Dan Gorenstein: For many, Medicaid is synonymous with government health care. 

And the joint federal and state program does provide health benefits to more than 80 million low-income Americans.

But 7 in 10 people in the program actually get their coverage through private insurers.

It’s called Medicaid managed care, and for decades, it’s promised to deliver on a simple ambitious goal — save states money and provide better care to patients.

So, has it worked?

Today, we return to the Research Corner with University of Minnesota health economist Sayeh Nikpay to find out whether Medicaid managed care has met those lofty expectations. 

From the studio at the Leonard Davis Institute at the University of Pennsylvania, I’m Dan Gorenstein, and this is Tradeoffs.

*****

DG: Sayeh, welcome back! How are you, my friend?

Sayeh Nikpay: I’m good. I’m recording inside of a children’s closet.

DG: The kids, everybody doing okay?

SN: We’re all doing good. Fall is in the air, pumpkin spice, midterms, fall is going.

DG: Pumpkin spice? You’re not a pumpkin spice person, are you?

SN: No, I’m not. I’m not a pumpkin spice person, but I am a decorative gourd person. Actually, Andrew Goodman-Bacon, my husband, is a decorative gourd person. So our house is lousy with gourds.

DG: Wait, like 20 gourds?

SN: Let’s just say this: Round 1 of gourds has started to mold, so we had to replace round 1 of gourds with round 2. We’re on Gourd 2.0.

DG: Sweet Jesus. Okay, fantastic, and as much fun as it would be to get a tour of your decorative gourds, I know you’re really here to talk with us about Medicaid managed care. 

I saw while prepping for this story that states and the federal government paid — I couldn’t believe this number — $360 billion in 2020 to private health plans to cover people on Medicaid.

Some of these plans are run by hospitals, nonprofits, even some county governments, but most are run by big commercial insurers — Aetna, UnitedHealthcare, Anthem.

And they’re getting paid more than half of our Medicaid dollars, Sayeh!

SN: Oh yeah. Medicaid managed care is big business, Dan. 

And that’s why I wanted to do this story because states are spending so much money on this and so many people receive their care through these arrangements. It’s really important to understand what we’re getting for all of that money.

We should pause for just a second and say that “Medicaid managed care” can look like a lot of different things, but in this episode, we’re going to be generally talking about states paying private health insurance plans a flat fee per person to manage their care, what’s sometimes called “comprehensive managed care.”

DG: Got it. That’s a helpful definition. 

So, Sayeh, how did we get to a place where Medicaid — the government health insurance program for low-income Americans — is paying hundreds of billions a year to private insurers?

SN: To answer that, Dan, I want to take you back to the early ‘90s…

SFX: Radio tuning
Mux: U Can’t Touch This
Mux: Smells Like Teen Spirit

SN: To my former home state of Tennessee…

Mux: Friends in Low Places 

SN: …where Medicaid costs were exploding.

1993 Tennessee Senate Hearing: It’s been immensely expensive and it’s been a program that we can no longer afford.

SN: Congress had recently required states to cover more kids from low-income families on Medicaid.

And from 1988 to 1993, Tennessee’s Medicaid enrollment nearly doubled and spending nearly tripled.

Policymakers had a few options: They could raise taxes, reduce benefits to people, cut payments to doctors and hospitals, or totally change the system.

DG: Politicians hardly ever want to raise taxes or cut benefits, so I’m assuming they went with the last option, a total reboot? 

SN: Exactly, Dan.

At the time, there was a lot of excitement throughout health care about giving insurers more room to “manage” people’s care.

And that was true in Medicaid and commercial insurance.

The thinking was if insurers took a more active role in getting customers primary care and steering patients towards more affordable doctors and hospitals, spending would fall without sacrificing quality.

So Tennessee jumps on the bandwagon and reshapes its Medicaid program into what lawmakers called TennCare.

