Academic journal article Health Care Financing Review

"Second-Generation" Medicaid Managed Care: Can It Deliver?

Academic journal article Health Care Financing Review

"Second-Generation" Medicaid Managed Care: Can It Deliver?

Article excerpt


Medicaid managed care has been mandatory on a large scale in many States only since the mid-1990s (Hurley, Freund, and Paul, 1993; McCall et al., 1985; Hurley, 1998).(1) States typically have pursued Medicaid managed care to achieve budget predictability, control costs, and improve access to and coordination of care. We have described key features of current programs and of the early experiences of five States actively involved in implementing Medicaid managed care (Gold, Sparer, and Chu, 1996). Others have conducted similar analyses (Holahan et al., 1998; Ku et al., 1998). These studies both provide valuable lessons and highlight the gaps in empirical evidence and the important issues that only additional experience and analysis can address.

This article aims to fill some of these gaps by focusing on the performance of "second-generation" managed care programs. We use the term second generation because our study includes two "tiers" of States: those with several years of experience under the most recent round of Federal waivers authorizing these programs and those whose late start presumably allowed them to benefit from the experience of the States preceding them. The article is based on insight developed through two rounds of case studies of States that have been actively engaged in Medicaid managed care.

The studies spanned the 5-year period between late 1994 and early 1999, which coincides with the most intense transition in States to mandatory Medicaid managed care. Through these studies, we sought to answer three questions that we believe are among the most critical to the future of Medicaid managed care:

(1) Does experience count? Do programs operate more smoothly after overcoming initial implementation hurdles? Does experience facilitate implementation by enabling States to learn from their own experience and from the experiences of other States? What does the role of experience tell us about the administrative performance of mature programs and about the inevitability of transition issues?

(2) What can we learn now about the ability of Medicaid managed care to achieve important health care delivery goals? While there is a lot we do not know even now, current experience can provide tentative insight into at least three important questions. First, can States attract and retain managed care plans in the Medicaid market? Second, how do States make tradeoffs between cost savings and improvements in access and quality that increase costs? Third, what can we learn about the tradeoff between Medicaid managed care and broader public health goals, particularly those relating to care for the uninsured and protection for the safety net providers who care for this population?

(3) Can Medicaid managed care models be extended beyond their initial target of low-income families and children? Can States use managed care to improve health care for elderly people, people with disabilities, and others with special health care needs? These subgroups contribute disproportionately to costs but have substantial care needs.

The answers to these large, outstanding questions can help policymakers identify the potential and the constraints of Medicaid managed care. Our analysis relies on an issue-specific approach focusing on State experiences that are most relevant to the three questions. We direct readers wishing a more comprehensive analysis to the individual case studies and to tables that compare features of the State initiatives.(2)


This article is based on information collected in site visits to seven States in our second round of indepth case studies (California, Florida, Maryland, Minnesota, Oregon, Tennessee, and Texas) conducted between late 1997 and early 1999. We selected these States because they are both geographically diverse and active in pursuing Medicaid managed care under mandatory models that rely heavily on capitated managed care. …

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