (MMCDCS)[H]. 

Indicator name: Allowable PCPs: PCCM; 
Description of indicator: Average number of different types of 
providers that a state allows to participate as PCPs in its PCCM 
program; 
Year of data: June 2009; 
Source: MMCDCS[H]. 

Source: GAO. 

[A] In general, we considered individuals as enrolled in an MCO if 
they were reported as being enrolled in an MCO and had a capitated 
payment made to an MCO on their behalf. For three states--Alabama, 
Idaho, and Utah--we assumed there was no MCO enrollment in 2008 to 
address data reporting issues. Specifically, Alabama did not enroll 
Medicaid beneficiaries into MCOs but reported dually eligible 
enrollees for whom Medicaid pays for Medicare cost sharing as an MCO 
enrollee. Idaho and Utah erroneously reported enrollment in MCOs; 
neither state enrolled Medicaid beneficiaries into MCOs in 2008. 

[B] Our definition of "Medicaid beneficiaries with complex health care 
needs" includes beneficiaries who were aged, blind/disabled, medically 
needy, or dually eligible for Medicare and Medicaid. We excluded dual 
eligibles who only received Medicare cost-sharing assistance through 
Medicaid from our definition. 

[C] In general, we considered individuals as enrolled in a PCCM 
program if they were reported as being enrolled in a PCCM program and 
had a monthly case management fee paid on their behalf. Because of the 
way Colorado, Delaware, Maine, Massachusetts, New York, South Dakota, 
and Utah reported PCCM case management payments, we relied only on the 
PCCM enrollment data to determine the number of enrollees. To 
determine PCCM enrollment in Oklahoma, we relied on the limited 
benefit plan enrollment data because Oklahoma typically reports those 
enrolled in its comprehensive PCCM program as enrolled in a limited 
benefit plan instead. 

[D] The Medicaid Expansion Index is based on two measures: (1) adults 
aged 19 to 64 who could become eligible, or who are already eligible 
for Medicaid but not enrolled, and (2) an Urban Institute estimate of 
individuals who may become newly eligible for Medicaid and may enroll. 
The number of individuals who would potentially become eligible for 
Medicaid under PPACA's eligibility expansion is standardized by the 
number of the individuals with incomes below 200 percent of FPL. This 
index was calculated using data from calendar years 2007 to 2009 and 
assumes that all states will expand Medicaid eligibility. 

[E] L. Ku, K. Jones, P. Shin, B. Bruen, and K. Hayes, "The State's 
Next Challenge--Securing Primary Care for Expanded Medicaid 
Populations," New England Journal of Medicine, vol. 364, no. 6 (2011), 
DOI: 10.1056/NEJMp1011623. 

[F] The market share is calculated on the basis of the number of 
insured individuals enrolled in a single, commercial HMO plan divided 
by the sum of all commercial HMO enrollment in a state, which is then 
multiplied by 100. 

[G] The number of "primary care providers" included the number of 
internists, family/general practitioners, pediatricians, 
obstetricians/gynecologists, 50 percent of the number of nurse 
practitioners and physician assistants, and the unduplicated number of 
patients seen at federally qualified health centers (FQHC). To create 
this index, the number of primary care providers was standardized by 
the state population, and the number of patients served by FQHCs was 
standardized by number of people with income below 200 percent of the 
FPL. This index was based on the following data sources: estimates of 
nonfederal physicians from the AMA; nurse practitioners in 2009 based 
on the Pearson Report; projected number of physician assistants in 
December 2008 from the American Academy of Physician Assistants; 
number of patients served in FQHCs in 2009 from the Health Resources 
and Services Administration, Bureau of Primary Health Care's Uniform 
Data System. 

[H] Because of reporting issues in the 2009 MMCDCS for Wisconsin and 
Vermont, for our cluster analysis we substituted data on the number 
of allowable primary care types in the state's MCO program(s) for 
Minnesota and the number of allowable types in Vermont's PCCM program 
with data collected by the Kaiser Family Foundation in a 50-state 
survey on Medicaid managed care. See K. Gifford, V. K. Smith, D. 
Snipes, and J. Paradise, A Profile of Medicaid Managed Care Programs 
in 2010: Findings from a 50-State Survey (Washington, D.C.: Kaiser 
Family Foundation, Kaiser Commission on Medicaid and the Uninsured, 
September 2011). 

[End of table] 

Limitations of Our Analysis: 

Our analysis captures state information with respect to the selected 
indicators described above; however, several other factors that 
reflect or affect states' use of Medicaid managed care were not 
included in our analysis. For example, states vary in their use of 
limited benefit plans, which provide a limited set of Medicaid 
benefits, such as behavioral health and dental services, and are a key 
component of the overall Medicaid managed care delivery system in some 
states.[Footnote 20] Although the MSIS data included information on 
states' enrollment in limited benefit plans, we identified cases where 
state-reported data were incomplete or inconsistent, and thus 
determined that the data were not reliable for our purposes.[Footnote 
21] Another factor we considered, but ultimately excluded from our 
analysis, was the extent of states' Medicaid managed care program 
management and oversight activities. According to CMS officials, the 
agency's most readily available data source on state Medicaid managed 
care programs--the MMCDCS--contains descriptive and qualitative data 
on state program management and oversight activities, which were not 
suitable for a cluster analysis, which requires continuous, 
quantitative data.[Footnote 22] We considered other factors that could 
affect states' use of Medicaid managed care, such as states' 
regulatory environment and staff capacity to oversee Medicaid managed 
care programs, but found these to be either difficult to quantify or 
not readily available, and we ultimately excluded these factors from 
our analysis. 

Data Reliability: 

To determine the reliability of the data sources we used, we reviewed 
related documentation and, when necessary, interviewed experts most 
knowledgeable in the collection and validation of the data. For large 
electronic data sets that we used, such as the MSIS APS, we conducted 
electronic testing for missing data, outliers, and other apparent 
errors. For example, we tested whether states known to not use a 
certain type of Medicaid managed care, such as MCOs, erroneously 
reported enrollment in or capitated payments to such plans. We also 
compared our results, when possible, to similar estimates of managed 
care enrollment available in other data sources, such as the 2008 
Medicaid Managed Care Enrollment Report, which is derived from the 
MMCDCS. We also compared our estimates to other publicly available 
estimates, such as those compiled by the Kaiser Commission on Medicaid 
and the Uninsured and the Medicaid and CHIP Payment and Access 
Commission (MACPAC). We determined that the data sources we used were 
sufficiently reliable for the purposes of our engagement. 

Methodology: 

After compiling data on the indicators we identified, we used cluster 
analysis to identify states that were similar across multiple 
indicators simultaneously. Cluster analysis is a method of measuring 
the degree to which groups of objects--in our case, states--resemble 
each other on many different characteristics. One can measure group 
similarity on a single characteristic simply by using graphs, 
descriptive statistics, or manually inspecting the data. However, 
these methods are less useful in describing similarities on multiple 
characteristics at once. The form of cluster analysis we used creates 
an index from multiple indicators of interest, and then uses the index 
to form a sequence of clusters that range from most similar, with each 
state as its own cluster, to least similar, with all states in a 
single cluster. We did not have strong prior hypotheses about the 
multivariate distribution of the data, or where potential clusters may 
be located. As a result, the nonparametric and exploratory nature of 
our clustering method was appropriate to identify many clusters at 
varying degrees of similarity. 

Because this method uses mathematical clustering rules and measures of 
similarity, it identifies potential clusters in a more objective, 
systematic, and replicable way than methods that require more human 
judgment. Cluster analysis requires us to decide (1) how to measure 
similarity across multiple variables, and (2) how to identify clusters 
of states that are similar to each other. The diversity of our 
indicator scales makes the measurement of similarity somewhat 
difficult. As table 2 shows, several of our indicators are scaled as 
proportions, but others are small counts or broader concepts measured 
on arbitrary scales. The maximum values across all indicators range 
from 2.79 to 10,000. 

Table 2: Descriptive Statistics for Indicators Used in Cluster 
Analysis: 

Population-based Characteristics: 

Indicator: Percent of Medicaid beneficiaries enrolled in managed care 
organizations (MCO); 
Mean: 36.2; 
Minimum: 0; 
25th Percentile: 0; 
Median: 46.2; 
75th Percentile: 65.1; 
Maximum: 92.9. 

Indicator: Percent of Medicaid beneficiaries with complex health care 
needs enrolled in MCOs; 
Mean: 16.9; 
Minimum: 0; 
25th Percentile: 0; 
Median: 7.1; 
75th Percentile: 31.2; 
Maximum: 98.0. 

Indicator: Percent of Medicaid beneficiaries enrolled in primary care 
case management (PCCM) programs; 
Mean: 20.3; 
Minimum: 0; 
25th Percentile: 0; 
Median: 6.9; 
75th Percentile: 40.8; 
Maximum: 86.1. 

Indicator: Percent of Medicaid beneficiaries with complex health care 
needs enrolled in PCCM programs; 
Mean: 15.0; 
Minimum: 0; 
25th Percentile: 0; 
Median: 5.0; 
75th Percentile: 22.1; 
Maximum: 93.9. 

Indicator: Medicaid Expansion Index; 
Mean: 100; 
Minimum: 25; 
25th Percentile: 90.2; 
Median: 101; 
75th Percentile: 117.1; 
Maximum: 153.9. 

State Market and Other Characteristics: 

Indicator: Concentration of low-income individuals in urban areas; 
Mean: 74.5; 
Minimum: 45.2; 
25th Percentile: 62.8; 
Median: 75.9; 
75th Percentile: 86.4; 
Maximum: 100. 

Indicator: Health maintenance organization (HMO) penetration rate; 
Mean: 17.2; 
Minimum: 0.1; 
25th Percentile: 7.7; 
Median: 16.6; 
75th Percentile: 24.2; 
Maximum: 54.1. 

Indicator: Commercial HMO market competition index; 
Mean: 3,889; 
Minimum: 1,293; 
25th Percentile: 2,426; 
Median: 3,414; 
75th Percentile: 4,758; 
Maximum: 10,000. 

Indicator: Number of MCOs per 100,000 Medicaid beneficiaries; 
Mean: 0.53; 
Minimum: 0; 
25th Percentile: 0; 
Median: 0.46; 
75th Percentile: 0.76; 
Maximum: 2.79. 

Indicator: Primary Care Capacity Index; 
Mean: 100; 
Minimum: 55.5; 
25th Percentile: 75.7; 
Median: 85.2; 
75th Percentile: 115.7; 
Maximum: 244.4. 

Indicator: Allowable primary care providers (PCP): MCO; 
Mean: 6.0; 
Minimum: 0; 
25th Percentile: 0; 
Median: 7.5; 
75th Percentile: 9.2; 
Maximum: 13. 

Indicator: Allowable PCPs: PCCM; 
Mean: 5.2; 
Minimum: 0; 
25th Percentile: 0; 
Median: 6; 
75th Percentile: 9; 
Maximum: 14. 

Source: GAO. 

[End of table] 

To make the indicators comparable, we standardized their scales in two 
different ways. First, we normalized each indicator so that its mean 
and standard deviation equaled 0 and 1, respectively. Second, we 
rescaled the indicators so that they ranged on the unit interval. 
Because both transformations are affine (or order-preserving), they 
eliminated scale differences, while preserving the relative position 
of the states in each univariate distribution. This, in turn, allowed 
us to compare the relative location of each state in multiple 
dimensions. After rescaling the data, we calculated the Euclidean 
distance between each of the (N*(N-1))/2 = 1,275 possible pairs of 
states and arranged the results in a symmetric matrix. This served as 
our final measure of multivariate distance. Using Euclidean distance, 
the normal standardization assumes that each variable has equal weight 
on the overall distance, but the unit interval standardization relaxes 
this assumption. 

We used a hierarchical, agglomerative algorithm to identify clusters 
from the distance matrix. We first assumed that each state was its own 
cluster, and then combined states into larger clusters using the 
"complete linkage" method. This clustering rule avoided giving too 
much weight to the moderate number of outliers in the data, 
particularly states that enrolled zero participants in Medicaid, 
managed care, unlike single or, to a lesser extent, average or median 
linkage methods. Our method produced a sequence of cluster options 
that varied from most to least homogenous within clusters. Working 
from these many clustering options, we used our knowledge of Medicaid 
managed care, and PPACA to create a final set of clusters that 
meaningfully described variation across states. 