1993 Tennessee Senate Hearing: A bold new program that I think deserves our vote today that essentially will privatize this, throw it in the private sector.

SN: Now, instead of the state paying every time someone on Medicaid goes to see the doctor, Tennessee would just pay a lump sum to the insurers, and it was up to the private plans to pay the providers.

And, Dan, an added bonus of paying a flat fee to these plans was that Tennessee could better predict its Medicaid bill each year.

DG: That makes sense, and I get this from a financial perspective — managed care plans compete for Medicaid contracts, potentially helping lower state costs, right? Plus insurers want to keep costs low because they’re on the hook for anything above that flat payment that you’re talking about, Sayeh.

But from the people side of this, what made policymakers think that private insurers would actually do a better job of “managing the care” of people?

That’s seriously tricky business.

SN: A couple things, Dan. 

First, some just argued that private insurers would run Medicaid more efficiently than states could. 

Second, let’s go back to that lump sum we were talking about. 

The plans would have more flexibility to do things states struggled to do with traditional Medicaid programs. 

Most importantly, people hoped they could pay providers higher rates, which would get them to see more Medicaid patients and maybe cut down on wait times.

And folks thought plans could just spend the money creatively, investing in things like employing people to literally call someone with asthma up and say, “Let’s get you an inhaler. Let’s get you to the doctor,” which in theory would keep them healthier and out of the hospital.

DG: Got it. So that was the sales pitch. 

Was Tennessee the first state to go all in on Medicaid managed care?

SN: No. There were a handful of states, Dan, that were already experimenting, but the idea was getting more and more popular, in part because lots of states were watching their Medicaid programs eat up their budgets. 

Some even nicknamed Medicaid “Pac-Man” because it gobbled up so much money.

SFX: Pacman

DG: Pac-Man? That is ridiculously nerdy, Sayeh, but also kind of perfect.

SN: Right? And it’s really at this time, the 1990s, that Medicaid managed care starts to spread like wildfire.

DG: Through the prairies?

SN: Through the prairies, the desert, the city, from sea to shining sea, everywhere.

The year after Tennessee launched TennCare just 15% of Medicaid enrollees nationwide were in managed care plans like the ones in Tennessee.

Four years later, it had jumped to 42%.

DG: It sounds like states were really buying into this original idea that insurers “managing” care could be their Medicaid fix that they’d been looking for — bring costs under control and improve care at the same time.

I think you know where I’m going next. 

SN: You want to know what the research says, Dan. You want to know if it worked! 

DG: Ding, ding, ding, my friend. 

SN: Well I have good news, and I have bad news.

Which do you want first?

DG: Let’s start with the bad news.

SN: Alright, well the bad news is every state’s version of Medicaid managed care is a little different.

We’re now up to 41 states using some variation of what Tennessee set up. 

But of course, they all look different, with different plans, covering different groups of people, offering different benefits.

And this makes it really hard for researchers like me to compare programs or generalize results.

DG: It feels like you’re setting us up for one of your classic “we don’t really know” research answers.

SN: Hold up! I’m just laying out an important caveat to the good news which you apparently forgot that I’m going to tell you about.

DG: Yes, yes, okay fine. Good news, hit me. Go for it.

SN: The good news is, unlike some of the topics we’ve tackled on Research Corner, there are a lot of studies on Medicaid managed care.

Kathleen Adams: We came up with I think 32 articles we went through.

SN: That’s Kathleen Adams. 

She’s a health economist and professor at Emory University in Atlanta, and she was one of the co-authors on a 2020 literature review of Medicaid managed care research.

It actually was the second big lit review on this topic. The first one covered another 30 plus peer reviewed articles going back to the late ‘80s.

DG: Okay, it’s really nice to have all this research.

What’s the takeaway? 

Has Medicaid managed care actually done its job of lowering costs and improving care?

SN: I asked Kathleen Adams that exact question.

KA: The research clearly says that that goal has not been reached.

SN: Let’s just stop here for a second and think about what she just said.

