2023 marked an inflection point in the growth of Medicaid managed care.  Enrollment in MCOs, which had climbed continuously in both 2021 and 2022 due largely to the continuous coverage policy in place during the Public Health Emergency, plateaued and then headed downward, due largely to the PHE unwinding.  Much uncertainty remains as to how many of those terminated from Medicaid will re-enroll, and how long of a break in coverage they will experience. Against this backdrop, there was no shortage of notable developments affecting Medicaid managed care during 2023 viewed through the lens of children and families.

CMS

Much of the oxygen in the CMCS room was taken out by the PHE unwinding. (CMCS is the Center within CMS that administers the Medicaid and CHIP programs at the federal level).  Among other things, CMCS gave states new policy flexibilities  (“(e)(14)s”) in an effort to reduce the coverage losses for procedural reasons and to mitigate related disruptions in MCO enrollment.  Two of these options were MCO-specific: one, adopted by 32 states, to collaborate with MCOs to update beneficiary contact information, and one, adopted by 10 states, to automatically reenroll an eligible individual into an MCO up to 120 days after the termination of Medicaid eligibility.

Some oxygen remained for other actions.  CMCS at long last aligned its organizational chart with the reality of Medicaid as an MCO contractor, creating a new Managed Care Group. CMS issued a final rule implementing the requirement that all states report Child Core Set metrics beginning in 2024, but it did not take the opportunity to require reporting on an MCO-specific basis as well as on an aggregate, statewide basis. The agency proposed two rules, Ensuring Access to Medicaid Services and Managed Care Access, Finance, and Quality, with important implications for Medicaid managed care. As of this writing, neither of these proposals has been issued as final rules; however, the final version of CMS’s December 6, 2022 proposal to improve prior authorization processes in Medicaid and other programs is under review at OMB.

CMCS’s management of Medicaid managed care was the focus of three new oversight initiatives.  The HHS Office of Inspector General examined prior authorization denial rates in 115 MCOs, published the results by MCO, parent company, and state Medicaid agency, and made recommendations for CMS to improve state oversight of prior authorization denials.  The Chair of the Senate Special Committee on Aging followed up on the OIG report with a letter to CMS asking, among other things, whether CMS has taken steps to ensure that enrollees are informed about their appeal rights.  The Energy & Commerce majority wrote to CMS asking what steps the agency is taking to ensure that state Medicaid agencies do not make payments to Medicaid MCOs on behalf of beneficiaries who have died or who are concurrently enrolled in two state Medicaid programs.  And CMS, perhaps coincidentally, issued an Informational Bulletin on “Managed Care Monitoring and Oversight Tools.”

States

The dominant issue for all states—managed care and fee-for-service alike—was the unwinding of the PHE continuous coverage requirement.  As noted above, CMS offered states some MCO-related “flexibilities” to mitigate procedural terminations, and a number of states took them up.   Fourteen managed care states took up the option to reinstate eligibility effective on the date of termination in the case of those who were disenrolled for procedural reasons and were redetermined eligible during a 90-day reconsideration period.  This allowed the states to use federal matching funds to make retroactive capitation payments to MCOs during that period for those enrollees who were procedurally terminated.

According to KFF, no state joined the Medicaid MCO Club this year; membership held steady at 40 states and the District of Columbia. (Oklahoma is scheduled to launch its managed care program in 2024).  KFF also reports that there was no change in the number of states (18) that relied on revenues from MCO taxes to help pay their share of Medicaid program costs.  (Iowa’s MCO tax takes effect in 2024).

Procurements remain contentious and demanding for state Medicaid agencies.  Incumbent MCOs don’t like to lose their share of the Medicaid market, and potential new entrants don’t like to be kept out, sometimes leading to litigation.  For the agencies, the resulting  uncertainty can undercut policy reforms. Nonetheless, despite the unprecedented demands of the unwinding, six Medicaid agencies launched procurements in 2023:  Florida, Georgia, Kansas, Michigan, New Hampshire, and Virginia.  Together, these states accounted for nearly 15 percent of the Medicaid managed care market at the end of 2022.

Investigative reporters continued to illuminate the workings of Medicaid managed care in individual states.  California HealthLine documented the barriers Medicaid enrollees in California face in accessing specialists for needed care and the disruption in financial protection that can occur when beneficiaries move from one county to another.  The Lever reported on a highly problematic subcapitation arrangement in Florida affecting children’s access to speech therapy. The Atlanta Journal-Constitution exposed the inability of foster care children and youth enrolled in an MCO to access needed mental health care.  And the Lund Report examined the large surpluses accumulated by nonprofit MCOs in Oregon during the pandemic.

