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Moving All Medicaid to Managed Care Could Save Billions

News  |  By Gregory A. Freeman  
   July 25, 2017

Managed care models already are saving more than $7 billion this year in Medicaid. Moving all Medicaid fee-for-service to managed care could save $63 billion over a decade, a study concludes.

Moving all Medicaid fee-for-service spending to a capitated managed-care model could produce total savings of $63 billion over 10 years, including $35 billion in federal savings, according to a newly released analysis.

A report from the Association for Community Affiliated Plans (ACAP) analyzes the current and potential savings to Medicaid programs around the country from the adoption of the managed care model.

The report estimates that in 2016, Medicaid managed care already results in nationwide savings of $7.1 billion, and it projects savings from these existing managed care programs to total $94.4 billion over the next 10 years.

Managed care is poised to become the dominant payment model for Medicaid, the report notes. As recently as 2010, capitated managed care represented only a quarter of total Medicaid spending nationwide. That figure rose to 48.9% of national Medicaid expenditures by 2016, and this percentage will likely continue to increase, the report says.

ACAP CEO Margaret A. Murray says the report "puts in black and white the fact that managed care can save precious Medicaid resources while at the same time maintaining a high level of access and quality care. Should Congress continue to turn to managed care's predictable budgeting and quality management tools to effect further savings, they must assure that Medicaid managed care plans are reimbursed in an actuarially sound manner."

Legislators should be pushing states to adopt the manage care model more extensively, the report suggests, targeting the potential savings of transitioning remaining Medicaid fee-for-service expenditures and beneficiary subgroups into the capitated model.


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Gregory A. Freeman is a contributing writer for HealthLeaders.

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