All this money, all these people enrolled in Medicaid managed care, and we’re not getting the impact states wanted.

Kathleen says states have achieved more predictability in their Medicaid budgets. And that’s good. 

But only a very few number of studies show that it’s helped actually states lower costs or improve quality for states.

So the general consensus of both those lit reviews and multiple experts we spoke to is best summed up by this great line from Kathleen’s paper.

KA: While there are incidences of success, research evaluating managed care programs show that these initial hopes were largely unfounded.

DG: Okay, so this really is a sobering moment, Sayeh. We’re talking about dozens of research papers, billions of dollars handed over to private plans. It’s pretty clear Medicaid managed care has not delivered on this original promise.

One thing that comes up when lots of people talk about Medicaid is health equity.

60% of people on Medicaid are people of color.

Do we have any sense of whether managed care has helped address equity at all, even though it hasn’t done these other things?

SN: So there hasn’t been as much research on that question as I would’ve liked, and what studies we do have come to mixed results.

There’s certainly no magic paper that shows managed care has had a big impact.

Some states think managed care could help them address health equity in the future.

Because, remember, these plans are paid that lump sum of money which makes it easier to do things like pay for meals, transportation, put a new air filter in someone’s house, and these are things we think might help improve equity.

DG: What is going on, Sayeh? A lot of money for not much in return.

Is anyone looking at all this data and saying, “Maybe we should do something different?”

SN: Yeah, a couple of states have effectively abandoned managed Medicaid all together.

Connecticut dropped managed care about a decade ago. 

Colorado and Oregon still technically use it, but they’ve drastically redesigned their programs.

DG: And what’s going on in those states?

SN: Connecticut says costs are down and more docs are treating Medicaid patients, but that’s not from a peer-reviewed study.

And in Colorado and Oregon, we actually do have some peer-reviewed studies that show lower costs and improved care.

But these states are the exception. 

Most states are still humming along with Medicaid managed care despite the mountain of evidence.

DG: When we come back, how some states are hoping a wonky, decidedly un-sexy tool can turn up pressure on their managed care plans, and a return trip to Tennessee. 

MIDROLL

DG: Welcome back.

We’re here with Tradeoffs Contributing Research Editor Sayeh Nikpay, and before the break, Sayeh, you told us that based on 30 years of research — that’s 60-plus papers — the evidence is clear: Medicaid managed care hasn’t been the game changer many states hoped it would be.

But still 7 in 10 Medicaid beneficiaries are in these plans?

SN: I know! The question for states really has moved from, “Should we do Medicaid managed care?” to “How can we get the most out of the Medicaid managed care plans that we have?” 

And one of the biggest levers states have at their disposal is something we don’t talk about a lot in health policy research — contracts.

DG: Contracts. Okay, tell me more.

SN: All of these managed care companies have to sign contracts with the state to get access to the Medicaid beneficiaries and get paid. And a few states are trying to get more value from these companies through their contracts.

DG: Real quick, when you say “value,” that’s a word that gets thrown around a lot in health care. What do you mean?

SN: I think value in this case is states recognizing they are paying these companies a lot of money, we’re talking billions of dollars, and Medicaid directors need to do everything they can to get the best quality and access for a reasonable price. 

I talked to Allan Baumgarten about this.

Allan Baumgarten: I’m a Minneapolis based independent analyst and in 2019 completed a far-ranging study of how states contract with Medicaid managed care companies and how they oversee the performance of those companies.

SN: Allan focused on eight states that have been pretty aggressive and innovative with their Medicaid managed care contracts. 

And one of them happened to be our old friend Tennessee.

Mux: Friends in Low Places

DG: Right! Tennessee! What actually happened to managed care in the Volunteer State?

SN: It was kind of a disaster. 

After they rolled out their new program, the state still struggled to control costs, some of the managed care plans went belly up, providers were upset, and patient advocates sued the state. 