Specifically, our clustering algorithm had the following form. For any 
multivariate distance h 0, let i = 1, 2, ... , N index states and j = 
1, 2, ... , Nh index clusters (subsets of states). Let Xij denote the 
vector of observations for state i in cluster j. The complete linkage 
algorithm initializes with h0 = 0 and i = j. For each j and h > h0, 
complete linkage adds state i to cluster j if max(d(Xi, Xj)) h for all 
i in j, where d(·) is the Euclidean distance function and the maximum 
is taken over i. This step of the algorithm repeats until Nh = 1. We 
then chose from the sequence of clusters formed along values of h. 

Results: 

Figure 2 presents the results of our cluster analysis. This version of 
the analysis used the normalized standardization and all variables in 
table 2. The figure plots the distance between each pair of states as 
a matrix of colors, or a "heat map," in which states that are more 
similar are shaded in darker red and those that are dissimilar are 
shaded in yellow. A "dendrogram" above the heat map represents the 
clustering process. Each line at the bottom of the dendrogram denotes 
a single state. The convergence of lines represents the combination of 
states into larger clusters at decreasing levels of similarity, which 
is measured on the vertical axis. Because distance matrices are 
symmetric, the plot is reflected above and below the diagonal. The 
results show four broad clusters, or groups, of states, based 
predominantly on the proportions of Medicaid beneficiaries enrolled in 
MCOs or PCCM programs, relative to other states. Within these large 
clusters, subclusters form around the degree of likely Medicaid 
expansion, the structure of the health care market, and the 
concentration of low-income individuals that lived in urban areas. 

Figure 2: Distance Matrix and Results of Cluster Analysis: 

[Refer to PDF for image: illustration] 

Source: GAO analysis. 

[End of figure] 

Because rescaling on the unit interval did not meaningfully change the 
four broad clusters we identified, we concluded that our choice of 
scale was not critical, given the moderate stability of the results 
and our focus on the four broad clusters. Our four broad clusters 
persisted when removing various indicators from the multivariate 
measure of distance. As with rescaling the data, some subclusters 
included different states, and some states might have been 
reclassified as outliers. Ultimately, we decided to include all of the 
variables in table 2, in order to allow each variable to contribute to 
the final results. 

[End of section] 

Enclosure II: Summary of States' Use of Medicaid Managed Care by 
Groups of Similar States: 

This enclosure highlights the indicators of states' use of Medicaid 
managed care that were generally shared among states in each of the 
four distinct clusters, or groups, of states we identified. The 
descriptions provided in this enclosure generally focus on the 
indicators that appeared to have had significant influence on how 
states grouped. For labeling purposes, we typically describe the four 
groups on the basis of states' enrollment of Medicaid beneficiaries in 
managed care organizations (MCO) and primary care case management 
(PCCM) programs, which was generally the predominant similarity among 
states within each group. 

Summary of Group 1: PCCM Predominant States: 

Group 1 was the largest group of states we identified and included 18 
states: Alabama, Alaska, Arkansas, Idaho, Illinois, Iowa, Louisiana, 
Maine, Mississippi, Montana, New Hampshire, North Carolina, North 
Dakota, Oklahoma, South Dakota, Utah, Vermont, and Wyoming. These 
states enrolled, on average, the highest percentage of beneficiaries 
in PCCM programs and typically did not enroll any Medicaid 
beneficiaries in MCOs. In addition, these states generally had a low 
concentration of low-income individuals that lived in urban areas, and 
lower managed care penetration in their overall health insurance 
markets compared to states in the other groups we identified. States 
in Group 1 generally shared the following characteristics: 

High PCCM and No or Low MCO Enrollment: 

* PCCM Enrollment: Fourteen of 18 states enrolled Medicaid 
beneficiaries, including those with complex health care needs, in PCCM 
programs. On average, states in Group 1 enrolled 45 percent of all 
Medicaid beneficiaries in PCCM programs, which was higher than the 
national average of 20 percent, and highest among the four groups we 
identified. (See figure 3.) In addition, these states typically 
extended enrollment to Medicaid beneficiaries with complex health care 
needs, though to a lesser degree than their general Medicaid 
population. In 2008, most of these states enrolled between 20 to 50 
percent of Medicaid beneficiaries with complex health care needs in 
PCCM programs.[Footnote 23] 

Figure 3: Percentage of Medicaid Beneficiaries Enrolled in Primary 
Care Case Management (PCCM) Programs among Group 1 States, Fiscal Year 
2008: 

[Refer to PDF for image: horizontal bar graph] 

Idaho: 83.8%; 
South Dakota: 71.1%; 
North Carolina: 68.3%; 
Vermont: 67.6%; 
Louisiana: 62.2%; 
Illinois: 61.3%; 
Arkansas: 58.9%; 
Maine: 53.0%; 
North Dakota: 52.4%; 
Montana: 48.5%; 
Alabama: 45.3%; 
Iowa: 36.6%; 
Utah: 17.2%; 
National average: 20.3%; 
Group 1 average: 45.1%; 
Group 2 average: 11.7%; 
Group 3 average: 0.6%; 
Group 4 average: 5.1%. 

Source: CMS and GAO. 

Note: GAO analysis of the Center for Medicare & Medicaid Services' 
2008 Medicaid Statistical Information System Annual Person Summary 
file. Oklahoma operates an enhanced PCCM program, but the state's 
enrollment data are excluded from this figure because we determined 
that they were unreliable for our purposes. Specifically, the state 
reports enrollment in its enhanced PCCM program as enrollment in a 
limited benefit plan rather than in the PCCM program category in the 
MSIS. Therefore, we could not accurately estimate enrollment numbers 
in the state's PCCM program. The following states did not enroll any 
Medicaid beneficiaries in PCCM programs and were excluded from this 
figure: Alaska, Mississippi, New Hampshire, and Wyoming. However, 
Alaska, Mississippi, New Hampshire, Oklahoma, and Wyoming were 
included in our calculation of the Group 1 average percentage of 
Medicaid beneficiaries enrolled in PCCM programs. 

[End of figure] 

* MCO Enrollment: Sixteen of the 18 states did not enroll any Medicaid 
beneficiaries in MCOs in 2008. In the 2 states that did enroll 
Medicaid beneficiaries in MCOs--Illinois and Iowa--less than 10 
percent of all beneficiaries were enrolled in MCOs and an even lower 
percentage of beneficiaries with complex health care needs were 
enrolled. 

* No PCCM or MCO Enrollment: Four states--Alaska, Mississippi, New 
Hampshire, and Wyoming--did not enroll any Medicaid beneficiaries in 
PCCM programs or MCOs in 2008. 

Low Concentration of Low-Income Individuals in Urban Areas: 

Sixteen of the 18 states had a lower percentage of low-income 
individuals that lived in urban areas than the national average (75 
percent). Most commonly, the overall percentages of low-income 
individuals that lived in urban areas was between 45 and 75 percent, 
which was generally a lower percentage than in states in other groups. 

Low HMO Penetration: 

The health maintenance organization (HMO) penetration rate, which 
measured the percentage of the total population enrolled in an HMO, 
such as commercial HMOs, Medicaid MCOs, and Medicare managed care 
plans, was lower than the national average (17.2 percent) in 17 of the 
18 states, and was typically less than 10 percent. 

Variation in Potential Expansion of Medicaid and Managed Care: 

* These states varied with regard to the degree of potential Medicaid 
expansion, in that 8 states were above the national average and 10 
states were below. (See figure 4.) However, 4 of these states--Alaska, 
Louisiana, Mississippi, and Oklahoma--had the highest potential 
expansion index of all states. Ten states reported plans to expand the 
use of Medicaid managed care, 6 of which had a potential Medicaid 
expansion that was above the national average.[Footnote 24] 

Figure 4: Group 1 States by Potential Medicaid Expansion Index and 
Medicaid Managed Care Expansion Plans: 

[Refer to PDF for image: illustrated U.S. map] 

Above average Medicaid expansion, plans to expand Medicaid managed 
care (6): 
Alabama: 109.8; 
Louisiana: 135.3; 
Mississippi: 127.7; 
New Hampshire: 121.0; 
North Carolina: 115.5; 
Oklahoma: 143.7. 

Above average Medicaid expansion, no plans to expand Medicaid managed 
care (2): 
Alaska: 153.9; 
Wyoming: 114.7. 

Above average Medicaid expansion, plans to expand Medicaid managed 
care unknown (1): 
Arkansas: 118.9. 

Average or below average Medicaid expansion, plans to expand Medicaid 
managed care (4): 
Idaho: 100.5; 
Illinois: 95.1; 
Maine: 67.2; 
South Dakota: 95.1. 

Average or below average Medicaid expansion, no plans to expand 
Medicaid managed care (5): 
Iowa: 82.8; 
Montana: 99.6; 
North Dakota: 95.0; 
Utah: 95.4; 
Vermont: 40.5. 

Sources: GAO, New England Journal of Medicine, and Kaiser Commission 
on Medicaid and the Uninsured; Map Resources (map). 

Note: The potential Medicaid Expansion Index values are presented on 
this map for each state in Group 1. GAO analysis of data from L. Ku, 
K. Jones, P. Shin, B. Bruen, and K. Hayes, "The State's Next 
Challenge--Securing Primary Care for Expanded Medicaid Populations," 
New England Journal of Medicine, vol. 364, no. 6 (2011), DOI: 
10.1056/NEJMp1011623, and K. Gifford, V. K. Smith, D. Snipes, and J. 
Paradise, A Profile of Medicaid Managed Care Programs in 2010: 
Findings from a 50-State Survey, (Washington, D.C.: Kaiser Family 
Foundation, Kaiser Commission on Medicaid and the Uninsured, September 
2011). 

[End of section] 

Summary of Group 2: States That Use Both MCOs and PCCM Programs: 

Group 2 was the second largest group of states we identified, and 
included 16 states: Colorado, Connecticut, Florida, Georgia, Indiana, 
Kansas, Kentucky, Missouri, Nebraska, Nevada, Pennsylvania, South 
Carolina, Texas, Virginia, Washington, and West Virginia. Most 
notably, these states were generally characterized by their enrollment 
of Medicaid beneficiaries, including those with complex health care 
needs, in MCOs and PCCM programs. However, these states enrolled 
beneficiaries in MCOs or PCCM programs to a lesser extent than the 
other groups of states that used such arrangements. (See figure 5.) 
Additionally, when compared to the other groups of states, Group 2 
states generally had an average concentration of low-income 
individuals that lived in urban areas and average managed care 
penetration. 

MCO and PCCM Enrollment: 

* Above Average MCO Enrollment: All 16 states enrolled Medicaid 
beneficiaries, including those with complex health care needs, into 
MCOs in 2008. On average, these states enrolled 46 percent of all 
Medicaid beneficiaries in such plans, which was 10 percentage points 
higher than the national average (36 percent), but notably lower than 
the average percentage of beneficiaries enrolled in MCOs in Group 3 
(64 percent) and Group 4 (67 percent). Over half of these states 
enrolled between 40 and 60 percent of all Medicaid beneficiaries in 
MCOs, but notable variation in enrollment existed among the states. 
Four states--Colorado, Kentucky, Nebraska, and South Carolina--
enrolled less than a third of all beneficiaries; and two states--
Georgia and Indiana--enrolled two-thirds or more of all beneficiaries. 
While all these states extended MCO enrollment to Medicaid 
beneficiaries with complex health care needs, they most commonly 
enrolled less than 20 percent of such beneficiaries in MCOs. 

* Moderate PCCM Enrollment: Thirteen states enrolled Medicaid 
beneficiaries, including those with complex health care needs, in PCCM 
programs in 2008. Enrollment in these states varied widely, ranging 
from less than 10 percent of all Medicaid beneficiaries in about half 
of the states, to 45 percent of beneficiaries in Kentucky. While 8 of 
the 13 states enrolled beneficiaries with complex health care needs to 
a lesser extent than their total population, 5 states--Colorado, 
Georgia, Indiana, Kansas, and Washington--enrolled a considerably 
higher percentage of beneficiaries with complex health care needs than 
the percentage of overall beneficiaries. 

