Massachusetts: Medicaid Managed Care Pays Hospitals More

A recent report from the Massachusetts Office of Inspector General (pdf) found that Medicaid managed care plans paid hospitals and physicians up to 38 percent more than Medicaid fee-for-service plans, which raised "serious questions about the viability" of a managed care structure's ability to save healthcare costs.

Massachusetts' Medicaid program, MassHealth, runs through two different programs: the MassHealth Managed Care Organization program and the Primary Care Clinician plan. The PCC plan is a FFS managed care program, while the MMCO program involves capitated managed care plans.

The MMCOs contract directly with hospitals and physicians at negotiated reimbursement rates instead of regulated reimbursement rates or FFS rates like PCC plans. The Massachusetts OIG found that across inpatient, outpatient and professional services, MMCOs paid much more to providers than PCCs. For inpatient services, MMCOs reimbursed 28 percent more than PCCs; for outpatient services, 38 percent more; and for professional services, 33 percent more.

In total, MMCOs paid $1.32 billion to hospitals and other providers in fiscal year 2011 — 33 percent higher than the PCC equivalent reimbursement of $995.2 million and costing state taxpayers roughly $328 million.

The Massachusetts OIG concluded that "while it is theoretically possible that the MMCO program produces enough savings in utilization to outweigh the large differentials in reimbursement rates, there is little evidence to support that possibility. In fact, studies of the private market have indicated that managed care savings come primarily from price reductions and not from decreases in utilization."

The results buck the national trend in which states are shifting toward capitated Medicaid managed care plans. The Massachusetts OIG recommended the state adopt some type of regulation for FY 2012 MMCO capitation rates, which it said could result in more than $200 million in annual savings for the state.

More Articles on Medicaid Managed Care:

3 Managed Care Companies Obtain Kansas Medicaid Contracts

Ohio Judge Halts Medicaid Managed Care Contracts at Aetna's Request

Medicaid Managed Care: 6 Perspectives on its Effectiveness

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