Has Medicaid Managed Care Delivered On Its Promise?

November 4, 2021

Letting private insurers offer Medicaid coverage was supposed to lower costs and improve care. We dig into the research on Medicaid managed care.

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The Basics: Medicaid Managed Care

Medicaid provides health benefits to more than 80 million low-income Americans including pregnant women, the elderly, disabled adults and kids. And while the $650 billion program is jointly funded by the federal and state governments, 7 in 10 Medicaid beneficiaries receive their coverage from private insurers, through what’s known as Medicaid managed care.

Managed care programs can take many different forms, but the most common version involves states paying private insurance plans a flat fee per beneficiary to manage their care, what’s often called comprehensive managed care. Medicaid traditionally has been a “fee-for-service” program, where the state pays providers for each service a beneficiary gets. Some managed care plans are run by hospitals, nonprofits or even county governments, but most are operated by major commercial insurance companies.

states (including D.C.) offer comprehensive Medicaid managed care¹
$ 0
billion spent by Medicaid on comprehensive managed care in 2020²
0 %
of managed care beneficiaries enrolled in plans run by multi-state commercial insurers³

Medicaid managed care gained popularity in the 1980s before truly taking off in the 1990s. States faced growing Medicaid enrollment and spending, and many viewed it as a bloated and inefficient program that underpaid providers, leaving some beneficiaries with long waits to see the small number of doctors who accepted Medicaid. Policymakers believed private plans would be more efficient and that providing them a lump sum payment would allow them more flexibility to pay providers more and invest in employing staff to actively work with patients to direct them to cheaper and more prompt care.

Medicaid managed care was billed as a way for states to lower costs, increase access and improve quality, and by paying plans a flat fee, states also hoped to gain more control and predictability over their Medicaid budgets.

The Evidence: Has Medicaid Managed Care Delivered?

Over the last three decades, researchers have published more than 60 peer-reviewed studies looking at whether Medicaid managed care has reached its goals. Results have been mixed with a few studies showing lowered costs, expanded access or improved quality, and most showing no or negative impacts. (Results have also been mixed on the far fewer studies done on managed care’s impact on health equity and racial disparities.)

Experts caution that it’s difficult to generalize conclusions from this research because of the variation across state managed care programs, but two separate literature reviews done in 2012 and 2020 came to the same overall finding: 

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

The Future: States Search For Value in Managed Care

Despite the lack of evidence that managed care has achieved its goals, it continues to grow in its dominance of Medicaid, with more states making the switch and states adding more complex populations into these plans. Some states have responded, changing their programs in varying ways to try to achieve better value, but experts stress that more rigorous research is necessary to measure the impact of these changes.

Abandon Managed Care

What Happened: Connecticut dropped its managed care program in 2012 after complaints of high costs, delayed care and inadequate provider networks.

Evidence: In 2016, Connecticut said its average per patient cost was down 7% since abandoning managed care, and the share of doctors accepting Medicaid was up 7%.

Major Redesign

What Happened: Colorado and Oregon still use elements of managed care, but both have drastically redesigned their programs over the last decade to include a larger role for providers, among other reforms.

Evidence: Two recent studies showed spending and emergency room visits went down, as did primary care visits.

Agressive Contracting

What Happened: A handful of states are using their contracts with managed care plans to set higher expectations for patient access and outcomes and to exert more oversight. A 2020 Robert Wood Johnson Foundation report by independent analyst Allan Baumgarten outlined some of the most common tactics including bonuses for reaching goals, withholding payment for missing goals, requiring plans to dedicate staff to particular issues and requiring regular meetings to review performance.

Evidence: Little peer-reviewed research has studied the impact of these contracting tactics, but states report improvements on many of their targets, such as increased childhood screenings in Tennessee.

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Episode Resources

Research Cited in the Episode:

Medicaid Managed Care’s Effects on Costs, Access, and Quality: An Update (Daniela Franco Montoya, Puneet Kaur Chehal and E. Kathleen Adams; Annual Review of Public Health; 4/2020)

Analyzing Medicaid Managed Care Organizations: State Practices for Contracting with Managed Care Organizations and Oversight of Contractors (Allan Baumgarten, Robert Wood Johnson Foundation, 8/26/2020)

Medicaid managed care: Costs, access, and quality of care (Michael Sparer, Robert Wood Johnson Foundation, 9/2012)

Additional Research and Reporting on Medicaid Managed Care:

How is Georgia managing Medicaid managed care? (Rebecca Grapevine and Andy Miller, Georgia Health News, 9/13/2021)

Medicaid Managed Care: Further Reform Needed to Deliver on Promise (Courtney Zott and Andrew Ryan, American Journal of Managed Care, 2/2021)

10 Things to Know About Medicaid Managed Care (Elizabeth Hinton, Robin Rudowitz, Lina Stolyar and Natalie Singer; 10/29/2020)

Exploring the Growth of Medicaid Managed Care (Congressional Budget Office, 8/7/2018)

California’s reboot of troubled Medi-Cal puts pressure on health plans to perform (Bernard J. Wolfson; California Healthline; 9/20/2021)

Episode Credits


Sayeh Nikpay, PhD, Tradeoffs Contributing Research Editor; Associate Professor of Health Policy and Management, University of Minnesota

Kathleen Adams, PhD, Professor of Health Policy and Management, Rollins School of Public Health at Emory University

Allan Baumgarten, JD, Independent Health Policy Analyst

The Tradeoffs theme song was composed by Ty Citerman, with additional music this episode by Blue Dot Sessions.

This episode was reported and mixed by Ryan Levi.

Special thanks to:

Vince McGrath at the Tennessee State Library and Archives.

Additional thanks to:

Robin Rudowitz, Elizabeth Hinton, Chima Ndumele, Joseph Benitez, Michael Sparer, Maya Rossin-Slater, Loren Anthes, Katherine Hempstead, Sharon Lewis, Matt Salo, Lindsey Browning, Melora Simon, Andy Schneider, Samantha Scotti, Emily Blanford, Jeff Viohl, Jacob Wallace, Tim Layton, Lanhee Chen, Jay Ludlam, Sarah Gregorsky, Stacey Mazer, the National Association of State Budget Officers, Alice Burns, the Congressional Budget Office, MACPAC, Vince McGrath, the Tradeoffs Advisory Board and our stellar staff!