Figure 5: Percentage of Medicaid Beneficiaries Enrolled in Managed 
Care Organizations (MCO) and Primary Care Case Management (PCCM) 
Programs among Group 2 States, Fiscal Year 2008: 

[Refer to PDF for image: horizontal bar graph] 

State: Indiana; 
Medicaid beneficiaries enrolled in PCCM programs: 8.0%; 
Medicaid beneficiaries enrolled in MCOs: 68.4%. 

State: Georgia; 
Medicaid beneficiaries enrolled in PCCM programs: 8.5%; 
Medicaid beneficiaries enrolled in MCOs: 66.6%. 

State: Virginia; 
Medicaid beneficiaries enrolled in PCCM programs: 5.1%; 
Medicaid beneficiaries enrolled in MCOs: 59.6%. 

State: Connecticut; 
Medicaid beneficiaries enrolled in PCCM programs: 0%; 
Medicaid beneficiaries enrolled in MCOs: 59.5%. 

State: Pennsylvania; 
Medicaid beneficiaries enrolled in PCCM programs: 17.3%; 
Medicaid beneficiaries enrolled in MCOs: 58.9%. 

State: Washington; 
Medicaid beneficiaries enrolled in PCCM programs: 7.2%; 
Medicaid beneficiaries enrolled in MCOs: 57.8%. 

State: Nevada; 
Medicaid beneficiaries enrolled in PCCM programs: 0%; 
Medicaid beneficiaries enrolled in MCOs: 54.8%. 

State: Kansas; 
Medicaid beneficiaries enrolled in PCCM programs: 6.1%; 
Medicaid beneficiaries enrolled in MCOs: 54.1%. 

State: West Virginia; 
Medicaid beneficiaries enrolled in PCCM programs: 6.9%; 
Medicaid beneficiaries enrolled in MCOs: 48.9%. 

State: Texas; 
Medicaid beneficiaries enrolled in PCCM programs: 23.7%; 
Medicaid beneficiaries enrolled in MCOs: 46.7%. 

State: Missouri; 
Medicaid beneficiaries enrolled in PCCM programs: 0%; 
Medicaid beneficiaries enrolled in MCOs: 46.2%. 

State: Florida; 
Medicaid beneficiaries enrolled in PCCM programs: 15.5%; 
Medicaid beneficiaries enrolled in MCOs: 39.4%. 

State: South Carolina; 
Medicaid beneficiaries enrolled in PCCM programs: 11.8%; 
Medicaid beneficiaries enrolled in MCOs: 27.7%. 

State: Kentucky; 
Medicaid beneficiaries enrolled in PCCM programs: 44.9%; 
Medicaid beneficiaries enrolled in MCOs: 18.9%. 

State: Nebraska; 
Medicaid beneficiaries enrolled in PCCM programs: 20.1%; 
Medicaid beneficiaries enrolled in MCOs: 13.9%. 

State: Colorado; 
Medicaid beneficiaries enrolled in PCCM programs: 12.5%; 
Medicaid beneficiaries enrolled in MCOs: 13.9%. 

National average: 
Medicaid beneficiaries enrolled in PCCM programs: 20.3%; 
Medicaid beneficiaries enrolled in MCOs: 36.2%. 

Group 1 average: 
Medicaid beneficiaries enrolled in PCCM programs: 45.1%; 
Medicaid beneficiaries enrolled in MCOs: 0.5%. 

Group 2 average: 
Medicaid beneficiaries enrolled in PCCM programs: 11.7%; 
Medicaid beneficiaries enrolled in MCOs: 46.2%. 

Group 3 average: 
Medicaid beneficiaries enrolled in PCCM programs: 0.6%; 
Medicaid beneficiaries enrolled in MCOs: 64.0%. 

Group 4 average: 
Medicaid beneficiaries enrolled in PCCM programs: 5.1%; 
Medicaid beneficiaries enrolled in MCOs: 66.6%. 

Sources: CMS and GAO. 

Note: GAO analysis of the Center for Medicare & Medicaid Services' (CMS) 2008 Medicaid Statistical Information System Annual Person Summary file. 

[End of figure] 

Average Concentration of Low-Income Individuals in Urban Areas: 

On average, the percentage of low-income individuals that lived in 
urban areas in this group of states (76 percent) was roughly equal to 
the national average of 75 percent, and was over 10 percentage points 
higher than the average of states in Group 1 (63 percent). It was also 
about 10 percentage points lower than the average of states in Group 3 
(85 percent) and Group 4 (87 percent). 

Average HMO Penetration: 

This group of states had an average HMO penetration rate (16 percent) 
that was roughly equal to the national average of 17 percent. When 
compared to the other groups, the average HMO penetration rate in 
these states was higher than those in Group 1 (7 percent), but lower 
than those in Group 3 (26 percent) and Group 4 (36 percent). 

Variation in Potential Expansion of Medicaid and Managed Care: 

These states varied with regard to the degree of potential Medicaid 
expansion, in that 10 states were higher than the national average and 
6 states were lower. (See figure 6.) However, three of these states--
Georgia, Kentucky and South Carolina--were among the 10 states with 
the largest potential Medicaid expansions. Ten states reported plans 
to expand the use of Medicaid managed care in the future, seven of 
which had a potential Medicaid expansion that was above the national 
average.[Footnote 25] 

Figure 6: Group 2 States by Potential Medicaid Expansion Index and 
Medicaid Managed Care Expansion Plans: 

[Refer to PDF for image: illustrated U.S. map] 

Above average Medicaid expansion, plans to expand Medicaid managed 
care (7): 
Colorado: 109.5; 
Florida: 111.0; 
Kentucky: 125.0; 
South Carolina: 123.8; 
Virginia: 108.7; 
West Virginia: 118.6; 
Texas: 120.2. 

Above average Medicaid expansion, no plans to expand Medicaid managed 
care (2): 
Georgia: 125.1; 
Missouri: 106.0. 

Above average Medicaid expansion, plans to expand Medicaid managed 
care unknown (1): 
Kansas: 101.0. 

Average or below average Medicaid expansion, plans to expand Medicaid 
managed care (3): 
Connecticut: 82.8; 
Indiana: 91.9; 
Washington: 89.9. 

Average or below average Medicaid expansion, no plans to expand 
Medicaid managed care (2): 
Nevada: 98.4; 
Pennsylvania: 81.2. 

Average or below average Medicaid expansion, plans to expand Medicaid 
managed care unknown (1): 
Nebraska: 92.0. 

Sources: GAO, New England Journal of Medicine, and Kaiser Commission 
on Medicaid and the Uninsured; Map Resources (map). 

Note: The potential Medicaid Expansion Index values are presented on 
this map for each state in Group 2. GAO analysis of data from L. Ku, 
K. Jones, P. Shin, B. Bruen, and K. Hayes, "The State's Next 
Challenge--Securing Primary Care for Expanded Medicaid Populations," 
New England Journal of Medicine, vol. 364, no. 6 (2011), DOI: 
10.1056/NEJMp1011623, and K. Gifford, V. K. Smith, D. Snipes, and J. 
Paradise, A Profile of Medicaid Managed Care Programs in 2010: 
Findings from a 50-State Survey (Washington, D.C.: Kaiser Family 
Foundation, Kaiser Commission on Medicaid and the Uninsured, September 
2011). 

[End of figure] 

Summary of Group 3: MCO Predominant States: 

The 12 states in Group 3--Arizona, California, Delaware, Maryland, 
Michigan, Minnesota, New Jersey, New Mexico, New York, Ohio, Rhode 
Island, and Wisconsin--were among those that generally enrolled the 
highest percentage of Medicaid beneficiaries in MCOs, and typically 
did not enroll any Medicaid beneficiaries in PCCM programs. In 
addition, these states generally had a high concentration of low-
income individuals that lived in urban areas, and high managed care 
penetration within the states' overall health insurance markets when 
compared to the other groups of states we identified. 

High MCO and No or Low PCCM Enrollment: 

* MCO Enrollment: All 12 states enrolled Medicaid beneficiaries, 
including those with complex health care needs, in MCOs in 2008. On 
average, these states enrolled 64 percent of all Medicaid 
beneficiaries in MCOs, which was substantially higher than the 
national average of 36 percent and the enrollment averages in Groups 1 
and 2. (See figure 7.) All 12 states also extended MCO enrollment to 
Medicaid beneficiaries with complex health care needs, though to a 
lesser degree than their general Medicaid population. These states 
typically enrolled between one-third and two-thirds of Medicaid 
beneficiaries with complex health care needs in MCOs. 

Figure 7: Percentage of Medicaid Beneficiaries Enrolled in Managed 
Care Organizations among Group 3 States, Fiscal Year 2008: 

[Refer to PDF for image: horizontal bar graph] 

Arizona: 77.6%; 
Delaware: 72.9%; 
Ohio: 71.2%; 
New Jersey: 70.3%; 
Minnesota: 67.7%; 
Maryland: 66.7%; 
New Mexico: 66.4%; 
Michigan: 66.3%; 
New York: 63.4%; 
Rhode Island: 60.9%; 
Wisconsin: 47.8%; 
California: 36.9%; 
National average: 36.2%; 
Group 1 average: 0.5%; 
Group 2 average: 46.2%; 
Group 3 average: 64.0%; 
Group 4 average: 66.6%. 

Source: CMS and GAO. 

Note: GAO analysis of the Center for Medicare & Medicaid Services' (CMS) 2008 Medicaid Statistical Information System Annual Person Summary file. 

[End of figure] 

* PCCM Enrollment: Ten of the 12 states did not enroll any Medicaid 
beneficiaries in PCCM programs in 2008. The 2 states that did enroll 
Medicaid beneficiaries in PCCM programs at this time--Delaware and New 
York--enrolled less than 10 percent of enrollees in PCCM programs, and 
enrolled an even lower percentage of beneficiaries with complex health 
care needs in such programs. 

High Concentration of Low-Income Individuals in Urban Areas: 

The average percentage of low-income individuals that lived in urban 
areas in these states was 85 percent, which was notably higher than 
the national average (75 percent) and the averages in both Group 1 (63 
percent) and Group 2 (76 percent). 

High HMO Penetration: 

The HMO penetration rate was higher than the national average (17 
percent) in all 12 states, and these states, on average, had a higher 
HMO penetration rate (27 percent) than that of both Group 1 (7 
percent) and Group 2 (16 percent). 

Variation in Potential Expansion of Medicaid and Managed Care: 

These states varied with regard to the degree of potential Medicaid 
expansion, in that 7 states were above the national average for 
potential Medicaid expansion and 5 states were below the national 
average. (See figure 8.) New Mexico was among the 10 states with the 
largest potential degree of Medicaid expansion in the United States. 
Five states reported plans to expand the use of Medicaid managed care, 
one of which, Michigan, had a potential Medicaid expansion that was 
above the national average.[Footnote 26] 

Figure 8: Group 3 States by Potential Medicaid Expansion Index and 
Medicaid Managed Care Expansion Plans: 

Above average Medicaid expansion, plans to expand Medicaid managed 
care (1): 
Michigan: 114.5. 

Above average Medicaid expansion, no plans to expand Medicaid managed 
care (3): 
Maryland: 103.5; 
New Mexico: 122.6; 
Ohio: 105.4. 

Average or below average Medicaid expansion, plans to expand Medicaid 
managed care (4): 
California: 94.8; 
Delaware: 56.0; 
New Jersey: 100.2; 
New York: 57.6. 

Average or below average Medicaid expansion, no plans to expand 
Medicaid managed care (3): 
Arizona: 66.1; 
Minnesota: 90.4; 
Rhode Island: 77.7. 

Average or below average Medicaid expansion, plans to expand Medicaid 
managed care unknown (1): 
Wisconsin: 77.2. 

Sources: GAO, New England Journal of Medicine, and Kaiser Commission 
on Medicaid and the Uninsured; Map Resources (map). 

Note: The potential Medicaid Expansion Index values are presented on 
this map for each state in Group 3. GAO analysis of data from L. Ku, 
K. Jones, P. Shin, B. Bruen, and K. Hayes, "The State's Next 
Challenge--Securing Primary Care for Expanded Medicaid Populations," 
New England Journal of Medicine, vol. 364, no. 6 (2011), DOI: 
10.1056/NEJMp1011623, and K. Gifford, V. K. Smith, D. Snipes, and J. 
Paradise, A Profile of Medicaid Managed Care Programs in 2010: 
Findings from a 50-State Survey, (Washington, D.C.: Kaiser Family 
Foundation, Kaiser Commission on Medicaid and the Uninsured, September 
2011). 

