reports

Medi-Cal and managed care: risk, costs, and regional variation

Sacramento, CA, USA: Public Policy Institute of California.

Rollins School of Public Health, Emory University, Atlanta, GA; School of Public Health, University of Alabama at Birmingham, USA

Historically, growth in health care expenditures motivated both the public and private sectors to use various forms of managed care, often health maintenance organizations (HMOs) or prepaid health plans (PHPs), to better manage and lower the costs of health care services. Nationally, the Medicaid program came under scrutiny in the early 1990s, as states experienced annual growth rates ranging from 18 to 25 percent. Although managed care initiatives are often credited with savings over traditional Medicaid fee-for-service (FFS) plans, issues have arisen related to quality of care and the financial viability of plans serving large numbers of Medicaid clients. The adequacy of rates is a major issue (Holahan et al., 1999). Recent reports that low profit margins are causing plans to exit Medicaid markets indicate that just as some states are expanding mandatory Medicaid managed care programs, for-profit plans’ interest in serving Medicaid clients may be waning (Kilborn, 1998; Fisher, 1998).
Yet states continue to expand their use of managed care for Medicaid populations. The portion of Medicaid beneficiaries in managed care increased from 10 percent in 1991 to 48 percent in 1997; 70 percent of this total is under primary care case management (PCCM) and the remainder is under a fully capitated arrangement. Under PCCM, enrollees choose a primary care physician who is responsible for providing and coordinating their care. In the California PCCM program, physicians are paid on a per capita basis for a subset of services; other providers (e.g., hospital inpatient) are paid directly. Under fully capitated care in California and elsewhere, plans are paid a set amount per capita, or enrolled member, for which they must provide and coordinate care for almost all services; plans do not receive more money if actual service costs for members exceed this total amount or “cap.”