Proponents of managed care in Medicaid argue that, compared to fee-for-service, it can reduce spending and improve outcomes. But states may not be enrolling their Medicaid beneficiaries in managed care in the most cost-effective way possible.
According to a new report from the Congressional Budget Office (CBO), the majority of spending on the most expensive Medicaid populations comes in the form of fee-for-service payments, not payments to managed care organizations (MCOs).
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Elderly and disabled beneficiaries and dual-eligible individuals cost the program $1,602 and $1,402 per month, respectively, in 2012. More than $1000 per beneficiary per month went toward fee-for-service spending.
Children cost an average of $242 per month to cover, and non-elderly, non-disabled adults cost $416 per month.
About 70% of both children and non-elderly, non-disabled adults were enrolled in comprehensive managed care, versus 56% of elderly and disabled beneficiaries and 24% of dual-eligible individuals.
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Although managed care spending increased in most states between 1999 and 2014, fee-for-service payments exceeded managed care payments by 40% in 2014. Payments to MCOs totaled $182 billion of all Medicaid spending, while fee-for-service payments comprised $254 billion total.
The number of states requiring some or all beneficiaries to enroll in managed care has risen over time. States are less likely to impose this requirement on dual-eligible beneficiaries due to federal policy restrictions.
CBO noted 2012 was the most recent year for which it had access to data on Medicaid beneficiaries, so these figures do not factor in changes after the Affordable Care Act’s enactment in 2014.