[End of figure] 

Summary of Group 4: Other States: 

Group 4 consisted of five states--the District of Columbia, Hawaii, 
Massachusetts, Oregon, and Tennessee. When compared to the other three groups we identified, the degree of similarity across these five states was the weakest, which may be due to the fact that one of these states was typically an "outlier" on one or more of the indicators we examined. That is, at least one state had a value on an indicator that was either markedly higher or lower than the values for the other four states, thus diminishing the degree of overall similarity across states in this group. Although these states exhibited similarities on certain key indicators--such as MCO enrollment or concentration of low-income individuals that lived in urban areas--to states in the other groups, they did not cluster with those states, possibly as result of the states' "outlier" values on indicators. 

High MCO Enrollment and No or Low PCCM Enrollment: 

All five states enrolled Medicaid beneficiaries, including those with 
complex health care needs, into MCOs, and with the exception of 
Massachusetts, did not typically enroll beneficiaries in PCCM 
programs.[Footnote 27] Specifically, these states enrolled an average 
of 67 percent of all Medicaid beneficiaries in MCOs, which was the 
highest average among all groups. (See figure 9.) At 93 percent, 
Tennessee had the highest MCO enrollment of all states, which was 15 
percentage points higher than the next highest state. All five states 
also enrolled Medicaid beneficiaries with complex health care needs in 
MCOs, but generally to a lesser degree than their overall Medicaid 
population.[Footnote 28] Massachusetts differed from the other 4 
states in that it enrolled a smaller percentage of Medicaid 
beneficiaries in MCOs, and did enroll a sizable percentage of 
beneficiaries in PCCM programs. Specifically, Massachusetts enrolled 
30 percent of all Medicaid beneficiaries in MCOs, and 24 percent of 
beneficiaries in PCCM programs, which was similar to MCO and PCCM 
enrollment of states in Group 2. In contrast, the other four states in 
this group--the District of Columbia, Hawaii, Oregon, and Tennessee--
were most similar to Group 3 states in terms of MCO and PCCM 
enrollment. 

Figure 9: Percentage of Medicaid Beneficiaries Enrolled in Managed 
Care Organizations (MCO) among Group 4 States, Fiscal Year 2008: 

[Refer to PDF for image: horizontal bar graph] 

Tennessee: 92.9%; 
Hawaii: 75.6%; 
Oregon: 70.3%; 
District of Columbia: 63.9%; 
Massachusetts: 30.1%; 
National average: 36.2%; 
Group 1 average: 0.5%; 
Group 2 average: 46.2%; 
Group 3 average: 64.0%; 
Group 4 average: 66.6%. 

Source: CMS and GAO. 

Note: GAO analysis of the Center for Medicare & Medicaid Services' (CMS) 2008 Medicaid Statistical Information System Annual Person Summary file. We use "states" to refer to the 50 states and the District of Columbia. 

[End of figure] 

High Concentration of Low-Income Individuals in Urban Areas: 

On average, 86 percent of low-income individuals in these states lived 
in urban areas, which was the highest concentration of all groups we 
identified. The District of Columbia had the highest concentration of 
low-income individuals that lived in urban areas (100 percent) of all 
states. With respect to this indicator, states in this group generally 
were similar to states in Group 3; however, Tennessee, where the 
concentration of low-income individuals that lived in urban areas was 
65 percent, was most similar to states in Group 1. 

High HMO Penetration: 

All five states had HMO penetration rates that were higher than the 
national average (17 percent), and three of the states--the District 
of Columbia, Hawaii, and Massachusetts--had HMO penetration rates that 
were among the top five states nationally. At 54 percent, Hawaii had the highest HMO penetration of any other state, which was 12 percentage 
points higher than the second highest state. Generally, states in this 
group exhibited similar HMO penetration rates as states in Group 3. 

Variation in Potential Expansion of Medicaid and Managed Care: 

Like the other three groups we identified, states in Group 4 varied 
with regard to the degree of potential Medicaid expansion in that two 
states were above the national average for potential Medicaid 
expansion and three states were below. Massachusetts, which 
implemented a statewide health care reform in 2006 that included an 
expansion of Medicaid, was expected to have the smallest potential 
Medicaid expansion of any state as a result of Medicaid eligibility 
expansion requirements under the Patient Protection and Affordable 
Care Act.[Footnote 29] Oregon, however, was among the 10 states with 
the largest potential degree of Medicaid expansion, and reported plans 
to expand the use of Medicaid managed care.[Footnote 30] 

[End of section] 

Enclosure III: Summary of Indicators for States: 

This enclosure provides state-specific data on each of the indicators 
that we included in our analysis. We describe each indicator and its 
relevant data source, and provide general observations of differences 
among groups of states with respect to each indicator. 

Percentage of Medicaid Beneficiaries Enrolled in Managed Care 
Organizations and Primary Care Case Management Programs: 

The Medicaid managed care enrollment indicators we identified provide 
information on the: 

* percentage of Medicaid beneficiaries who were enrolled in a managed 
care organization (MCO);[Footnote 32] 

* percentage of Medicaid beneficiaries with complex health care needs 
enrolled in an MCO;[Footnote 33] 

* percentage of Medicaid beneficiaries enrolled in a primary care case 
management (PCCM) program;[Footnote 34] and: 

* percentage of Medicaid beneficiaries with complex health care needs 
enrolled in a PCCM program. 

We obtained data from the Centers for Medicare & Medicaid Services' 
(CMS) Medicaid Statistical Information System (MSIS), which states report to CMS quarterly, and which are summarized at an individual level annually in CMS's Annual Person Summary (APS) file. Using the APS, we identified the beneficiaries who were enrolled in MCOs or PCCM 
programs, including beneficiaries that we considered to have complex 
health care needs. 

Percentage of Medicaid Beneficiaries Enrolled in MCOs: 

In 2008, 35 states enrolled Medicaid beneficiaries into MCOs, but 
enrollment varied widely, ranging from about 1 percent in Iowa to 93 
percent in Tennessee. Twenty-eight states, including all states in 
Group 3, and 4 of 5 states in Group 4, enrolled more than one-third of 
beneficiaries in MCOs, of which 16 states enrolled more than 60 
percent. (See figure 10.) The 35 states that used MCOs in 2008 also 
enrolled Medicaid beneficiaries with complex health care needs into 
MCOs, although to a lesser extent than the overall Medicaid population 
in all states but Colorado and Tennessee. 

Figure 10: Percentage of Medicaid Beneficiaries Enrolled in Managed 
Care Organizations (MCO) in 35 States with MCOs, Fiscal Year 2008: 

[Refer to PDF for image: horizontal bar graph] 

Group 4: 

State: Tennessee; 
Medicaid beneficiaries with complex health care needs enrolled in 
MCOs: 98.0%; 
Medicaid beneficiaries enrolled in MCOs: 92.9%. 

State: Hawaii; 
Medicaid beneficiaries with complex health care needs enrolled in 
MCOs: 7.8%; 
Medicaid beneficiaries enrolled in MCOs: 75.6%. 

State: Oregon; 
Medicaid beneficiaries with complex health care needs enrolled in 
MCOs: 61.6%; 
Medicaid beneficiaries enrolled in MCOs: 70.3%. 

State: District of Columbia; 
Medicaid beneficiaries with complex health care needs enrolled in 
MCOs: 44.9%; 
Medicaid beneficiaries enrolled in MCOs: 63.9%. 

State: Massachusetts; 
Medicaid beneficiaries with complex health care needs enrolled in 
MCOs: 7.8%; 
Medicaid beneficiaries enrolled in MCOs: 30.1%. 

Group 3: 

State: Arizona; 
Medicaid beneficiaries with complex health care needs enrolled in 
MCOs: 68.8%; 
Medicaid beneficiaries enrolled in MCOs: 77.6%. 

State: Delaware; 
Medicaid beneficiaries with complex health care needs enrolled in 
MCOs: 46.3%; 
Medicaid beneficiaries enrolled in MCOs: 72.9%. 

State: Ohio; 
Medicaid beneficiaries with complex health care needs enrolled in 
MCOs: 34.6%; 
Medicaid beneficiaries enrolled in MCOs: 71.2%. 

State: New Jersey; 
Medicaid beneficiaries with complex health care needs enrolled in 
MCOs: 33.3%; 
Medicaid beneficiaries enrolled in MCOs: 70.3%. 

State: Minnesota; 
Medicaid beneficiaries with complex health care needs enrolled in 
MCOs: 34.6%; 
Medicaid beneficiaries enrolled in MCOs: 67.7%. 

State: Maryland; 
Medicaid beneficiaries with complex health care needs enrolled in 
MCOs: 53.5%; 
Medicaid beneficiaries enrolled in MCOs: 66.7%. 

State: New Mexico; 
Medicaid beneficiaries with complex health care needs enrolled in 
MCOs: 42.6%; 
Medicaid beneficiaries enrolled in MCOs: 66.4%. 

State: Michigan; 
Medicaid beneficiaries with complex health care needs enrolled in 
MCOs: 45.2%; 
Medicaid beneficiaries enrolled in MCOs: 66.3%. 

State: New York; 
Medicaid beneficiaries with complex health care needs enrolled in 
MCOs: 42.6%; 
Medicaid beneficiaries enrolled in MCOs: 63.4%. 

State: Rhode Island; 
Medicaid beneficiaries with complex health care needs enrolled in 
MCOs: 8.6%; 
Medicaid beneficiaries enrolled in MCOs: 60.9%. 

State: Wisconsin; 
Medicaid beneficiaries with complex health care needs enrolled in 
MCOs: 3.8%; 
Medicaid beneficiaries enrolled in MCOs: 57.8%. 

State: California; 
Medicaid beneficiaries with complex health care needs enrolled in 
MCOs: 28.9%; 
Medicaid beneficiaries enrolled in MCOs: 36.9%. 

Group 2: 

State: Indiana; 
Medicaid beneficiaries with complex health care needs enrolled in 
MCOs: 10.6%; 
Medicaid beneficiaries enrolled in MCOs: 68.4%. 

State: Georgia; 
Medicaid beneficiaries with complex health care needs enrolled in 
MCOs: 2.0%; 
Medicaid beneficiaries enrolled in MCOs: 66.6%. 

State: Virginia; 
Medicaid beneficiaries with complex health care needs enrolled in 
MCOs: 29.1%; 
Medicaid beneficiaries enrolled in MCOs: 59.6%. 

State: Connecticut; 
Medicaid beneficiaries with complex health care needs enrolled in 
MCOs: 2.4%; 
Medicaid beneficiaries enrolled in MCOs: 59.5%. 

State: Pennsylvania; 
Medicaid beneficiaries with complex health care needs enrolled in 
MCOs: 42.8%; 
Medicaid beneficiaries enrolled in MCOs: 58.9%. 

State: Washington; 
Medicaid beneficiaries with complex health care needs enrolled in 
MCOs: 4.0%; 
Medicaid beneficiaries enrolled in MCOs: 57.8%. 

State: Nevada; 
Medicaid beneficiaries with complex health care needs enrolled in 
MCOs: 1.6%; 
Medicaid beneficiaries enrolled in MCOs: 54.8%. 

State: Kansas; 
Medicaid beneficiaries with complex health care needs enrolled in 
MCOs: 1.7%; 
Medicaid beneficiaries enrolled in MCOs: 54.1%. 

State: West Virginia; 
Medicaid beneficiaries with complex health care needs enrolled in 
MCOs: 7.1%; 
Medicaid beneficiaries enrolled in MCOs: 48.9%. 

State: Texas; 
Medicaid beneficiaries with complex health care needs enrolled in 
MCOs: 23.4%; 
Medicaid beneficiaries enrolled in MCOs: 46.7%. 

State: Missouri; 
Medicaid beneficiaries with complex health care needs enrolled in 
MCOs: 1.1%; 
Medicaid beneficiaries enrolled in MCOs: 46.2%. 

State: Florida; 
Medicaid beneficiaries with complex health care needs enrolled in 
MCOs: 23.7%; 
Medicaid beneficiaries enrolled in MCOs: 39.4%. 

State: South Carolina; 
Medicaid beneficiaries with complex health care needs enrolled in 
MCOs: 9.4%; 
Medicaid beneficiaries enrolled in MCOs: 27.7%. 

State: Kentucky; 
Medicaid beneficiaries with complex health care needs enrolled in 
MCOs: 16.1%; 
Medicaid beneficiaries enrolled in MCOs: 18.9%. 

