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

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In Stage I, the <strong>Medicaid</strong> agency has made a substantial commitment to managed care-one
that is likely to encompass most or all of the families with dependent children and perhaps
even some of the aged, blind and disabled beneficiaries. Some of these individuals may
be enrolled in full-risk managed care, but most are likely to be in PCCM and/or carve-out
arrangements. This change calls for some adjustments in traditional agency operations.
But the reverberations are relatively contained because the fee-for-service system remains
essentially intact. Beneficiaries in PCCM and carve-out arrangements continue to receive
much care from providers who continue to bill <strong>Medicaid</strong> for each episode of care.'
In Stage II, the critical difference is that full-risk managed care becomes mainstream. The
agency begins to reposition itself as a purchaser of services from relatively few health
plans rather than as a payer of bills from thousands of providers. In one way or another,
more and more agency staff are involved in defining, supporting, and overseeing the work
of health plans. The demands on the fee-for-service sector of the agency begin to
diminish and staff accustomed to working on functions such as prior authorization or
surveillance and utilization review must learn new roles. In this milieu, reorganizations
are common.
In Stage m, full-risk managed care becomes even more dominant to the point where it
encompasses many or even most of the aged, blind, and disabled beneficiaries. Although
a minority of the caseload, they have accounted for a majority of agency expenditures and
claims processed. As such, they have been instrumental in sustaining the fee-for-service
sector of the <strong>Medicaid</strong> agency during Stages I and IL. As these "high-user" beneficiaries
join full-risk health plans, the foundation of the fee-for-service operation begins to give
way. The agency reaches a breakthrough point that calls for far-reaching changes in its
internal organization and in its use of agency staff.
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