How is managed care paid for

In addition, coverage of certain high-cost services e. In general, states set provider payments under fee for service. Section a 30 A of the Social Security Act requires that such payments be consistent with efficiency, economy, and quality of care, and are sufficient to provide access equivalent to the general population.

Medicaid FFS payment rates for physician services are often much lower than those paid by other payers, raising concerns that low fees affect physician participation in Medicaid, and thus access to care Decker , Cunningham and May While other factors, such as administrative burden, are also known to affect physician participation, research has consistently shown an association between low payment rates relative to other payers and lower levels of physician participation.

On average, Medicaid FFS physician payment rates are two-thirds of the rates Medicare pays, although this varies greatly by state and service. It is more difficult to compare Medicaid FFS payments to hospitals and nursing facilities due to the variation in how states pay these providers.

Overall, Medicaid payment is comparable or higher than Medicare once supplemental payments and provider contributions are taken into account. In , 81 percent of all Medicaid beneficiaries were enrolled in some form of managed care CMS States have incorporated managed care into their Medicaid programs for a number of reasons. Managed care provides states with some control and predictability over future costs.

Compared with FFS, managed care can allow for greater accountability for outcomes and can better support systematic efforts to measure, report, and monitor performance, access, and quality. States have pursued risk-based contracting with managed care plans for different purposes, seeking to increase budget predictability, constrain Medicaid spending, improve access to care and value, and meet other objectives. While the shift to MCOs has increased budget predictability for states, the evidence about the impact of managed care on access to care and costs is both limited and mixed.

Figure 1: As of July , 40 states used capitated managed care models to deliver services in Medicaid. States pay Medicaid managed care organizations MCOs a set per member per month payment for the Medicaid services specified in their contracts.

Under federal law, payments to Medicaid MCOs must be actuarially sound. Plan rates are usually set for a month rating period and must be reviewed and approved by CMS each year.

States may use a variety of mechanisms to adjust plan risk, incentivize plan performance, and ensure payments are not too high or too low, including risk sharing arrangements, risk and acuity adjustments, medical loss ratios MLRs , or incentive and withhold arrangements. As a result, many states are evaluating options to make adjustments to existing MCO rates and risk sharing mechanisms in response to unanticipated COVID costs and conditions that have led to decreased utilization.

Under existing Medicaid managed care authority, states have several options to address payment issues that have arisen as a direct result of the COVID pandemic. As of July , Although this group is still less likely to be enrolled in MCOs than children and adults, over time, states have been moving to include seniors and people with disabilities in MCOs.

Figure 4: MCO managed care penetration rates have grown across Medicaid eligibility groups. Although MCOs provide comprehensive services to beneficiaries, states may carve specific services out of MCO contracts to fee-for-service FFS systems or limited benefit plans. Services frequently carved out include behavioral health, pharmacy, dental, and long-term services and supports LTSS. However, there has been significant movement across states to carve these services in to MCOs.

The MCO share of spending ranged from a low of 0. As states expand Medicaid managed care to include higher-need, higher-cost beneficiaries, expensive long-term services and supports, and adults newly eligible for Medicaid under the ACA, the share of Medicaid dollars going to MCOs will continue to increase.

This is called prior authorization , precertification, or preapproval, depending on your insurer. The primary way in which managed care plans work is by establishing provider networks. A provider network serves plan members over a certain geographic area in which the health plan is available. The providers in these networks agree to offer their services at reduced costs.

Your health plan pays more of the cost of your care if you see providers in the network. In fact, some plans will not cover you at all if you go to a doctor not in the network.

An HMO is much more limited in how you can use it, but it also offers you the lowest cost. For a PPO, you have the option to see doctors outside the network and still be covered, but you will save money if you see in-network doctors. Both types of plans are designed to help keep costs lower and quality high. Managed care is a type of health care model that is commonplace. Most common types of health plans have features of managed care that help keep costs in check and quality of care high.

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