State Medicaid expansions as a result of the Affordable Care Act (ACA) have once again put a spotlight on different delivery reforms that could potentially improve outcomes and lower costs.  In November 2011, with federal approval from the Center for Medicaid and Medicare Services (CMS), Kentucky transitioned about 550,000 Kentucky Medicaid patients from a fee-for-service delivery system with a primary care case management component (PCCM) into risk-based managed care coverage administered by three external Managed Care Organizations (MCOs), Centene, Coventry, and WellCare.  This policy change was viewed as a pre-cursor to Kentucky’s Medicaid expansion in January of this year.  

The transition to Medicaid managed care we analyze took place in seven of Kentucky’s eight Medicaid regions which accounted for about 69 percent of the state’s Medicaid population.  The remaining region, which consists of Louisville (Jefferson county) and 15 surrounding counties, has operated its own locally formed risk-based Medicaid MCO, known as Passport, since the state began the Kentucky Health Partnership Program demonstration in 1995.

The purpose of this paper is to evaluate the early impacts of this change in Medicaid delivery on enrollee utilization, expenditures, and health outcomes.  Our primary source of data for the analysis is administrative data from the Kentucky Medicaid program covering enrollment and health care claims from 2010-2013.  This data allows us to implement a difference-in-differences approach, where we compare the utilization of Medicaid recipient in those regions impacted by the managed care expansion with the utilization of Medicaid recipients in the Passport region already covered by a MCO.

Our preliminary results focus on three forms of utilization: inpatient admissions, outpatient visits, and emergency room (ER) visits.  We find that the introduction of the private MCOs led to significant reductions in inpatient and ER utilization among both children and non-elderly adult Medicaid enrollees and no change in outpatient utilization.  We supplement these results with an analysis of the universe of hospital discharges in Kentucky over the same time period and find that avoidable hospitalization rates did not go up for Medicaid enrollees living in the “treated” counties outside of the Louisville area.

The results of this evaluation should be of interest to academics as well as state policymakers looking to introduce or expand managed care within their own Medicaid programs as a means of improving quality and lowering costs.