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Medicaid: States' Use of Managed Care

GAO-12-872R Published: Aug 17, 2012. Publicly Released: Sep 17, 2012.
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What GAO Found

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:

  • 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.

Why GAO Did This Study

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, they also frequently rely on other arrangements, such as limited benefit plans, 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. 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) 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); this expansion is estimated to result in the enrollment of an additional 7 million individuals in 2014. 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. States that choose to provide Medicaid services to newly eligible individuals may do so through managed care arrangements.

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. 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.

For more information, contact Carolyn L. Yocom at (202) 512-7114 or

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Case managementMedicaid programHealth maintenance organizationsBeneficiariesHealth careManaged health careHealth care servicesMedicaidPrimary care