Demystifying Medicaid Managed Care, Its Role in the Future of VBC

October 20, 2023 - As the US healthcare system slowly transitions to value-based care, Medicaid managed care organizations are joining the movement by promoting capitated payment models and quality-based assessments.

California was the first state to test out Medicaid managed care in the 1970s. Nearly 50 years later, most state Medicaid programs have adopted this model for their beneficiaries. Medicaid managed care organizations handle Medicaid coverage for millions of Americans.

What is Medicaid managed care, and how does it fit into the value-based care framework? HealthPayerIntelligence explores this prevalent model below.

Overview of Medicaid managed care

In Medicaid managed care, states contract with managed care organizations (MCOs) to provide Medicaid healthcare benefits along with other services. Managed care organizations give beneficiaries access to their provider networks and offer care coordination.

MCOs adopt a value-based care approach. MCO contracts typically employ a capitation model, meaning they receive a fixed monthly amount to cover beneficiaries’ needs.

As in all value-based care contracts, states assess MCOs based on quality measures and patient outcomes. Managed care benefits exceed fee-for-service Medicaid plans by incorporating population health efforts to address chronic disease management needs, incentivizing high quality of care, and implementing a value-based care approach.

Not all Medicaid plans are managed care plans. Medicaid plans that are not involved in managed care contracts operate on a fee-for-service reimbursement model, similar to the distinction between Medicare Advantage and traditional Medicare.

Structure and models of Medicaid managed care

There are a few different types of Medicaid managed care plans. Like commercial plans, MCOs’ plans can function as health maintenance organizations (HMOs), preferred provider organizations (PPOs), exclusive provider organizations (EPOs), and provider-sponsored organizations (PSOs). These groups are defined, largely, by their provider networks.

There are also comprehensive risk-based managed care and primary care case management (PCCM) arrangements. These two categories are defined by their reimbursement model and benefits.

The largely network-based groupings are not unique to Medicaid managed care and align with the rest of the industry. For example, EPOs only cover services from certain providers, while HMOs require members to live in their service area and use their contracted providers for coverage.

Comprehensive risk-based managed care and PCCM are also found across the health insurance industry, however, PCCM is strongly associated with Medicaid.

Comprehensive risk-based managed care plans must choose between a certain selection of services to cover. States pay plans a monthly capitation amount. Plans can retain any remaining funds at the end of the month, assuming they meet the medical loss ratio requirements, and are responsible for covering any excess costs.

Over seven out of ten Medicaid beneficiaries are enrolled in comprehensive risk-based managed care plans (72 percent) and 41 states, including Washington, DC, had these plans in 2021. That year, payments to these plans contributed over half of overall Medicaid spending.

In contrast, PCCMs merge fee-for-service reimbursement and managed care models. The essentials of the model include assigning each member to a primary care provider who receives a monthly case management fee. However, individual providers do not assume risk. They are paid on a fee-for-service basis.

Outside of these fundamentals, PCCM models vary substantially from state-to-state. Even the definition of a “primary care provider” may be broader in some states than in others. Although most Medicaid programs have shifted toward comprehensive risk-based managed care, PCCM models may be useful for states with large rural populations.

As of 2022, only five states functioned on a strictly PCCM model—Alabama, Idaho, Montana, Oklahoma, and South Dakota. Seven states offered beneficiaries both managed care and PCCM models. The percentage of the Medicaid population covered by a PCCM compared to a comprehensive risk-based managed care model varied across the states.

Medicaid managed care enrollment trends

Five companies dominate the Medicaid managed care space: Centene, Aetna, Elevance Health, Molina Healthcare, and UnitedHealth Group.

Centene boasted the largest number of Medicaid managed care organizations at 33 plans. UnitedHealth Group followed with 29. And Elevance Health came in third with 21 plans.

However, when arranged by enrollment numbers, the order changes. Centene remains at the top with 16,059,600 enrollees. But Elevance Health’s population surpasses its competitor, UnitedHealth Group, with 11,759,000 enrollees compared to UnitedHealth’s 8,335,000.

Despite these strong enrollment numbers, these companies have experienced the fallout of the public health emergency unwinding. As continuous eligibility policies ended and states kicked off redetermination of eligibility processes, enrollment dropped significantly and experts anticipated that it would continue to do so.

The big five companies’ Medicaid enrollment increased during the pandemic, starting at 30.1 million in March 2020 and peaking at 44.2 million in March 2023. But over the span of just a couple months, enrollment diminished to 43.6 million in June 2023.

Top-performing Medicaid managed care plans

In 2023, no Medicaid managed care plan earned a 5.0 star rating from the National Committee for Quality Assurance (NCQA), the highest rating a plan can achieve. However, 13 Medicaid managed care plans rose to the top for their quality of care with 4.5 star ratings. All of the plans were HMOs, spread out across Massachusetts, New York, Pennsylvania, Nebraska, Rhode Island, Maryland, and Hawaii.

Nine of the plans received an electronic clinical data distinction. NCQA created this distinction to identify health plans that use and share electronic data.

Below are the ratings for the three largest Medicaid managed care plans that received a 4.5 star rating in 2023.

UPMC For You, Inc.

The largest of the highest-rated Medicaid managed care plans in 2023, UPMC for You, Inc. is an HMO serving 634,029 members in Pennsylvania. The health plan achieved four NCQA awards and distinctions: Electronic Clinical Data, Health Equity Accreditation, Health Equity Accreditation Plus, and Long Term Services and Support.

The plan achieved a 3.5 star rating in patient experience, with 5.0 stars on ease of access to care and on member satisfaction with the health plan. It scored 4.5 stars on prevention and equity. Equity was the only subcategory in this category that received a 5.0 star rating.

For treatment, the plan received a 4.0 star rating. In this category, it achieved the highest scores in plan all-cause readmissions, certain behavioral health and heart disease measures, all but two of its diabetes measures.

Tufts Health Public Plans, Inc.

Tufts Health Public Plans, Inc. serves 333,339 members in Massachusetts. It received one accreditation, the Health Equity Accreditation.

Its performance on prevention and equity measures was the main driver behind its overall 4.5 star rating. The plan received five stars for its work in women’s reproductive health, cancer screenings, and equity as well as certain other preventive services. Under the treatment category, most of its respiratory, behavioral health, and heart disease measures received five stars as well.

Although the payer received 5.0 stars for its member satisfaction with the health plan, its patient experience category lacked a star rating due to insufficient data.

Excellus Health Plan, Inc. dba Excellus BlueCross BlueShield

With 267,895 enrollees in the state of New York, Excellus Health Plan, Inc. is the third-largest 4.5 star-rated Medicaid managed care plan. It has an Electronic Clinical Data accreditation from NCQA.

Like Tufts Health Public Plans, Excellus Health Plan, Inc. had the highest scores in its prevention and equity measures. This category received a 4-star rating, compared to 3.5 stars for treatment and no stars for patient experience. Women’s reproductive health, cancer screening, equity, and flu shot measures all received 5.0 stars.

The health plan also acquired 5.0 stars for certain respiratory, heart disease, behavioral health—care coordination, and opioid prescribing measures. However, also similar to the second-largest Medicaid managed care plan, it achieved a 5.0 star rating for member satisfaction with the health plan but lacked sufficient data in patient experience to receive a star rating in this area overall.