And within a decade, they basically had to do a hard reboot on their Medicaid reboot.

DG: Wait, they still stuck with managed care after all that?

SN: They did, and the state is actually now seen as a model, believe it or not, in part because of the lessons they learned after failing so spectacularly the first go around.

DG: And Tennessee is baking those lessons into the contracts they now have with insurers, I’m guessing?

What exactly is it, Sayeh, about these contracts that Allan finds so innovative or interesting?

SN: Allan says you’ve got to set high expectations in the contracts, and you’ve got to be specific and data-driven.

Like, a couple years ago, Tennessee zeroed in on childhood preventive screenings.

AB: They looked at the data and they said, “You know, our managed care companies, they’re not meeting the benchmarks that we’d like them to meet in terms of the percentage of eligible children who are going through this screening.”

SN: So Tennessee set aside part of the plans’ payment and required them to use that money to get more kids screened. 

The bottom line, Dan, is that Tennessee wants to see certain outcomes, and they’re trying to use contracting to make sure companies are held accountable and make it happen. 

So they’re offering bonuses if plans hit goals on things like childhood vaccinations and postpartum care.

They’re forcing companies to hire staff to address patient’s social needs around housing and transportation. 

And they’re keeping closer tabs on all this, requiring quarterly, sometimes monthly meetings to evaluate plans’ performance.

DG: Do other states do this with their contracts or is Tennessee an outlier?

SN: There are a handful of states Allan studied — including Minnesota, Michigan, Arizona and Ohio — that are known for being pretty aggressive too in their contracting.

DG: And based on his research, was he able to draw concrete conclusions about whether these states actually get more value out of their programs? 

SN: No. Nothing peer-reviewed. 

Tennessee has reported improvements in several of its specific goals, like more childhood screenings. 

And based on his years of studying Medicaid programs, Allan is convinced that ratcheting up the specifics and being creative in the contracts is probably the best way to hold the private insurers accountable. 

But to have any real confidence that these states are getting more out of managed care, he says we need much more robust evidence than what we’ve got. 

AB: It’s important to innovate, and then it’s important to say, “So what did we accomplish?”

DG: Hearing you and Allan talk about these contracts, it feels like what Tennessee and these other states are doing is really geared toward getting better services but not necessarily lowering costs.

Am I reading that right? 

SN: I think you are, Dan, and I think it shows that the goals of Medicaid managed care have kind of flipped. 

When Tennessee and others got started in the ‘90s, their big problem was money. 

Medicaid was Pac-Man-ing their state budgets, and they needed a ghost to slow that down.

SFX: Pac-Man dies

SN: Improving access and quality were bonuses, the cherry, if you will.

DG: Oh my god, Sayeh. How much Pac-Man jokes can one podcast take?

SN: There’s no limit! 

But seriously, even though Medicaid remains a big slice of a state’s fiscal pie, when you look at all the performance requirements in these contracts, it’s clear that access and quality are a bigger focus for states right now. 

And the hope is that managed care will allow them to achieve those goals without breaking the bank.

DG: In other words, the definition of success has changed. 

SN: Exactly. Which is good. We have to have realistic expectations for our policies. That’s progress.

But then we have to study it!

Given the billions states are spending, it’s critical they do more to collect data from their plans.

And then — I know this may sound self-serving — but if they are committed to delivering more value, states need to partner with researchers who can design strong studies that can tell us with some certainty whether or not any of this is actually working.

DG: It always comes back to more research and data with you, doesn’t it?

SN: This is Research Corner!

DG: It’s true. 

Sayeh Nikpay, thanks so much for making us smarter about Medicaid managed care. It is always great to spend time with you.

SN: Always a pleasure, Dan.

DG: If you want to dig into Kathleen’s literature review, Allan’s contracting report and more research on Medicaid managed care, visit our website tradeoffs.org, or click the link in our show notes.

I’m Dan Gorenstein, and this is Tradeoffs.