Medicaid Managed Care

With its emphasis on primary care, restricted access to specialists, and control of services, managed care is seen as a way to control spiraling Medicaid costs, which totaled $159 billion in fiscal year 1995. So far, states have extended prepaid care largely to low-income families--about 30 million persons--but to few of the additional six million Medicaid beneficiaries who are mentally or physically disabled. Managed care's emphasis on primary care and control of services is seemingly at odds with the care requirements of disabled beneficiaries, many of whom need extensive services and access to highly specialized providers. However, because more than one-third of all Medicaid payments go for the care of the disabled, policymakers have been exploring the possibility of enrolling disabled persons in managed care plans. These efforts affect three key groups: disabled beneficiaries, who include a small number of very vulnerable persons who may be less able to effectively advocate on their own behalf for access to needed services; prepaid care plans, which are concerned about the degree of financial risk in treating persons with extensive medical needs; and the state and federal governments, which run Medicaid. This report examines the (1) extent to which states are implementing Medicaid prepaid managed care programs for disabled beneficiaries and (2) steps that have been taken to safeguard the interests of all three groups. GAO's review of safeguards focuses on two areas: efforts to ensure quality of care and strategies for setting rates and sharing financial risk.

GAO found that: (1) few states have significant experience with prepaid care programs for disabled Medicare beneficiaries; (2) 13 states have submitted proposals to enroll their disabled beneficiaries in prepaid care, and 12 of these states intend to make this enrollment mandatory; (3) half of the states with prepaid enrollment programs rely on disabled individuals to inform them of their dissatisfaction with their plans; (4) states that mandate the enrollment of their disabled beneficiaries in prepaid managed care plans develop more appropriate quality assurance mechanisms; (5) these states build safeguards into health care programs by incorporating adequate planning and consensus-building, and tailoring programs to meet the specific needs of disabled Medicare beneficiaries; (6) it is difficult for states to maintain a financially sound managed care system for disabled individuals; (7) some disabled groups have substantially higher medical costs than other groups; (8) individuals with high-cost disabilities find it more difficult to enroll in managed health care programs and experience limited health care services; (9) a few states are adopting an approach to limit the amount of profit a plan can earn or lose; (10) this approach lessens the incentive to limit service to high-cost beneficiaries; and (11) careful attention should be given when including the disabled population in prepaid health care plans, given their complex health care needs and states' limited experience with serving disabled individuals in prepaid settings.