State: Nebraska; 
Medicaid beneficiaries with complex health care needs enrolled in 
MCOs: 8.0%; 
Medicaid beneficiaries enrolled in MCOs: 17.0%. 

State: Colorado; 
Medicaid beneficiaries with complex health care needs enrolled in 
MCOs: 14.1%; 
Medicaid beneficiaries enrolled in MCOs: 13.9%. 

Group 1: 

State: Illinois; 
Medicaid beneficiaries with complex health care needs enrolled in 
MCOs: 3.2%; 
Medicaid beneficiaries enrolled in MCOs: 7.1%. 

State: Iowa; 
Medicaid beneficiaries with complex health care needs enrolled in 
MCOs: 0.1%; 
Medicaid beneficiaries enrolled in MCOs: 1.5%. 

Note: GAO analysis of the Center for Medicare & Medicaid Services' (CMS) 2008 Medicaid Statistical Information System Annual Person Summary file. 

[End of figure] 

Percentage of Medicaid Beneficiaries Enrolled in PCCM Programs: 

Thirty-one states enrolled Medicaid beneficiaries into PCCM programs, 
although enrollment was relatively low except in the Group 1 states, 
which typically enrolled more than 50 percent of Medicaid 
beneficiaries in such programs.[Footnote 35] (See figure 11.) All 31 
states also enrolled beneficiaries with complex health care needs in 
PCCM programs, although generally to a lesser extent than the overall 
Medicaid population. 

Figure 11: Percentage of Medicaid Beneficiaries in Primary Care Case 
Management (PCCM) Programs in 30 States with PCCM Programs, Fiscal 
Year 2008: 

[Refer to PDF for image: horizontal bar graph] 

Group 4: 

State: Tennessee; 
Medicaid beneficiaries with complex health care needs enrolled in PCCM 
programs: 16.9%; 
Medicaid beneficiaries enrolled in PCCM: 24.3%. 

State: Oregon; 
Medicaid beneficiaries with complex health care needs enrolled in PCCM 
programs: 2.2%; 
Medicaid beneficiaries enrolled in PCCM: 1.2%. 

Group 3: 

State: Delaware; 
Medicaid beneficiaries with complex health care needs enrolled in PCCM 
programs: 5.0%; 
Medicaid beneficiaries enrolled in PCCM: 6.9%. 

State: New York; 
Medicaid beneficiaries with complex health care needs enrolled in PCCM 
programs: 0.4%; 
Medicaid beneficiaries enrolled in PCCM: 0.5%. 

Group 2: 

State: Kentucky; 
Medicaid beneficiaries with complex health care needs enrolled in PCCM 
programs: 16.6%; 
Medicaid beneficiaries enrolled in PCCM: 44.9%. 

State: Texas; 
Medicaid beneficiaries with complex health care needs enrolled in PCCM 
programs: 10.4%; 
Medicaid beneficiaries enrolled in PCCM: 23.7%. 

State: Nebraska; 
Medicaid beneficiaries with complex health care needs enrolled in PCCM 
programs: 10.1%; 
Medicaid beneficiaries enrolled in PCCM: 20.1%. 

State: Pennsylvania; 
Medicaid beneficiaries with complex health care needs enrolled in PCCM 
programs: 13.4%; 
Medicaid beneficiaries enrolled in PCCM: 17.3%. 

State: Florida; 
Medicaid beneficiaries with complex health care needs enrolled in PCCM 
programs: 13.7%; 
Medicaid beneficiaries enrolled in PCCM: 15.5%. 

State: Colorado; 
Medicaid beneficiaries with complex health care needs enrolled in PCCM 
programs: 22.0%; 
Medicaid beneficiaries enrolled in PCCM: 12.5%. 

State: South Carolina; 
Medicaid beneficiaries with complex health care needs enrolled in PCCM 
programs: 8.1%; 
Medicaid beneficiaries enrolled in PCCM: 11.8%. 

State: Georgia; 
Medicaid beneficiaries with complex health care needs enrolled in PCCM 
programs: 46.1%; 
Medicaid beneficiaries enrolled in PCCM: 8.5%. 

State: Indiana; 
Medicaid beneficiaries with complex health care needs enrolled in PCCM 
programs: 36.5%; 
Medicaid beneficiaries enrolled in PCCM: 8.0%. 

State: Washington; 
Medicaid beneficiaries with complex health care needs enrolled in PCCM 
programs: 33.3%; 
Medicaid beneficiaries enrolled in PCCM: 7.2%. 

State: West Virginia; 
Medicaid beneficiaries with complex health care needs enrolled in PCCM 
programs: 1.8%; 
Medicaid beneficiaries enrolled in PCCM: 6.9%. 

State: Kansas; 
Medicaid beneficiaries with complex health care needs enrolled in PCCM 
programs: 14.8%; 
Medicaid beneficiaries enrolled in PCCM: 6.1%. 

State: Virginia; 
Medicaid beneficiaries with complex health care needs enrolled in PCCM 
programs: 4.4%; 
Medicaid beneficiaries enrolled in PCCM: 5.1%. 

Group 1: 

State: Idaho; 
Medicaid beneficiaries with complex health care needs enrolled in PCCM 
programs: 81.1%; 
Medicaid beneficiaries enrolled in PCCM: 83.8%. 

State: South Dakota; 
Medicaid beneficiaries with complex health care needs enrolled in PCCM 
programs: 22.2%; 
Medicaid beneficiaries enrolled in PCCM: 71.1%. 

State: North Carolina; 
Medicaid beneficiaries with complex health care needs enrolled in PCCM 
programs: 40.5%; 
Medicaid beneficiaries enrolled in PCCM: 68.3%. 

State: Vermont; 
Medicaid beneficiaries with complex health care needs enrolled in PCCM 
programs: 41.7%; 
Medicaid beneficiaries enrolled in PCCM: 67.6%. 

State: Illinois; 
Medicaid beneficiaries with complex health care needs enrolled in PCCM 
programs: 41.0%; 
Medicaid beneficiaries enrolled in PCCM: 61.3%. 

State: Arkansas; 
Medicaid beneficiaries with complex health care needs enrolled in PCCM 
programs: 48.3; 
Medicaid beneficiaries enrolled in PCCM: 58.9%. 

State: Maine; 
Medicaid beneficiaries with complex health care needs enrolled in PCCM 
programs: 6.1%; 
Medicaid beneficiaries enrolled in PCCM: 53.0%. 

State: North Dakota; 
Medicaid beneficiaries with complex health care needs enrolled in PCCM 
programs: 8.8%; 
Medicaid beneficiaries enrolled in PCCM: 52.4%. 

State: Montana; 
Medicaid beneficiaries with complex health care needs enrolled in PCCM 
programs: 29.7%; 
Medicaid beneficiaries enrolled in PCCM: 48.5%. 

State: Alabama; 
Medicaid beneficiaries with complex health care needs enrolled in PCCM 
programs: 36.3%; 
Medicaid beneficiaries enrolled in PCCM: 45.3%. 

State: Iowa; 
Medicaid beneficiaries with complex health care needs enrolled in PCCM 
programs: 1.4%; 
Medicaid beneficiaries enrolled in PCCM: 36.6%. 

State: Utah; 
Medicaid beneficiaries with complex health care needs enrolled in PCCM 
programs: 21.9%; 
Medicaid beneficiaries enrolled in PCCM: 17.2%. 

Sources: CMS and GAO. 

Note: GAO analysis of the Center for Medicare & Medicaid Services' (CMS) 2008 Medicaid Statistical Information System Annual Person Summary file. 

[End of figure] 

Concentration of Low-Income Individuals in Urban Areas: 

This indicator measures the percentage of individuals with incomes 
below 125 percent of the federal poverty level (FPL) that lived in 
urban areas from calendar year 2005 to 2009. In general, states with 
higher MCO enrollment, such as those in Groups 3 and 4, had a higher 
concentration of low-income individuals that lived in urban areas, 
while states with greater PCCM enrollment and no MCO enrollment, 
particularly those in Group 1, generally had a lower concentration of 
low-income individuals that lived in urban areas. States with a 
comparatively small concentration of low-income individuals in urban 
areas may face challenges attracting MCOs that may have concerns about 
the availability of adequate provider networks or the sufficiency of 
enrollment. 

Figure 12: Concentration of Low-Income Individuals in Urban Areas by 
State, Calendar Years 2005-2009: 

[Refer to PDF for image: horizontal bar graph] 

Group 4: 

District of Columbia: 100.0%; 
Massachusetts: 95.6%; 
Hawaii: 87.8%; 
Oregon: 83.4%; 
Tennessee: 65.4%. 

Group 3: 

New Jersey: 96.8%; 
Rhode Island: 96.3%; 
California: 94.2%; 
New York: 90.9%; 
Maryland: 89.6%; 
Arizona: 83.4%; 
Ohio: 82.7%; 
Delaware: 80.7%; 
Michigan: 79.5%; 
Wisconsin: 75.9%; 
New Mexico: 74.6%; 
Minnesota: 74.2%. 

Group 2: 

Connecticut: 94.4%; 
Nevada: 87.8%; 
Florida: 87.3%; 
Colorado: 86.3%; 
Texas: 84.6%; 
Washington: 82.9%; 
Pennsylvania: 81.6%; 
Indiana: 78.7%; 
Kansas: 77.2%; 
Nebraska: 75.9%; 
Georgia: 72.11%; 
Virginia: 69.9%; 
Missouri: 69.6%; 
South Carolina: 59.5%; 
Kentucky: 53.1%; 
West Virginia: 48%. 

Group 1: 

Illinois: 90.7%; 
Utah: 86.5%; 
Louisiana: 74.1%; 
Iowa: 70.1%; 
Wyoming: 69.9%; 
Idaho: 68.8%; 
Oklahoma: 68.6%; 
New Hampshire: 64.7%; 
North Carolina: 60.9%; 
Montana: 58.9%; 
North Dakota: 58.5%; 
Alaska: 58.3%; 
Arkansas: 57.5%; 
Alabama: 57%; 
South Dakota: 51.8%; 
Mississippi: 51.5%; 
Vermont: 46.2%; 
Maine: 45.2%. 

Sources: GAO and U.S. Census Bureau. 

Note: GAO analysis of the U.S. Census Bureau 2005-2009 American 
Community Survey. 

[End of figure] 

Health Maintenance Organization Penetration Rate: 

A state's health maintenance organization (HMO) penetration rate is 
the percentage of the total population in the state that is enrolled 
in HMOs, such as commercial HMOs, Medicaid MCOs, and Medicare managed 
care plans. The state HMO penetration rates we used were based on 
population data from the U.S. Census Bureau data as of July 2010. [Footnote 36] Typically, less than one-third of a state's population was enrolled in such plans; however, a larger percentage of Medicaid 
beneficiaries were enrolled in MCOs, on average, than the percentage 
of the total U.S. population enrolled in any HMOs. In 2008, an average 
of 36 percent of Medicaid beneficiaries nationwide was enrolled in an 
MCO whereas about 17 percent of the general population, on average, 
was enrolled in an HMO in 2010. Among states with MCOs, states in Groups 3 and 4, which had the highest MCO enrollment, also typically had high HMO penetration rates. As expected, HMO penetration rates were lowest among states in Group 1, which generally did not enroll beneficiaries into MCOs. 

Figure 13: Health Maintenance Organization (HMO) Penetration Rate by 
State, July 2010: 

[Refer to PDF for image: horizontal bar graph] 

Group 4: 

Hawaii: 54.1%; 
District of Columbia: 41%; 
Massachusetts: 33.1%; 
Oregon: 28.8%; 
Tennessee: 23.4%. 

Group 3: 

California: 42.1%; 
New York: 31.3%; 
Wisconsin: 29.1%; 
Maryland: 28.4%; 
New Mexico: 28.2%; 
Michigan: 27.4%; 
Arizona: 24.9%; 
Delaware: 22.6%; 
New Jersey: 21.5%; 
Ohio: 21.5%; 
Minnesota: 19.4%; 
Rhode Island: 19.2%. 

