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JAMA Forum Archive, 2012-2019: Health policy commentary from leaders in the field
JAMA Forum

Redesigning Medicaid Managed Care

When it comes to health care, California is often considered a bellwether state. California has experienced the largest gain of any state in the number of individuals who are covered by insurance following the implementation of the Affordable Care Act (ACA). It has also been a leader in the use of managed care. As of 2016, almost 23 million Californians (58% of the population) received care delivered through a health maintenance organization (HMO). This includes the state Medicaid program (Medi-Cal), through which 10.3 million beneficiaries (about 80%) receive services through managed care. Nationwide, 1 in 5 Medicaid beneficiaries who are in managed care reside in California.

In the 1970s, Medi-Cal was the first state Medicaid program to introduce managed care. Medi-Cal managed care was initially implemented in a handful of counties, and it has grown statewide over time, primarily through mandatory enrollment. Medicaid managed care was originally targeted toward low-income children and their parents; it now includes seniors and persons with disabilities, as well as the ACA-related expansion population of childless adults. Medi-Cal is also testing a voluntary program of managed care enrollment for dual-eligible beneficiaries (people eligible for both Medicaid and Medicare) in 7 counties where more than half of dual-eligible beneficiaries in the state reside.

Lessons in Performance

Medi-Cal managed care varies across its 58 counties, and there are lessons in the performance of these different models, not only for California but for the nation as a whole. California uses health plans to manage Medi-Cal services in 1 of 3 main types of arrangements, which vary across counties: (1) a single public health plan (county-organized health system model [COHS]), (2) multiple competing private health plans (geographic or regional model), or (3) a public health plan in competition with a single private health plan (2-plan model). Approximately 21% of Medi-Cal managed care beneficiaries are in COHS counties, 14% are in geographical or regional counties, and 64% are in 2-plan counties.

At the time California expanded Medi-Cal managed care using the 2-plan model, there was concern that health plans might exclude safety net providers from their networks. The public plans, known as local initiatives, were established to ensure there was a plan within the county to enable Medi-Cal beneficiaries to choose a safety net provider, such as a community health center or a county-operated clinic for their care. The percentage of care delivered to Medi-Cal beneficiaries through traditional safety net providers has grown over time, as has enrollment in local initiatives relative to their private counterparts.

Competition among insurers is regarded as an important method to control costs in the individual market through health insurance exchanges. Nationally, the price of private insurance coverage is higher for individuals in markets where there are fewer plans competing.  But the situation may be somewhat different in Medicaid, for which beneficiaries do not pay premiums and most states (including California) set the prices paid to plans. By law, these prices must be sufficient but not in excess of what the health plan needs to provide access to necessary services for the covered population. In California, the amounts paid to plans are not determined by competitive bids but are set by the state. Payment is adjusted for beneficiary characteristics such as age, sex, and eligibility group, but all plans in a county are paid the same amount for a beneficiary with a given set of characteristics.

Encouraging Competition

Although Medi-Cal managed care plans serving the same county do not compete based on price, they do compete on network composition (the mix of primary care clinicians, specialists, and medical facilities such as hospitals) and quality of care. In counties with multiple plans, California has taken steps to encourage competition based on quality by autoassigning Medi-Cal beneficiaries, who do not make a choice, to the plan within the county that demonstrated the highest quality scores in the prior year. A plan benefits financially from autoassigned enrollees not only because it gains a greater number of beneficiaries but also because these individuals tend to use services at a lower rate than those who actively choose a plan.

The variation in the Medicaid managed care models across California allows one to examine the question of whether health plan choice and multiple-plan competition result in higher quality for Medi-Cal beneficiaries than is achieved for these beneficiaries in the COHS counties with just a single public plan. One can also examine in 2-plan counties whether competing public or private plans perform differently on behalf of Medicaid beneficiaries.

In general, the quality of care—as measured by the state, using the Healthcare Effectiveness Data and Information Set (a tool used by most US health plans to evaluate performance related to care and service)—is consistently higher among Medi-Cal managed care beneficiaries in COHS counties with just a single Medi-Cal plan than in counties with multiple competing plans. Furthermore, in most counties where a public plan competes with a private plan, the public plan performs better on average.

Although these findings are based on a limited number of quality measures and are not from a study that randomly assigned the model of Medi-Cal managed care across counties, they do raise questions about the benefit derived from having Medicaid plan competition. For example, recent media reports suggest that even though they do not provide the highest quality, nonpublic plans are reaping enormous profits through their participation in Medi-Cal. In addition, low physician participation rates in Medicaid programs, including Medi-Cal, make it challenging for these programs to provide the access that their beneficiaries need. Competing Medicaid managed care plans further narrow the network of physicians available within their plans, which can further reduce a Medicaid beneficiary’s access to care. Problems with access to care can be further exacerbated when Medicaid programs are unable to provide beneficiaries with timely and accurate information about which physicians are in the network of the various managed care plans.

Medicaid beneficiaries rely on Medicaid programs to ensure that they have access to high-quality care. Many state programs are now experimenting with payment reform to promote value. Based on the California experience, it may also be appropriate for them to reconsider whether this is best done through competing or noncompeting health plans. The care offered by a single Medicaid plan in a region may be of higher quality and greater value than that offered by multiple competing plans. States that question whether a single plan, public or private, within a region will be motivated to deliver high-value care could benchmark the performance of Medicaid plans across regions within their state—and if necessary, replace poor performers with a different noncompeting plan. Having a valid, reliable, and robust method for measuring the performance of health plans is essential, but a single local Medicaid plan combined with payment models that incentivize quality may result in greater value and accountability in Medicaid managed care programs.

One state, Oregon, is actually testing this approach. It is using 15 coordinated care organizations (CCOs), which, like COHS plans in California, do not compete with one another across different regions in the state. Unlike a COHS, a CCO receives a global budget for all services, with payment partially dependent on achieving financial and quality targets. More than 3 years into this experiment, Oregon’s Medicaid program overall and most of its CCOs have been successful in slowing the rate of spending and improving quality. If this trend continues, Oregon and its model for managing Medicaid services could become the new bellwether for the nation.

About the author: Andrew Bindman, MD, is professor of medicine and epidemiology & biostatistics based within the Philip R. Lee Institute for Health Policy Studies at the University of California, San Francisco (UCSF). He is a former Director of the Agency for Healthcare Research and Quality and a member of the National Academy of Medicine. (Image: Ted Grudzinski/AMA)
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