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Enrollment in Medicaid and Managed Care Organization (MCO) plans in the United States has reached an all-time high of 74 million recipients. According to Health Affairs, “an estimated 71 percent of Medicaid recipients are receiving their care via private health plans, both investor-owned and nonprofit.” In 2016, research behind the shift showed that managed care plans can provide services that state Medicaid agencies cannot fulfill. For example, network contracting, information technology, and use of management systems to display low-value care can vastly improve the health of beneficiaries. 

  • Medicaid Managed Care is rapidly growing: Consumers with MCOs are the fastest-growing class of health plan members. Health Affairs states, “Many health plans are increasingly dependent on Medicaid contracting for growth, a circumstance that would appear to enhance states’ bargaining leverage with their contracting MCOs.” For elderly patients, particularly those with dual-eligibility in Medicaid, both payments and potential underwriting profits may significantly exceed consumers of commercial health plan.
  • Health plan revenues from Medicaid more than tripled: According to Deloitte, in 2016, health plans generated $207 billion in profit—an increase of $64 billion from 2011. In states that expanded Medicaid eligibility, Medicaid managed care plans had higher margins each year after 2016. Medicaid managed care markets demonstrated a broadening performance variation at the company and state levels beginning in 2014. In 2016, underwriting gains for Medicaid managed care were $3.0 billion, compared with $5.8 billion for Medicare Advantage (MA) programs. Deloitte defines underwriting gains as “the profits that an insurance company makes after paying all claims and incurring general and administrative expenses.
  • Impact to Managed Care Organizations (MCOs): The Affordable Care Act (ACA) expanded Medicaid eligibility to 138 percent of the federal poverty level, resulting in more than 14 Million people obtaining coverage under Medicaid Expansion (ME). From 2014 to 2016, the federal government covered 100 percent of the costs for Medicaid expansion. Starting in 2020 and beyond, this will decrease to covering 90 percent of the Medicaid expansion costs.   

What’s next for Medicaid Managed Care? 

The Trump administration has expressed the desire for states to propose changes to their Medicaid programs. The response showed the need for waivers and to modify their existing program under section 1115 of the Social Security Act. The Deloitte report on state-led Medicaid reform efforts discusses the flexibilities states have, under current law, to design and administer their programs. Several states are requesting their Medicaid managed care plans to accelerate delivery system reforms and value-based care intentions. Sarah Thomas, Managing Director at Deloitte says “The overall economy is likely to be a factor affecting Medicaid managed care. When a state’s fiscal health is strong, policymakers are less likely to put pressure on payments to Medicaid plans and providers.” Medicaid work requirements in several states could impact health plans along with the potential of lower enrollments. Health plans could be facing higher administrative costs and will need to implement up-to-date data employment. 


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