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

383
G A ^. United States
General Accounting Office
Washington, D.C. 20548
Health. Education, and
Human Services Division
B-270335
May 16, 1997
The Honorable John D. Dingell
Ranking Minority Member
<strong>Committee</strong> on Commerce
House of Representatives
Dear Mr. Dingell:
Over the past decade, <strong>Medicaid</strong> expenditures have soared. By fiscal year
1996, they reached $160 billion-nearly quadrupling fiscal year 1986
expenditures. Although the annual growth rate abated significantly in
1996, <strong>Medicaid</strong> expenditures continue to exert strong pressure on federal
and state budgets. To help bring these costs under control, states
increasingly are mandating significant numbers of their <strong>Medicaid</strong>
population to enroll in managed care programs. By emphasizing primary
and preventive care and treatment, it is hoped that managed care will
improve beneficiary health care while curbing health care costs.
As of June 1996, about 11 million <strong>Medicaid</strong> beneficiaries were enrolled in
"capitated' managed care programs. Under a capitated managed care
model, states contract with managed care plans, such as health
maintenance organizations (HMo), and pay them a monthly, or capitated,
fee per <strong>Medicaid</strong> enrollee to provide most medical services-which are
coordinated through primary care physicians. This model, with its fixed
prospective payment for a package of services, creates an incentive for
plans to provide preventive and primary care and to ensure that only
necessary medical services are provided. However, managed care also can
create an incentive to underserve or even deny beneficiaries access to
needed care since plans and, in some cases, providers can profit from not
delivering services. Moreover, <strong>Medicaid</strong> beneficiaries required to enroll in
managed care may find It difficult to seek alternative care if they find that
plan providers fail to meet their needs.
Because of your concern about these issues, we reviewed state efforts to
hold managed care plans accountable for meeting <strong>Medicaid</strong> program goals
and for providing beneficiaries enrolled in capitated managed care plans
the care they need. As agreed with your office, we focused our study on
the difficulties that purchasers, including states, have in monitoring
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