Panel Paper:
Contracting for the Health of It: Examining the Relationship between States’ Medicaid Managed Care Caseload and Health Care Quality
*Names in bold indicate Presenter
The practice of contracting out governmental services in the United States has increased in recent decades in an effort to reduce government’s financial expenditures and to meet rising calls for social service reform. These reform efforts are particularly salient for Medicaid, as states have great deal of discretion on the program’s scope. State run Medicaid programs undertaking measures to reduce expenditures are often faced with the consequences of prioritizing efficiency, namely maintaining service quality.
One popular method states choose to mitigate Medicaid costs is to contract with managed care organizations (MCO’s). MCO’s are systems, comprised of both private and non-profit firms, that arbitrate approval for patients’ health care use. These firms are able to deny payment for health care services that are not deemed medically necessary in order to contain costs. The level of MCO involvement varies by state and year, with some states having no MCO’s present and others contracting with MCO’s for all Medicaid beneficiaries. Currently, MCO’s oversee aspects of two thirds of all Medicaid beneficiaries’ health care in 39 states (Garfield et al., 2017).
Proponents of MCO’s taut the reduced or fixed costs provided contractually. Opponents point out potential problems with MCO’s, which include uneven organizational missions, lack of competitive contracting, unclear performance measurements, and the uncertain organizational capacity and accountability of MCO’s (Portz, Reidy, & Rochefort, 1999). The process of contracting out social services is challenging to successfully complete and is often dependent on environmental factors outside of the control of both the principal and agent (Romzek & Johnston, 2002). The focus of this paper is on the varying degrees that states contract with MCO’s for the administration of Medicaid services, and whether increases in the administration of state’s Medicaid programs through MCO’s impacts the quality of health care provided.
I exploit state policy differences on the utilization and caseload of MCO’s in order to assess their relationship to the quality of health care rendered. Using data from The Centers for Medicare and Medicaid Services (CMS), supplemented with publicly available political, managerial, and economic variables, I examine associations between states’ MCO use against annual measures of health care quality. Key quality variables explored include measurements of mental illness treatment and percent of Medicaid recipients receiving annual exams. This research contributes to the literature on contracting, program performance, and Medicaid policy.
Garfield, R., Hinton, E., Cornachione, E., & Hall, C. (2018). Medicaid Managed Care Plans and Access to Care: Results from the Kaiser Family Foundation 2017 Survey of Medicaid Managed Care Plans. Kaiser Family Foundation.
Portz, J., Reidy, M., & Rochefort, D. (1999). How Managed Care is Reinventing Medicaid and Other Public Health Care Bureaucracies. Public Administration Review, 59(5), 400–409.
Romzek, B., & Johnston, J. (2002). Effective contract implementation and management: A preliminary model. Journal of Public Administration Research and Theory, 12(3), 423–453.