Group 2: 

Pennsylvania: 25.6%; 
Connecticut: 23.5%; 
Nevada: 22.3%; 
Washington: 20.7%; 
Florida: 20.2%; 
Georgia: 19.2%; 
Virginia: 17.2%; 
Colorado: 16.6%; 
Indiana: 16.5%; 
West Virginia: 16.1%; 
Texas: 12.9%; 
Missouri: 12.8%; 
South Carolina: 11.3%; 
Kansas: 10.2%; 
Kentucky: 7.6%; 
Nebraska: 4.2%. 

Group 1: 

Utah: 26.7%; 
New Hampshire: 12.2%; 
Illinois: 11.6%; 
South Dakota: 9.7%; 
Iowa: 8.2%; 
Vermont: 8%; 
Maine: 7.9%; 
Louisiana: 6.6%; 
Oklahoma: 6%; 
Idaho: 5.8%; 
Alabama: 4.5%; 
Montana: 4.2%; 
North Carolina: 3.6%; 
Arkansas: 3.3%; 
North Dakota: 2.9%; 
Wyoming: 2.8%; 
Mississippi: 1.7%; 
Alaska: 0.1%. 

Sources: GAO and Kaiser Family Foundation. 

Note: GAO analysis of Kaiser Family Foundation state HMO penetration 
rate data. 

[End of figure] 

Commercial HMO Market Competition Index: 

This indicator describes the competitiveness of the commercial HMO 
market as measured by the Herfindahl-Hisrchman Index (HHI), which was 
calculated on the basis of the market shares of commercial HMOs in 
each state as of January 2009.[Footnote 37] In general, states with 
low HHI values--defined as less than 1,500--are considered to have the 
most competitive HMO markets, while states with higher HHI values are 
considered to be less competitive. States with HHI values between 
1,500 and 2,500 are considered slightly uncompetitive, and those with 
HHI values greater than 2,500 are considered to be the least 
competitive.[Footnote 38] 

In general, there was variation among states in all four groups with 
respect to their HHI values, but overall, most states were not 
considered to have competitive commercial HMO markets according to 
this measure. Only two states, New York and Ohio, which are in Group 
3, would be considered to have competitive commercial HMO markets. 
However, because states in Groups 3 and 4 have been able to establish 
and maintain high enrollment in MCOs, the relationship between the 
competitiveness of a state's commercial HMO market and its Medicaid 
MCO market is unclear. 

Figure 14: Commercial Health Maintenance Organization Market 
Competition Index by State, January 2009: 

[Refer to PDF for image: horizontal bar graph] 

Herfindalh-Hirschman Index: 

Group 4: 

Hawaii: 5,002; 
Oregon: 4,804; 
Tennessee: 3,414; 
Massachusetts: 3,265; 
District of Columbia: 3,145. 

Group 3: 

New Jersey: 4,354; 
Rhode Island: 4,203; 
New Mexico: 3,710; 
Delaware: 3,455; 
California: 3,307; 
Michigan: 3,016; 
Arizona: 3,010; 
Maryland: 2,636; 
Minnesota: 2,539; 
Ohio: 1,350; 
New York: 1,293. 

Group 2: 

Nevada: 5,400; 
Washington: 4,711; 
Nebraska: 4,702; 
Colorado: 3,629; 
Kentucky: 3,437; 
West Virginia: 3,155; 
Connecticut: 2,469; 
Kansas: 2,238; 
South Carolina: 2,182; 
Indiana: 2,016; 
Pennsylvania: 2,016; 
Texas: 2,016; 
Georgia: 1,887; 
Florida: 1,818; 
Missouri: 1,739; 
Virginia: 1,736. 

Group 1: 

Wyoming: 8,042; 
Utah: 7,032; 
Alabama: 6,558; 
South Dakota: 5,512; 
Arkansas: 5,449; 
Vermont: 5,006; 
New Hampshire: 4,809; 
Maine: 4,309; 
Mississippi: 3,949; 
Oklahoma: 3,768; 
Illinois: 3,697; 
Iowa: 3,064; 
Louisiana: 2,969; 
North Carolina: 2,657; 
Idaho: 2382. 

Sources: GAO and American Medical Association. 

Notes: GAO analysis of data from American Medical Association (AMA), 
Competition in health insurance: A comprehensive study of U.S. 
markets--2011 Update (Chicago, Ill.: AMA, Division of Economic and 
Health Policy Research, 2011). The HHI data for Alaska, Montana, North Dakota, and Wisconsin are excluded above. Data for Alaska, Montana, and North Dakota were excluded because those states do not have measurable commercial HMO markets. Data for Wisconsin were excluded because data were unavailable. 

[End of figure] 

Number of MCOs per 100,000 Medicaid Beneficiaries: 

This indicator measures the number of MCOs with which each state 
contracts per 100,000 Medicaid beneficiaries, on the basis of state-
reported enrollment data and the number of MCO contracts in a state as 
of October 1, 2010.[Footnote 39] The number of MCOs per 100,000 
Medicaid beneficiaries ranged from 0.12 in Illinois to 2.79 in Oregon, 
and averaged 0.75 in the 36 states with MCOs. However, this indicator 
has limitations and needs to be considered within the broader context 
of states' Medicaid programs. For example, while Tennessee has the 
highest MCO enrollment of all states, the number of MCOs serving 
Medicaid beneficiaries in the state is among the lowest because the 
state purposefully limits the number of MCOs with which they contract. 
Similarly, in some states, such as California, certain MCOs operate in 
limited regions of the state and are not available to Medicaid 
beneficiaries outside of those areas. Nonetheless, on average, groups 
of states with more MCOs relative to the size of their Medicaid 
population also had high percentages of Medicaid beneficiaries 
enrolled in MCOs, such as states in Groups 3 and 4. 

Figure 15: Number of Managed Care Organizations (MCO) per 100,000 
Medicaid Beneficiaries in States Contracting with MCOs, October 2010: 

[Refer to PDF for image: horizontal bar graph] 

Number of MCOs per 1000,000 beneficiaries: 

Group 4: 

Oregon: 2.79; 
Hawaii: 1.91; 
District of Columbia: 0.88; 
Massachusetts: 0.69; 
Tennessee: 0.25. 

Group 3: 

Rhode Island: 1.69; 
Wisconsin: 1.56; 
Arizona: 1.4; 
Minnesota: 1.11; 
Delaware: 1.04; 
New Mexico: 0.81; 
Michigan: 0.76; 
Maryland: 0.76; 
New York: 0.62; 
California: 0.57; 
New Jersey: 0.39; 
Ohio: 0.35. 

Group 2: 

Nebraska: 0.98; 
West Virginia: 0.9; 
Florida: 0.84; 
Nevada: 0.72; 
Missouri: 0.67; 
Kansas: 0.62; 
Virginia: 0.59; 
Washington: 0.52; 
Indiana: 0.49; 
South Carolina: 0.49; 
Texas: 0.46; 
Connecticut: 0.45; 
Pennsylvania: 0.43; 
Colorado: 0.18; 
Georgia: 0.18; 
Kentucky: 0.13. 

Group 1: 

Utah: 0.46; 
Mississippi: 0.33; 
Illinois: 0.12. 

Sources: GAO and Kaiser Commission on Medicaid and the Uninsured. 

Notes: GAO analysis of data from K. Gifford, V. K. Smith, D. Snipes, 
and J. Paradise, A Profile of Medicaid Managed Care Programs in 2010: 
Findings from a 50-State Survey, (Washington, D.C.: Kaiser Family 
Foundation, Kaiser Commission on Medicaid and the Uninsured, September 
2011). GAO used data on the number of MCOs each state contracts with 
and the total number of Medicaid beneficiaries in each state to 
calculate the number of MCOs per 100,000 Medicaid beneficiaries. We 
use "states" to refer to the 50 states and the District of Columbia. 

[End of figure] 

Medicaid Expansion Index: 

This indicator provides an estimate of the degree to which states 
would need to expand their Medicaid eligibility to fully implement 
PPACA's eligibility requirements.[Footnote 40] The Medicaid expansion 
index assumed all states would expand Medicaid eligibility up to 133 
percent of the FPL and was developed prior to the U.S. Supreme Court 
ruling that states may choose not to expand coverage under PPACA and 
forgo only the federal matching funds associated with such expanded 
coverage. The Medicaid Expansion Index sets the average of all states 
at 100; states with index values greater than 100 have a higher than 
average potential expansion and states with a value lower than 100 
have a lower than average potential expansion. 

We found variation across the states with respect to the Medicaid 
expansion index, although some trends emerged. For example, states 
with higher than average potential Medicaid expansion index values 
were largely concentrated in the Southern region of the country, while 
states in the Northeast, Midwest, and West regions typically had 
lower than average potential Medicaid expansion index values. 
Similarly, on average, states in Groups 1 and 2 had higher than 
average potential Medicaid expansion index values when compared to the 
other two groups of states. For example, 3 of the 4 states in Group 1 
that did not enroll any Medicaid beneficiaries in MCOs or PCCM 
programs--Alaska, Mississippi, and New Hampshire--were among the 10 
states with the highest expansion index values. 

Figure: States' Medicaid Expansion Index by Group: 

[Refer to PDF for image: 2 illustrated U.S. maps] 

States with Above Average Medicaid Expansion Index by Group: 

Group 1: 

Alabama: 109.8; 
Alaska: 153.9; 
Arkansas: 118.9; 
Louisiana: 135.3; 
Mississippi: 127.7; 
New Hampshire: 121.0; 
North Carolina: 115.5; 
Oklahoma: 143.7; 
Wyoming: 114.7. 

Group 2: 

Colorado: 109.5; 
Florida: 111.0; 
Georgia: 126.1; 
Kentucky: 125.0; 
Missouri: 106.0; 
Kansas: 101.0; 
South Carolina: 123.8; 
Texas: 120.2; 
Virginia: 108.7; 
West Virginia: 118.6. 

Group 3: 

Maryland: 103.5; 
Michigan: 114.5; 
New Mexico: 122.6; 
Ohio: 105.4; 

Group 4: 

Hawaii: 101.0; 
Oregon: 125.6;
Tennessee: 103.7. 

States with Average or Below Average Medicaid Expansion Index by Group: 

Group 1: 

Idaho: 100.5; 
Illinois: 95.1; 
Iowa: 82.8; 
Maine: 67.2; 
Montana: 99.6; 
North Dakota: 95.0; 
South Dakota: 95.1; 
Utah: 95.4; 
Vermont: 40.5. 

Group 2: 

Connecticut: 82.8; 
Indiana: 91.9; 
Nebraska: 92.0; 
Nevada: 98.4; 
Pennsylvania: 81.2; 
Washington: 89.8. 

Group 3: 

Arizona: 68.1; 
California: 94.8; 
Delaware: 56.0; 
Minnesota: 90.4; 
New Jersey: 100.2; 
New York: 57.6; 
Rhode Island: 77.7; 
Wisconsin: 77.2. 

Group 4: 

District of Columbia: 78.8; 
Massachusetts: 25.0. 

Sources: GAO and New England Journal of Medicine; Map Resources (map). 

Note: GAO analysis of data from L. Ku, K. Jones, P. Shin, B. Bruen, 
and K. Hayes, "The State's Next Challenge--Securing Primary Care for 
Expanded Medicaid Populations," New England Journal of Medicine, vol. 
364, no. 6 (2011), DOI: 10.1056/NEJMp1011623. The Medicaid expansion 
index was based on measures of insurance status and estimates of the 
number of nonelderly adults aged 19 to 64 with incomes below 138 
percent of the federal poverty level (FPL) from the 2009 and 2010 
Annual Social and Economic Supplements (ASEC) of the Current 
Population Survey (CPS) and projections of the number of newly 
eligible Medicaid enrollees based on the 2007 and 2008 ASEC of the CPS 
and its Health Insurance Policy Simulation Model (HIPSM). 

[End of figure] 

Primary Care Capacity Index: 

The primary care capacity index is a measure of current primary care 
capacity in states based on the number of primary care providers 
(PCP), such as physicians in general medicine and nurse practitioners, 
and the number of uninsured patients served at federally qualified 
health centers.[Footnote 41] The average for the index was set at 100 
across the states so that states with an index value lower than 100 
are considered to have a lower than average primary care capacity and 
those with index values greater than 100 are considered to have higher 
than average primary care capacity. In general, states varied with 
respect to their primary care capacity index, but two-thirds of states 
had lower than average primary care capacity. Relative to the other 
groups, states in Groups 1 and 4 had the greatest variation on this 
measure, and Group 3 states had the least. All states face the 
potential for enrollment increases, particularly if states fully 
implement PPACA's Medicaid eligibility expansion. The increased 
enrollment will likely increase demand for primary care, which could 
be a challenge in states with low primary care capacity. 

