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Report: States could save money by expanding Medicaid managed care

Medicaid managed care is providing a safety net of care coordination to millions of at-risk Americans and is improving patient outcomes and quality of care as it reduces states’ healthcare costs, according to a recent Lewin Group report that was prepared for America’s Health Insurance Plans (AHIP).

A state looking to cut Medicaid costs should not reduce benefits or lower payment rates, but expand its managed care program, according to the report.

The Lewin Group released a similar study five years ago and returned to the same subject, achieving similar results. In its latest report, The Lewin Group stated that Medicaid managed care health plans improve beneficiaries’ access to services and have earned high satisfaction ratings from enrollees, in addition to improving care and saving money. The researchers pointed out that although nearly half of Medicaid beneficiaries are enrolled in managed care plans, more than 80% of national Medicaid spending is in the fee-for-service (FFS) setting.

“While it is difficult to accurately predict the level of cost savings that will be achieved in any given Medicaid managed care program, our synthesis of findings from a large body of research on the topic clearly illustrates that Medicaid managed care typically saves money and represents a highly attractive alternative to reductions in eligibility and benefits and/or provider payment cuts,” wrote The Lewin Group.

Karen Ignagni, president and CEO of AHIP, says Medicaid managed care plans coordinate care, offer patient outreach not available in FFS Medicaid, provide focused chronic care and disease management programs, offer preventive services, and give nonhealthcare assistance to beneficiaries in areas such as finding alternatives to nursing home care.

“The bottom line of The Lewin Report is that we are providing high value and cost-effectiveness for states at this time of economic crisis,” Ignagni says. “At this time, we are providing better quality, more access, and a higher degree of satisfaction to beneficiaries than traditional Medicaid programs. That’s quite a legacy.”

After analyzing 24 recent studies of Medicaid managed care programs, The Lewin Group reported that:

  • The studies strongly suggest that the Medicaid managed care model typically yields cost savings. The results ranged from 0.5% to 20% savings compared to FFS Medicaid.
  • The studies provide some evidence that Medicaid managed care savings are significant for the Supplemental Security Income (SSI) and SSI-related population.
  • Various studies demonstrate that states’ Medicaid managed care cost savings are largely attributed to decreases in inpatient utilization, which could be linked to care coordination.
  • Medicaid managed care plans yield “noteworthy savings” in pharmacy. In comparing FFS programs’ drug costs versus Medicaid health plans, researchers found the costs per member per month were 10%–15% lower for the private health plans.

James Carlson, president and CEO of AMERIGROUP Corporation, which covers 6.7 million Medicaid beneficiaries in 14 states, says care coordination helps millions of Americans who would otherwise be lost in the healthcare system, adding that more states understand the benefits of Medicaid managed care.

“I do think that we as an industry have matured to the point that the states understand that these programs have to be reasonably well funded because it would cost more if they didn’t have us ... More often than not, we’re finding states that appreciate the involvement of the private sector,” says Carlson.

Not every state has been satisfied with its Medicaid managed care program, most notably Florida. However, The Lewin Group highlighted other states which have experienced more positive results.

The Lewin Group wrote, “It is clear that—through carefully crafted managed care program design that is tailored to the state’s Medicaid populations and geographic landscape real opportunities exist for states to benefit from expanding the Medicaid managed care model to eligibility categories and services heretofore largely excluded from managed care.”

Rather than cutting eligibility, eliminating benefits, or reducing provider payments, The Lewin Group and Medicaid managed care supporters say states should look to expand these programs, given current budget pressures.

In its report, The Lewin Group suggested that:

  • States consider including SSI and SSI-related population in a Medicaid managed care program because the SSI subgroup has a larger percentage of Medicaid beneficiaries with disabilities
  • States with Medicaid managed care should revisit their carve-in, carve-out decisions

“As states consider expanding their Medicaid managed care programs and as other states implement new Medicaid managed care programs, they may wish to include certain populations (e.g., SSI) and services (e.g., pharmacy and mental health services) that have often been excluded from Medicaid managed care due to quality and access to care concerns,” according to the report.

Given these positive results, AHIP supports a plan that would allow anyone under 100% poverty levels to be eligible for Medicaid, Ignagni says.

Those levels now vary by state and are not strictly based on income.

Carlson also suggests that states change laws to allow Medicaid beneficiaries to not have to recertify their eligibility every six months.