Note: The following post was submitted to the blog by Matthew Nattinger. Matt is a doctoral student in the Department of Health Management and Policy at the University of Iowa. This is his first contribution to the blog, so if you like it, let him know in the comments and maybe we can encourage him to contribute more regularly–as long as it doesn’t detract from his studies!
Pending federal approval, Iowa Medicaid will change from a primarily fee-for-service (FFS) model into a risk-based managed care model beginning in January 2016 to reduce Medicaid expenditures. Under the current FFS model, Iowa directly pays providers about $2 billion annually for services provided to an estimated 564,000 Medicaid beneficiaries, but under the proposed managed care model, Iowa will contract with between 2 and 4 managed care organizations (MCOs) to operate Medicaid. According to Governor Terry Branstad’s (R) administration, Iowa will save an estimated $51 million within the first six months of the change. However, there are concerns in Iowa that the state is primarily focused on reducing program costs without considering the effects moving Medicaid from FFS to risk-based managed care may have on healthcare quality and access.
Iowa will pay each MCO a “per member per month” (PMPM) capitated rate to provide coverage for Medicaid beneficiaries. The MCOs profit if they provide the coverage for less than the capitated rate and take a loss if they are unable to do so. Thus, the state reduces costs by shifting the financial risk to MCOs. The change would mark a significant expansion of Medicaid managed care in Iowa. Since 1990, Iowa Medicaid has operated a primary care case management program, where primary care providers act as “care managers” for Medicaid beneficiaries, but still receive FFS. In 2012, Iowa first contracted with MCOs (Meridian and Magellan) to provide Medicaid coverage in 19 counties. Currently, Medicaid beneficiaries who live in those 19 counties are given the option to enroll in the MCO or stay in traditional FFS Medicaid. However, beginning in 2016, at least one Medicaid MCO will be available in every Iowa county and enrollment via MCO will be mandatory for all Medicaid beneficiaries who are not also enrolled in Medicare (i.e., dual-eligibles).
Iowa is not the only state that contracts with Medicaid MCOs. According to a Kaiser Family Foundation survey, 39 states and the District of Columbia contract with MCOs to provide coverage for over 26 million Medicaid beneficiaries, with many states having moved towards mandatory MCO enrollment in recent years. In 2010, 9 states reported that MCOs covered over 80% of their Medicaid populations. Moreover, as Medicaid expansion under the Affordable Care Act (ACA) moves forward, states are expected to rely more heavily on MCOs.
Thus far, there doesn’t appear to be a downside to Medicaid MCOs for states, but you may be wondering how Iowa can save $51 million with the MCOs simultaneously turning profits? Well, since MCOs only profit if they are able to provide coverage for less than the capitated rate, they must do an excellent job of controlling costs. Traditionally, Medicaid MCOs have controlled costs by implementing service review policies (e.g., prior authorization), developing narrow provider networks, reducing unnecessary services, improving care coordination between providers, and incentivizing preventive services (e.g., flu vaccinations) for beneficiaries.
While Medicaid MCOs can successfully reduce costs, there are concerns that their methods of cost control adversely affect healthcare access and quality for Medicaid beneficiaries. A study by the Robert Wood Johnson Foundation found that the available research is inadequate to determine how Medicaid MCOs affect the quality of healthcare, but found mixed results for how healthcare access has been affected. Thus, it’s difficult to say one way or another how contracting with MCOs will affect healthcare access and quality for Iowa Medicaid beneficiaries. As a result, advocacy groups, such as the Child and Family Policy Center, and Iowa state senators are calling for better state oversight of MCOs to ensure the quality of and access to healthcare are not adversely affected by the move. Since little is known about how risk-based managed care in Medicaid affects healthcare quality in other states, Medicaid officials in Iowa should carefully monitor how the change affects both healthcare access and quality for beneficiaries.