Insurers and Providers Clash As States Expand Medicaid Managed Care

More than a dozen governors are trying to contain Medicaid costs by requiring more people to enroll in managed care plans. With billions of dollars at stake, insurance companies, hospitals and doctors are fighting over money and control.

About half of the nation’s 50 million Medicaid recipients are in private managed care plans, which the states typically pay a set amount each month per patient. The other half has more freedom to choose where to go for medical care, with the Medicaid program paying a fee for each visit and procedure.

Medicaid is increasingly becoming a managed care program, a significant trend as the states prepare for a massive expansion required by the federal health care law. Beginning in 2014, an estimated 16 million more Americans are expected to qualify under the law’s expanded eligibility criteria.

Medicaid managed care plans are gearing up. UnitedHealthcare,(NYSE: UNH) the largest plan with about 3.4 million Medicaid recipients, announced this month it plans to add another 300,000 this year. While some patient advocates worry about the quality of managed care, the most powerful opposition to the states’ expansion plans this year is coming from hospitals, doctors and nursing homes.

Opposition by health care groups has held up plans in Maine and Louisiana to require Medicaid recipients to enroll in managed care plans. Elsewhere, in January, Mississippi became one of the latest states to institute managed care for Medicaid. But hospitals and doctors successfully lobbied to limit the program to 15 percent of Medicaid recipients and to end it in June 2012. The health industry also made sure managed care companies could not lower reimbursement rates to providers or reduce benefits to recipients. Those provisions left managed care companies little room to control costs. Medicaid managed care expansions are also being attempted in other states, including Texas, Michigan, Illinois, South Carolina and Florida.