MCO Industry

The PHE unwinding was the dominant issue for MCOs as well as for state Medicaid agencies. MCOs have a clear financial interest in minimizing the number of enrollees who are terminated from Medicaid (and therefore disenrolled from their MCO) for procedural reasons.  Despite this incentive and the availability of numerous “flexibilities” for state agencies to coordinate beneficiary outreach efforts with MCOs, net Medicaid enrollment in the “Big Five” national managed care companies dropped by a total of 2.5 million during Q2 and Q3, the first six months of the unwinding.

In the midst of the unwinding-driven enrollment declines, protecting and expanding market share during procurements took on even more importance, especially for the publicly-traded companies whose investors expect growth.  In Tennessee, for example, Centene reportedly turned to the legislature for assistance in obtaining a Medicaid MCO contract that it had failed to secure during the state’s procurement.

Among the issues raised by Centene competitors was the company’s settlements with 17 states relating to allegations of overbilling by its Pharmacy Benefits Manager.  In February the California Attorney General announced a $215 million settlement with the company.

In July, the HHS Office of Inspector General issued a report analyzing denials of prior authorization by 115 MCOs operating in 37 states in 2019.  The OIG found that the average denial rate was 12.5 percent, and that 12 of those MCOs had denial rates higher than 25 percent, and, in a victory for transparency, it named them and their parent companies.  In response, the Chairman of the Senate Finance Committee and the Ranking Member on the House Energy and Commerce Committee sent letters to each of the seven parent companies (Aetna, AmeriHealth Caritas, CareSource, Centene, Elevance, Molina Healthcare, and United Healthcare) asking, among other things, whether the company imposes prior authorization requirements on EPSDT services.

Research 

Much of the research published in 2023 relating to Medicaid managed care for children and families falls into one of three areas:  maternal health, children and youth with special health care needs, and social determinants of health.  Here’s a selection:

On maternal health, The Commonwealth Fund posted a groundbreaking analysis by researchers at George Washington University of the extent to which Medicaid agency risk contracts with MCOs incorporate best practices from pre-pregnancy through postpartum.  The Institute for Medicaid Innovation published a report on MCO initiatives to improve prenatal and child health among Medicaid enrollees.  A MACPAC Issue Brief reviewed barriers to access by Medicaid beneficiaries to midwives and birth centers, including in managed care.  Researchers at the Urban Institute continued their ongoing examination of the impact of North Carolina’s transition to Medicaid managed care on, among other things, maternal health outcomes.  A Research Letter in JAMA Network examined variation in maternity “kick payments” made by states to MCOs to supplement capitation payments.

Children and youth with special health care needs (CYSHCN) were the subject of a number of studies.  The National Academy for State Health Policy conducted a scan of provisions in state agency contracts with MCOs relating to CYSHCN.  Researchers at Emory University examined the relationship between quantitative MCO network adequacy standards and CYSHCN access to specialists, finding no association between the adoption of the standards and visits to mental health professionals or other specialists.

On social determinants, KFF tracked SDOH policies in state contracts with MCOs.  The Center for Health Care Strategies published a 12-state scan of how Medicaid programs finance MCO activities to address health-related social needs. University of Minnesota researchers published a proposal in Health Affairs for a Social Drivers of Health bond to finance Medicaid MCO interventions.  The Institute for Medicaid Innovation developed a SDOH toolkit for MCOs, state Medicaid agencies, and community-based organizations.

Other notable Medicaid managed care research: State Health and Value Strategies updated its compendium of state policies, as reflected in managed care contracts and procurement RFPs, to promote health equity in Medicaid. The National Academy of State Health Policy conducted a scan of behavioral health performance measures and payment incentives used by the state Medicaid programs in contracting with MCOs.  KFF compared health insurer financial performance across Medicaid, Medicare, employer group, and individual markets.  MACPAC assessed the role of external quality review in Medicaid managed care.  Families USA found limited evidence on access to care and care coordination as well as a lack of oversight and accountability tools.  And Georgetown CCF examined the absence of transparency about maternal health performance of individual MCOs in 12 states.

Looking Ahead

There is much that is uncertain about Medicaid managed care in 2024, but a few things are known.  The enrollment declines resulting from the PHE unwinding will continue; the only issue is when and at what level the disenrollments will bottom out (the answer will vary from state to state and from MCO to MCO).  By June 2024, CMS is required to review state implementation of EPSDT requirements through MCOs and identify any gaps and deficiencies in state compliance.  And states are required to report Child Core Set metrics to CMS by the end of December of 2024 following procedures set forth in subregulatory guidance.  Although this reporting will (regrettably) not be MCO-specific, in the 41 managed care states (including D.C.) the MCOs will necessarily be the primary source of the metrics measuring the quality of care provided to children and families through Medicaid.