Policy Analysis | October 2013

Southern States' Medicaid HMO Plans

Jeremy Williams

According to Kaiser Health, approximately 70 percent of all Medicaid enrollees, nationwide, received at least some services through managed care plans.  States vary on how they offer health maintenance organization (HMO) plans to enrollees.  Some offer HMO plans to all enrollees, while others restrict them to certain populations.  The most common populations for expanding access to managed care are children and pregnant women, but many states are expanding to include less healthy populations, such as the elderly and disabled – some of the most expensive Medicaid enrollees.  Regardless of the population, the greatest advantages documented by states in moving toward more managed care are associated with costs and consolidated caseloads.

Under fee-for-service systems, states pay each provider for every service they perform.  More services lead to more fees and higher costs.  Also, fee-for-service systems lend to the ability to commit fraud, because the state pays first and asks questions later.  Under the managed care system, however, insurance companies receive a capped amount to serve a patient.  Also, proponents claim that HMOs can provide better care through coordination among doctors, hospitals and other medical professionals. Fee-for-services systems often lack coordination, which leads to inconsistent care, particularly for those with chronic conditions, resulting in bad outcomes for patients and heftier, repetitive charges to the state.

It is easier for the state to manage a few dozen companies rather than tens of thousands of providers and millions of claims.  However, since managed care health plans are provided by for-profit companies, there is concern that their cost-control efforts may interfere with the provision of adequate healthcare.  Many states have reduced the total percentage of profits an HMO can take from fees, eliminating, or at least minimizing, this danger.  Another concern is that access to in-network specialists or even general practitioners may be limited, particularly in rural areas.  Also, there are complaints in some states that the move toward managed care has failed to produce the savings that were expected.  Finally, an HMO can commit fraud too, which has happened in a number of states.  However, nationally, the benefits seem to outweigh the opposition, and the continued shift from fee-for-service toward managed care is expected to continue.


Medicaid Managed Care Enrollment as of December 31, 2010

(click on headers to sort by column)

State/Region Medicaid Enrollment Managed Care Enrollment Percent in Managed Care
Alabama 539,211 891,327 60.5%
Arkansas 468,185 598,440 78.2%
Florida 1,902,030 2,984,959 63.7%
Georgia 1,288,271 1,546,747 83.3%
Kentucky 735,197 825,639 89.0%
Louisiana 749,233 1,191,460 62.9%
Mississippi 542,377 714,780 75.9%
Missouri 875,536 900,350 97.2%
North Carolina 1,232,673 1,465,113 84.1%
Oklahoma 608,174 719,660 84.5%
South Carolina 846,924 846,924 100.0%
Tennessee 1,205,614 1,205,614 100.0%
Texas 2,607,413 3,944,606 66.1%
Virginia 539,013 901,078 59.8%
West Virginia 161,579 339,288 47.6%
SLC 14,301,430 19,075,985 75.0%
Nation 40,121,876 56,004,483 71.6%

Note: The unduplicated Medicaid enrollment figures include individuals in State health care reform programs that expand eligibility beyond traditional Medicaid eligibility standards. The unduplicated managed care enrollment figures includes enrollees receiving comprehensive and limited benefits.

Source: Centers for Medicare & Medicaid Services, accessed September 27, 2013.