More states turn to Medicaid managed care to control costs

States desperate to slash budgets and deal with growing Medicaid programs are turning to managed care companies to handle coverage.

During the last few months, the early winners of new contracts to manage the health of Medicaid enrollees appear to be specialized Medicaid managed care organizations, or MCOs, rather than the larger plans that also have commercial insurance business.

In July, Centene, based in St. Louis, won contracts to manage expanded Medicaid populations in Louisiana and Kentucky, contracts it estimated would together be worth more than $1 billion in annual revenue. Centene already manages Medicaid care in 12 other states. In August, its contract in Texas was extended and expanded, as that state moves to switch more of its beneficiaries to managed care.

Molina, based in Long Beach, Calif., is one of the oldest Medicaid-focused health plans. It is contracted to help manage Medicaid enrollees' care in 10 states and also has Medicare Advantage plans.

The seven largest investor-owned health plans have either chosen not to bid or lost out in most cases to competitors that focus their business on Medicaid. There were just a few exceptions: UnitedHealth Group won one Louisiana contract, and Coventry Health Care was among the MCOs contracted as part of Kentucky's managed care expansion.

WellPoint has been notably absent from the bid award lists, despite executives saying they want to grow their Medicaid business. The company has pulled out of state Medicaid programs in Connecticut, Nevada and Ohio after deciding the payment rates were inadequate to cover medical costs. It has since been cautious about bidding on business it doesn't think will be sufficiently profitable.

In September 2010, Aetna won a contract to administer part of Illinois' managed care expansion by overseeing its aged, blind and disabled Medicaid population, and just began enrolling new members in that program. Aetna CEO, President and Chair Mark Bertolini said during the company's second-quarter earnings conference call that it was bidding on eight "Medicaid opportunities."

Research is mixed about whether Medicaid managed care saves states money or improves care of enrollees, said Andrew Bindman, MD, professor of medicine at the University of California, San Francisco. He has researched health system reform and the implications of changes in Medicaid policy and worked with MCOs as a practicing family physician.

Whether this most recent wave of Medicaid managed care will bring helpful care coordination or merely hassle for physicians depends largely on the character of the winning MCOs, but also on the degree to which physicians become involved in advocating for the variety that works best for them and their patients, Dr. Bindman said.

"Many physicians have a visceral reaction to the words 'managed care,' because they were burned in some cases and made to feel they were limited in their practice choices," he said. "I was very skeptical with the first wave of this in the early '90s, but I have really evolved in my belief that Medicaid managed care does come in multiple flavors."

He said the character of the next wave of Medicaid managed care may depend on the degree to which physicians advocate for the better flavors.

"I hope if physicians do get more active, they enter into that discussion recognizing it isn't a yes-or-no question about managed care," Dr. Bindman said. "It's about trying to encourage the best models that are out there."