Medicaid Managed Care - U.S. Senate Special Committee on Aging

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<strong>Medicaid</strong> is a joint federal and state entitlement program which provided payment for medical services
to over 32 million beneficiaries in FY 19943. The program is state administered with the costs shared
between the federal and state governments. The federal government provides matching funds at a
percentage determined annually by the federal government generally based on each state's per capita
income. Currently, the federal match for <strong>Medicaid</strong> services is set at a minimum of 50 percent and a
maximum of 83 percent Over the past few years federal funds have accounted for 57 percent of total
<strong>Medicaid</strong> expenditures. 4 <strong>Medicaid</strong> spending has increased from $41 billion in 1985 to $138 billion in
l994'.
The states have broad federal guidelines to follow in determining eligibility and coverage standards, but
each state designs and administers its own <strong>Medicaid</strong> program. <strong>Medicaid</strong> beneficiaries qualify for
coverage when determined to be either categorically needy or medically needy. Categorically needy
persons include those receiving Aid to Families with Dependent Children and most persons on
Supplemental Security Income. All of the states cover individuals in these categories. More than 75
percent of the states also provide benefits to the "medically needy"; the "medically needy" are
individuals whose resources exceed the income eligibility standards for the categorically needy but who
meet a separate state determined income standard. The medically needy include pregnant women, certain
children, the aged, disabled, families with dependent children and those persons who "spend down" their
income and assets due to large health care expenses.
Because the <strong>Medicaid</strong> program is swiftly becoming most states' largest budget item, averaging 19.4% of
the average state's total expenditures in 1994,6 states are implementing strategies designed to control
<strong>Medicaid</strong> costs-According to recent surveys, states are reducing expenses for health care services by
miaintaining or diminishing reimbursement rates as well as curtailing covered services'. States are also
converting their programs to managed care. More than half the states responding to a recent survey are
implementing or expanding managed care programs as a way to control costs while insuring quality and
access.
While most <strong>Medicaid</strong> programs are still similar to fee-for-service indemnity insurance with the state and
federal government at risk for expenditures, many states have begun to seek waivers from federal
<strong>Medicaid</strong> requirements in order to experiment with managed care. Under Sections 1115 and 1915(b) of
the Social Security Act, the Secretary of Health and Human Services miay waive certain requirements to
facilitate states' use of managed care for <strong>Medicaid</strong> beneficiaries. The mechanism through which most
states have enrolled <strong>Medicaid</strong> beneficiaries into managed care programs has been Section 1915(b)
program waivers. Under Section 1915(b) waivers, the Secretary may waive the requirement that states
3 HCFA, Office of the Actuary, FY 1994.
4 Health <strong>Care</strong> Financing Review Medicare and <strong>Medicaid</strong> Statistical Supplement, 1995, HCFA.
5 National Association of State Budget Officers, 1993 State Expenditure Report, March 1994.
6 National Association of State Budget Officers, 1994 State Expenditure Report, 1994.
7 7he State of State <strong>Medicaid</strong> Programs: Fiscalyear 1994, The American Public Welfare Association, May 1994.
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