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

Chapter I
Background
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<strong>Medicaid</strong>, ajoint federal-state health financing program for the poor,
provided health care coverage for more than 40 million people in fiscal
year 1995. <strong>Medicaid</strong> expenditures-about $159 billion in fiscal year
1996'-have more than tripled in the past 10 years. Under current
projections, they will double again within 8 years.
To help constrain rising costs, a number of states are making increased
use of prepaid managed care in their <strong>Medicaid</strong> programs. Under this
approach, a medical plan such as a health maintenance organization (Htmo)
agrees to make a specified set of medical benefits available in exchange
for a prepaid amount of money per person. This approach is considered
less expensive than the traditional fee-for-service approach because it
eliminates the incentive to provide unnecessary or overly expensive
services in order to maximize revenues.
Thus far, most states have focused their <strong>Medicaid</strong> managed care efforts on
programs for low-income families, which accounted for about 73 percent
of <strong>Medicaid</strong> beneficiaries in fiscal year 1994. However, states are now
directing more attention to using managed care for another group of
<strong>Medicaid</strong> beneficiaries-those who are disabled These individuals
constitute about 15 percent of all <strong>Medicaid</strong> beneficiaries, but because
many of them have a heavy need for specialized medical services, they
account for over one-third of all <strong>Medicaid</strong> expenditures.
For a number of reasons, such as their ongoing dependence on specialized
care and the wide diversity of types and severity of conditions, bringing
disabled people into managed care presents challenges that differ from
covering many other segments of the population. Dealing with these
challenges involves ensuring that adequate mechanisms are in place to
safeguard the interests of all three major stakeholder groups: the disabled
beneficiaries, who are concerned about adequate access to quality care;
the managed care plans, which are concerned about not assuming
inappropriate or excessive financial risk and the states and federal
govemment, which are concerned about protecting the interests of both
beneficiaries and taxpayers. For the most part, this is new territory Most
states have little or no experience in adjusting their managed care
programn to meet these specialized needs.
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