Perils of Pioneering: Monitoring Medicaid Managed Care

Article excerpt

Several States have used section 1115 demonstrations to introduce statewide, mandatory Medicaid managed care. When HCFA approves section 1115 demonstrations, it requires States to monitor managed care plans on a variety of measures and to report findings to HCFA. HCFA also monitors the demonstrations to ensure that the financial incentives resulting from capitated payment do not result in inappropriate underservice to the vulnerable Medicaid population (Health Care Financing Administration, 1995).

This article reviews the evolution and the adequacy of Federal and State monitoring of four section 1115 demonstrations between 1994 and 1998: (1) QUEST, in Hawaii; (2) SoonerCare, in Oklahoma; (3) Rite Care in Rhode Island; and (4) TennCare, in Tennessee (Wooldridge and Hoag, 1999). Our close observation of these four States in a larger evaluation offered an opportunity for assessing monitoring and for drawing valuable lessons for other States. In this review, we seek to answer the following questions:

* Through what structures and processes does the Federal Government monitor the States?

* Through what structures and processes do the States monitor the managed care plans?

* Is monitoring adequate?

We assess State monitoring in five domains: (1) financial, (2) encounter data, (3) quality assurance and quality improvement, (4) access and provider networks, and (5) grievance systems.

We define adequacy to mean that the monitoring agency sets performance standards, checks that the monitored entity meets the standards, provides regular feedback, and develops data and studies to review outcomes. Adequate monitoring also implies timely implementation of monitoring, allocation of sufficient resources to monitoring, consistently applied processes and standards, and improvements over time. Managed care offers a greater potential for improving quality and access to care than does FFS care because managed care monitoring goes beyond any that occurs under FFS.

We review the structure of Federal and State monitoring and analyze how States monitored finances, encounter data, quality assurance and quality improvement, access and provider networks, and grievance procedures between 1994 and 1998. Next, we discuss Federal monitoring efforts, and finish by discussing lessons learned from the State and Federal monitoring efforts.


Findings are based on data describing the structures and processes the States and HCFA use in monitoring, collected from documents and interviews with key people in each State and the Federal Government. We interviewed State officials, staff of managed care plans, providers, legislators, and advocacy organizations during site visits in 1995, 1996, and 1998, as part of case studies conducted for a HCFA-funded evaluation. We also drew on ongoing discussions with HCFA staff.(1)


The four demonstrations covered 1.7 million Medicaid enrollees as of July 1999. Key features of these demonstrations such as start date, eligibility groups included, types of participating plans and enrollment are shown in Table 1.

Table 1
Key Features of the Four Demonstration Programs

              Program Name and
State         Implementation Date

Hawaii        QUEST--8/1/94

Oklahoma      SoonerCare--4/1/96(2)

Rhode Island  Rite Care--8/1/94

Tennessee     TennCare--1/1/94

State         Key Design Elements at Implementation

Hawaii        Eligibility expansion to uninsured up to 300 percent of
              the FPL. Mandatory managed care design using MCOs for
              AFDC, poverty-related, and expansion beneficiaries;
              MCOs cover medical, acute behavioral, and dental care.

Oklahoma      No expansion initially. Mandatory managed care design
              for AFDC and poverty-related beneficiaries; MCOs in
              urban areas covering medical, dental, and behavioral;
              PCCM used in rural areas. …