Figure 17: States with an Above Average or Below Average Primary Care 
Capacity Index by Group: 

[Refer to PDF for image: 2 illustrated U.S. maps] 

States with Above Average Primary Care Capacity Index by Group: 

Group 1: 

Alaska: 169.2; 
Illinois: 106.2; 
Maine: 157.1; 
Montana: 106.2; 
New Hampshire: 115.9; 
Vermont: 206.8. 

Group 2: 

Colorado: 123.2; 
Connecticut: 147.6; 
West Virginia: 175.9. 

Group 3: 

New Mexico: 115.9; 
New York: 115.5; 
Rhode Island: 147.0. 

Group 4: 

District of Columbia: 244.4; 
Hawaii: 135.8; 
Massachusetts: 143.5. 

States with Below Average Primary Care Capacity Index by Group: 

Group 1: 

Alabama: 73.9; 
Arkansas: 65.3; 
Idaho: 84.3; 
Iowa: 83.2; 
Louisiana: 66.3; 
Mississippi: 89.8; 
North Carolina: 69.5; 
North Dakota: 85.2; 
Oklahoma: 58.8; 
South Dakota: 99.3; 
Utah: 71.0; 
Wyoming: 79.9. 

Group 2: 

Florida: 81.9; 
Georgia: 57.5; 
Indiana: 63.8; 
Kansas: 79.3; 
Kentucky: 77.5; 
Missouri: 85.2; 
Nebraska: 73.6; 
Nevada: 55.5; 
Pennsylvania: 93.4; 
South Carolina: 85.5; 
Texas: 55.9; 
Virginia: 78.3. 

Group 3: 

Arizona: 72.4; 
California: 92.9; 
Delaware: 77.7; 
Michigan: 86.8; 
Minnesota: 78.5; 
New Jersey: 97.5; 
Ohio: 71.6; 
Wisconsin: 84.2. 

Group 4: 

Oregon: 95.0; 
Tennessee: 80.5. 

Sources: GAO and New England Journal of Medicine; Map Resources (map). 

Note: GAO analysis of data from L. Ku, K. Jones, P. Shin, B. Bruen, 
and K. Hayes, "The State's Next Challenge--Securing Primary Care for 
Expanded Medicaid Populations," New England Journal of Medicine, vol. 
364, no. 6 (2011), DOI: 10.1056/NEJMp1011623. The Primary Care 
Capacity Index is based on the following data sources: estimates of 
nonfederal physicians from the American Medical Association (AMA); nurse practitioners in 2009 based on the Pearson Report; projected number of physician assistants in December 2008 from the American Academy of Physician Assistants; number of patients served in federally qualified health centers in 2009 from the Uniform Data System of the Bureau of Primary Health Care, Health Resources and Services Administration. 

[End of figure] 

Allowable PCP Types: 

The indicators for allowable PCP types show information on the types 
of providers that states permitted MCOs to identify as PCPs or 
permitted as PCPs in their PCCM programs as of June 2009. Providers 
that were considered PCPs included general practitioners, family 
practitioners, internists, obstetricians/gynecologists, federally 
qualified health centers, rural health clinics, nurse practitioners, 
nurse midwives, Indian Health Service providers, physician assistants, 
psychiatrists, and psychologists. Within each of the four groups of 
states we identified, the average number of different types of 
providers allowed to participate as PCPs in MCOs or PCCM programs 
varied widely.[Footnote 42] Some states have a greater number of 
allowable PCP types, which could be a consideration when assessing a 
state's capacity to provide primary care services to additional 
Medicaid beneficiaries.[Footnote 43] 

Figure 18: Average Number of Allowable Primary Care Provider (PCP) 
Types among States with Managed Care Organizations (MCO) and Primary 
Care Case Management (PCCM) Programs, June 2009: 

[Refer to PDF for image: horizontal bar graph] 

Group 4: 

State: District of Columbia; 
MCOs: 13; 
PCCM Programs: 8. 

State: Oregon; 
MCOs: 10; 
PCCM Programs: 8. 

State: Massachusetts; 
MCOs: 8; 
PCCM Programs: 0. 

State: Hawaii; 
MCOs: 7; 
PCCM Programs: 0. 

State: Tennessee; 
MCOs: 6; 
PCCM Programs: 0. 

Group 3: 

State: Delaware; 
MCOs: 13; 
PCCM Programs: 0. 

State: Ohio; 
MCOs: 12; 
PCCM Programs: 0. 

State: New Mexico; 
MCOs: 11.5; 
PCCM Programs: 0. 

State: Rhode Island; 
MCOs: 10.5; 
PCCM Programs: 0. 

State: New Jersey; 
MCOs: 10; 
PCCM Programs: 0. 

State: California; 
MCOs: 9; 
PCCM Programs: 0. 

State: Michigan; 
MCOs: 9; 
PCCM Programs: 0. 

State: Arizona; 
MCOs: 8; 
PCCM Programs: 0. 

State: Maryland; 
MCOs: 7; 
PCCM Programs: 0. 

State: Wisconsin; 
MCOs: 6.3; 
PCCM Programs: 0. 

State: Minnesota; 
MCOs: 6; 
PCCM Programs: 0. 

State: New York; 
MCOs: 4.8; 
PCCM Programs: 7. 

Group 2: 

State: Kansas; 
MCOs: 12; 
PCCM Programs: 14. 

State: Georgia; 
MCOs: 11; 
PCCM Programs: 9. 

State: Texas; 
MCOs: 11; 
PCCM Programs: 11. 

State: Kentucky; 
MCOs: 10; 
PCCM Programs: 9. 

State: Pennsylvania; 
MCOs: 10; 
PCCM Programs: 14. 

State: Colorado; 
MCOs: 9; 
PCCM Programs: 3. 

State: Connecticut; 
MCOs: 9; 
PCCM Programs: 9. 

State: Florida; 
MCOs: 8.5; 
PCCM Programs: 9. 

State: West Virginia; 
MCOs: 8.5; 
PCCM Programs: 9. 

State: Missouri; 
MCOs: 8; 
PCCM Programs: 0. 

State: Nevada; 
MCOs: 8; 
PCCM Programs: 0. 

State: South Carolina; 
MCOs: 8; 
PCCM Programs: 6. 

State: Virginia; 
MCOs: 8; 
PCCM Programs: 8. 

State: Washington; 
MCOs: 7.5; 
PCCM Programs: 1. 

State: Indiana; 
MCOs: 5; 
PCCM Programs: 6. 

State: Nebraska; 
MCOs: 5; 
PCCM Programs: 5. 

Group 1: 

State: Arkansas; 
MCOs: 9.4; 
PCCM Programs: 7. 

State: Illinois; 
MCOs: 5; 
PCCM Programs: 10. 

State: North Carolina; 
MCOs: 0; 
PCCM Programs: 14. 

State: Montana; 
MCOs: 0; 
PCCM Programs: 13. 

State: Idaho; 
MCOs: 0; 
PCCM Programs: 12. 

State: Oklahoma; 
MCOs: 0; 
PCCM Programs: 11. 

State: Maine; 
MCOs: 0; 
PCCM Programs: 9. 

State: South Dakota; 
MCOs: 0; 
PCCM Programs: 8. 

State: Iowa; 
MCOs: 0; 
PCCM Programs: 8. 

State: Louisiana; 
MCOs: 0; 
PCCM Programs: 8. 

State: North Dakota; 
MCOs: 0; 
PCCM Programs: 7. 

State: Alabama; 
MCOs: 0; 
PCCM Programs: 7. 

State: Utah; 
MCOs: 0; 
PCCM Programs: 4. 

State: Vermont; 
MCOs: 0; 
PCCM Programs: 3. 

Sources: GAO and the Kaiser Commission on Medicaid and the Uninsured. 

Notes: GAO analysis of data from the Center for Medicare & Medicaid 
Services' (CMS) 2009 Medicaid Managed Care Data Collection System and K. Gifford, V.K. Smith, D. Snipes, & J. Paradise. A Profile of 
Medicaid Managed Care Programs in 2010: Findings from a 50-State 
Survey (Washington, DC: Kaiser Family Foundation, Kaiser Commission 
on Medicaid and the Uninsured, September 2011). Providers that were 
considered allowable PCPs included general practitioners, family 
practitioners, internists, obstetricians/gynecologists, federally 
qualified health centers, rural health clinics, nurse practitioners, 
nurse midwives, Indian Health Service providers, physician assistants, 
psychiatrists, and psychologists. 

[End of figure] 

[End of section] 

Enclosure IV: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

Carolyn Yocom, (202) 512-7114 or yocomc@gao.gov: 

Staff Acknowledgments: 

In addition to the contact named above, key contributors to this 
report were Susan Anthony, Assistant Director; Emily Beller; Julianne 
Flowers; Joanne Jee; Drew Long; Katherine Mack; and Jeff Tessin. 

[End of section] 

Footnotes: 

[1] States pay MCOs a set, or capitated, per member per month fee to 
provide enrollees access to contracted services and coordination of 
care. 

[2] Some states enroll Medicaid beneficiaries into limited benefit 
plans, which generally are paid on a prepaid basis for providing a 
limited set of covered services, such as dental care, behavioral 
health care, and transportation, to beneficiaries. 

[3] GAO has historically described PCCM programs as a predominantly 
fee-for-service arrangement because most services provided by 
participating PCPs are reimbursed on a fee-for-service basis. Under a 
PCCM system, states pay participating PCPs a monthly, per person case 
management fee for coordinating enrollee health care services, and 
separately reimburse them on a fee-for-service basis for specific 
health care services they provide. For purposes of this report, 
however, we include PCCM programs in the broader discussion of managed 
care arrangements, which is consistent with CMS's current practice. In 
addition, CMS officials noted that the agency is thinking more broadly 
about how PCCM authority can be used in the future in a non-managed 
care delivery system. 

[4] Patient Protection and Affordable Care Act of 2010 (PPACA), Pub. 
L. No. 111-148, 124 Stat. 119, as amended by the Health Care and 
Education Reconciliation Act of 2010 (HCERA), Pub. L. No. 111-152, 124 
Stat. 1029. For purposes of this report, references to PPACA include 
the amendments made by HCERA. 

[5] Pub. L. No. 111-148, § 2001, 124 Stat. 271. The 7 million estimates 
includes new enrollment in both Medicaid and the Children's Health 
Insurance Program. See Congressional Budget Office, Estimates for the 
Insurance Coverage Provisions of the Affordable Care Act Updated for 
the Recent Supreme Court Decision (Washington, D.C.: July 2012). 

[6] See National Federation of Independent Business, et al., vs. 
Sebelius, Sec. of Health and Human Services, et al., No. 11-393 (U.S. 
June 28, 2012). 

[7] States will receive an increased federal match for newly eligible 
individuals at 100 percent for 2014 through 2016, 95 percent in 2017, 
94 percent in 2018, 93 percent in 2019, and 90 percent in 2020 and 
beyond. Pub. L. No. 111-148, § 2001, 124 Stat. 271, 918, as amended by Pub. L. No. 111-152, § 2101, 124 Stat.1051. 

[8] Our definition of "Medicaid beneficiaries with complex health care 
needs" includes beneficiaries who were aged, blind/disabled, medically 
needy, or dually eligible for Medicare and Medicaid. We excluded from 
our definition dual eligibles who only received Medicare cost-sharing 
assistance through Medicaid from our definition. 

[9] The 12 indicators were: (1) the percentage of Medicaid 
beneficiaries enrolled in MCOs; (2) the percentage of Medicaid 
beneficiaries with complex health care needs enrolled in MCOs; (3) the 
percentage of Medicaid beneficiaries enrolled in PCCM programs; (4) 
the percentage of Medicaid beneficiaries with complex health care 
needs enrolled in PCCM programs; (5) the Medicaid Expansion Index, 
which is the degree of potential Medicaid expansion; (6) the 
concentration of low-income individuals that lived in urban areas; (7) 
the HMO penetration rate; (8) the commercial HMO Market Competition 
Index; (9) the number of MCOs per 100,000 Medicaid beneficiaries; (10) 
the Primary Care Capacity Index; (11) the allowable PCPs in MCOs; and 
(12) the allowable PCPs in PCCM programs. 

[10] Enrollment data are derived from state-reported data to CMS's 
MSIS and provide detailed enrollment for the various managed care 
arrangements states have in place. 

[11] The Medicaid Expansion Index is derived from projections of the 
number of individuals considered potentially eligible for Medicaid in 
2014 as a result of PPACA's expansion of eligibility in relation to 
the number of low-income individuals in the state. For more details, 
see L. Ku, K. Jones, P. Shin, B. Bruen, and K. Hayes, "The State's 
Next Challenge--Securing Primary Care for Expanded Medicaid 
Populations," New England Journal of Medicine, vol. 364, no. 6 (2011), 
DOI: 10.1056/NEJMp1011623. This measure was developed prior to the 
Supreme Court decision and assumes expanded participation by all 
states; however, the extent to which states will implement PPACA's 
eligibility expansion is uncertain at this time. Its purpose as a 
measure is not to assume states' actions with regard to expanding 
Medicaid, but to provide a relative indicator of the extent of 
potentially eligible individuals within a state. 

[12] Historically, there have been differences in state implementation 
of Medicaid managed care in urban and rural areas; states have been 
more likely to contract with MCOs to provide care in urban areas. 

[13] We use "states" to refer to the 50 states and the District of 
Columbia for the purposes of this report. 

[14] In addition, the similarity identified among states in Group 4 
was weaker than the similarities identified among states in Groups 1, 
2, and 3. 

[15] At the time of our analysis, 2008 was the most recent year for 
which MSIS APS data were available; however, 2009 MSIS APS data are 
now available. Given the extensive time and effort required to 
identify and correct inconsistencies in the 2008 MSIS APS enrollment 
data, we opted to rely on the 2008 data rather than taking additional 
time to undertake similar data cleaning efforts with the 2009 data. 
State Medicaid agencies provide CMS with quarterly electronic files 
through MSIS that contain data on: (1) persons covered by Medicaid, 
known as "eligible files," and (2) adjudicated claims, known as "paid 
claims files," for medical services reimbursed by the Medicaid 
program. Each state's eligible file contains one record for each 
person covered by Medicaid for at least 1 day during the reporting 
quarter; eligible records consist of demographic, eligibility, and 
monthly enrollment data. Paid claims files contain information on 
medical service-related claims and capitation payments, but only 
include expenditures that can be linked to a specific enrollee. The 
APS, however, summarizes the demographic, eligibility, enrollment, 
utilization, and expenditure data for each person for an entire fiscal 
year. 

[16] At the time of our analysis, 2009 MMCDCS data were the most 
recently available. CMS indicated that overall MMCDCS enrollment data 
are more reliable than MSIS enrollment data; however, MMCDCS data do 
not provide enrollment on the basis of Medicaid eligibility category, 
which was integral to our analysis. 

[17] Low-income individuals are defined as those individuals with 
incomes below 125 percent of the federal poverty level (FPL). Urban 
areas comprise areas that consist of a central place(s), have a 
minimum population density of 1,000 people per square mile, and have 
an overall minimum population of 50,000 people. It also includes 
adjacent areas that have lower population density but are linked to 
the more densely settled area and have a population of at least 2,500 
people, but fewer than 50,000. 

[18] The Kaiser Family Foundation recently conducted a survey of state 
Medicaid managed care programs to collect information on states' use 
of managed care and their future plans to use or expand the use of 
managed care. For more details, see K. Gifford, V. K. Smith, D. 
Snipes, and J. Paradise, A Profile of Medicaid Managed Care Programs 
in 2010: Findings from a 50-State Survey (Washington, D.C.: Kaiser 
Family Foundation, Kaiser Commission on Medicaid and the Uninsured, 
September 2011). 

[19] The Primary Care Capacity Index is based on measures of states' 
primary care workforce in relation to the state's population. For 
purposes of this index, the primary care workers include internists, 
family or general practitioners, pediatricians, 
obstetricians/gynecologists, nurse practitioners, and physician 
assistants. It also accounts for the number of patients seen at 
federally qualified health centers. The Medicaid Expansion Index is 
derived from projections of the number of individuals considered 
potentially eligible for Medicaid in 2014 as a result of the Patient 
Protection and Affordable Care Act's (PPACA) expansion of eligibility 
in relation to the number of low-income individuals in the state. For 
more details, see L. Ku, K. Jones, P. Shin, B. Bruen, and K. Hayes, 
"The State's Next Challenge--Securing Primary Care for Expanded 
Medicaid Populations," New England Journal of Medicine, vol. 364, no. 
6 (2011), DOI: 10.1056/NEJMp1011623. This measure was developed prior 
to the U.S. Supreme Court ruling that states may choose not to expand 
coverage under PPACA and forgo only the federal matching funds 
associated with such expanded coverage, and assumes expanded 
participation by all states. See National Federation of Independent 
Business, et al., vs. Sebelius, Sec. of Health and Human Services, et 
al., No. 11-393 (U.S. June 28, 2012). However, the extent to which 
states will fully implement PPACA's eligibility expansion is uncertain 
at this time. 

[20] Previous research has shown that Medicaid beneficiaries sometimes 
experience challenges in accessing behavioral health and dental care. 
For some populations, such as individuals with complex health care 
needs, these access challenges can be especially problematic. 

[21] In addition, states were inconsistent in how they defined limited benefit plans or how they reported enrollment and capitated payments. Cluster analysis requires that all observations in the sample data have 
complete information, as missing or incorrect values could skew results. 

[22] CMS officials advised us that these are data are the only 
available program management data collected from states systematically 
and stored centrally, and that the data are an important source of 
high-level information on states' activities. However, the officials 
acknowledged that the data are limited in their robustness and level 
of detail. 

[23] Our definition of "Medicaid beneficiaries with complex health 
care needs" includes beneficiaries who were aged, blind/disabled, 
medically needy, or dually eligible for Medicare and Medicaid. We 
excluded from our definition dual eligibles who only received Medicare 
cost-sharing assistance through Medicaid. 

[24] In a 50-state survey, the Kaiser Commission on Medicaid and the 
Uninsured asked states to describe the future direction of Medicaid 
managed care in their states, including any plans to expand its use. 
For more information, see K. Gifford, V. K. Smith, D. Snipes, and J. 
Paradise, A Profile of Medicaid Managed Care Programs in 2010: 
Findings from a 50-State Survey (Washington, D.C.: Kaiser Family 
Foundation, Kaiser Commission on Medicaid and the Uninsured, September 
2011). 

[25] See K. Gifford et al., A Profile of Medicaid Managed Care 
Programs in 2010. 

[26] See K. Gifford et al., A Profile of Medicaid Managed Care 
Programs in 2010. 

[27] Although Oregon did use a PCCM program in 2008, it enrolled 1 
percent of its Medicaid beneficiaries in this program, which was the 
second smallest percentage of Medicaid beneficiaries enrolled among 
states that used PCCM programs. 

[28] Although Hawaii enrolled a high percentage of Medicaid 
beneficiaries in MCOs, which was similar to some other states in this 
group, it enrolled a distinctly smaller percentage of beneficiaries 
with complex health care needs (8 percent) than those other states 
enrolled. 

[29] Patient Protection and Affordable Care Act of 2010 (PPACA), Pub. 
L. No. 111-148, 124 Stat. 119 , as amended by the Health Care and 
Education Reconciliation Act of 2010 (HCERA), Pub. L. No. 111-152, 124 
Stat. 1029. For purposes of this report, references to PPACA include 
the amendments made by HCERA. 

[30] See K. Gifford et al., A Profile of Medicaid Managed Care 
Programs in 2010. 

[31] We considered someone as enrolled in an MCO if they were both 
reported as enrolled and had a capitated payment made on their behalf 
to an MCO. 

[32] For the purposes of this analysis, "Medicaid beneficiaries with 
complex health care needs" includes beneficiaries who were aged, 
blind/disabled, medically needy, or dually eligible for Medicare and 
Medicaid. We excluded dual eligibles who only received Medicare cost-
sharing assistance through Medicaid from our definition. 

[33] We considered individuals as enrolled in a PCCM program if they 
were both reported as enrolled and had a monthly case management fee 
paid on their behalf to a PCCM provider. 

[34] Oklahoma operates an enhanced PCCM program, but the state's 
enrollment data are excluded from the data presented here because we 
determined that they were unreliable for our purposes. Specifically, 
the state reports enrollment in its enhanced PCCM program as 
enrollment in a limited benefit plan rather than in the PCCM program 
category in the MSIS. Therefore, we could not accurately estimate 
enrollment in the state's PCCM program. 

[35] The Kaiser Family Foundation reports on HMO penetration rate. See 
Kaiser Family Foundation, "State HMO Penetration Rate, July 2010" 
(Washington, D.C.: July 2010), accessed September 30, 2011, 
[hyperlink, 
http://statehealthfacts.org/comparemaptable.jsp?ind=349&cat=7]. 

[36] We obtained data on state HHI values from the American Medical 
Association's (AMA) "Competition in Health Insurance: A Comprehensive 
Study of U.S. Markets" 2011 Update, which reported on market data as 
of January 1, 2009. The HHI is the sum of the squared market shares of 
each firm in the market. See AMA, Competition in health insurance: A 
comprehensive study of U.S. Markets--2011 Update (Chicago, Ill.: AMA, 
Division of Economic and Health Policy Research, 2011). 

[37] The HHI, which can reach a maximum value of 10,000, is a commonly 
used measure of market concentration and is one of the measures used 
by the Department of Justice (DOJ) and the Federal Trade Commission in 
assessing the effects of mergers on market competition. In general, 
the more concentrated a market is, the less competitive it is 
considered to be. The thresholds for classifying varying levels of 
market competitiveness are based on DOJ guidelines. 

[38] See K. Gifford, V. K. Smith, D. Snipes, and J. Paradise, A 
Profile of Medicaid Managed Care Programs in 2010: Findings from a 50-
State Survey, (Washington, D.C.: Kaiser Family Foundation, Kaiser 
Commission on Medicaid and the Uninsured, September 2011). 

[39] See L. Ku, K. Jones, P. Shin, B. Bruen, and K. Hayes, "The 
State's Next Challenge--Securing Primary Care for Expanded Medicaid 
Populations," New England Journal of Medicine, vol. 364, no. 6 (2011), 
DOI: 10.1056/NEJMp1011623. The Medicaid expansion index is derived 
from projections of the number of individuals considered potentially 
eligible for Medicaid in 2014 as a result of PPACA's expansion of 
eligibility up to 133 percent of the federal poverty level in relation 
to the number of low-income individuals in the state. National 
Federation of Independent Business, et al., vs. Sebelius, Sec. of 
Health and Human Services, et al., No. 11-393 (U.S. June 28, 2012). 
The extent to which states will fully implement PPACA's eligibility 
expansion is uncertain at this time. 

[40] See L. Ku, K. Jones, P. Shin, B. Bruen, and K. Hayes, "The 
State's Next Challenge--Securing Primary Care for Expanded Medicaid 
Populations," New England Journal of Medicine, vol. 364, no. 6 (2011), 
DOI: 10.1056/NEJMp1011623. To develop this index, researchers from 
George Washington University used data from a variety of sources on 
the numbers of different types of primary care providers in 2008 or 
2009, and data on the number of patients served at federally qualified 
health centers from the Health Resources and Services Administration's 
Uniform Data System. Data on the number of nonfederal physicians in 
December 2008 are based on estimates from the American Medical 
Association (AMA); data on the number of nurse practitioners in 2009 are based on the Pearson Report; and data on the number of physician 
assistants in clinical practice in December 2008 are from estimates by 
the American Academy of Physician Assistants. Data from the Uniform 
Data System are for 2009. 

[41] We used state-reported data from the CMS Medicaid Managed Care 
Data Collection System to calculate the average number of PCP types 
allowed in a state's MCO programs. For example, California reported 
having 11 MCO programs for which the number of allowable PCPs types 
ranged from 6 to 12. We calculated a similar average of the number of 
allowable PCP types across states' PCCM programs. 

[42] The Primary Care Capacity Index described previously in this 
report measures availability of certain providers including 
physicians, nurse practitioners, physician assistants, and the number 
of patients seen at federally qualified health centers; it does not 
include certain other providers, such as psychiatrists, psychologists, 
and social workers that some states report to CMS as being allowable 
primary care providers. 

[End of section] 

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