2024 was a year of transition for Medicaid managed care. At the federal level, there were significant revisions in regulatory requirements relating to access to care and increases in transparency about MCO performance. At the state level, the end of the unwinding of the public health emergency continuous eligibility requirement meant the end of the MCO disenrollments driven by the unwinding. The results of the November election raise the question as to whether, under the new Administration, the federal regulatory changes will be implemented and federal budget cuts will drive additional disenrollments.
Congress
Congress enacted only one statutory change affecting Medicaid managed care in 2024. The Continuing Appropriations Act, P.L. 118-42, made permanent the fiscal incentive for Medicaid expansion states to collect remittances from MCOs that do not meet a minimum medical loss ratio requirement of 85 percent or more. There were no oversight hearings or reports on Medicaid managed care, although the Senate Finance Committee did issue an exceptional report on inadequate oversight of youth residential treatment facilities funded by Medicaid.
CMS
In May, CMS revised the regulations governing state contracting with MCOs. The revisions contain provisions intended to improve access and quality, including additional requirements relating to transparency about MCO performance. These changes are scheduled to be implemented over the next six years. CMS also issued regulations intended to reduce the maximum timeframes for MCO prior authorization decisions from 14 to 7 days and to require MCO reporting of approvals and denials. These new rules are effective January 1, 2026.
In September, CMS issued subregulatory guidance laying out the federal requirements relating to Medicaid’s comprehensive child health benefit (EPSDT) and best practices for implementation. The guidance includes detailed information on the delivery of EPSDT services through MCOs, including limits on the use of prior authorization to deny needed services. (The impact of MCO prior authorization requirements on access to EPSDT services was the focus of a May 2024 GAO report that found monitoring of MCO denials of EPSDT services by state Medicaid agencies, and oversight of state agencies by CMS, to be inadequate.). CMS also issued a 5-year Medicaid integrity plan that identifies managed care as “a critical priority for CMS’ program integrity work during FYs 2024 – 2028.”
In addition to expanding transparency requirements for states in the May managed care rule, CMS took an important step in advancing transparency by posting the Managed Care Program Annual Reports (MCPARs) for performance year 2023 on its website. The MCPARs, which states are required to submit annually, include MCO-specific information relating to quality and performance measures, sanctions, and appeals and grievances. Taken together, they have the potential to become a publicly-accessible database on MCO performance within and across states. (Of course, for this vision to be realized, states must actually submit the reports in a timely manner; a GAO review found that, as of December 2023, six states—FL, KY, NM, OR, TN, and VT—had not submitted the required MCPARs for 2022).
CMS did not lack for free advice about improving Medicaid managed care. The HHS Office of Inspector General made recommendations for improving access for MCO enrollees to behavioral health providers and, in a separate report, for improving compliance by states with the parity requirements for mental health and substance use disorder services. GAO made recommendations for improving the collection and analysis of data relating to appeals of MCO denials of services. And as noted above, GAO also made recommendations to CMS to improve oversight of state Medicaid agency monitoring of MCO prior authorization denials of EPSDT services. Finally, MACPAC, in its March report to Congress, made a number of recommendations to both CMS and Congress intended to improve oversight and transparency of denials of services and beneficiary appeals of those denials.
States
After several years of contentious debate, in April Oklahoma launched mandatory managed care for children, parents, pregnant women, and expansion adults, making it the 41st state (plus DC) to contract with MCOs for the delivery of Medicaid services. Connecticut, which is currently not among the 41, undertook a study to consider whether to resume contracting with MCOs after a 14-year hiatus. But there was also movement in the opposite direction. Minnesota decided to exclude for-profit MCOs from participating in its Medicaid managed care program. The legislature has also directed the state Medicaid agency to develop an implementation plan to give beneficiaries a fee-for-service option.
State procurement of MCO contractors is potentially a tool for accountability but it remains intensely competitive and litigious because it creates winners and losers. In Florida, a joint venture of CareSource and Spark Pediatrics has filed suit in state court challenging the outcome of the state’s 2023 procurement. In Kansas, Aetna is appealing a state court judge’s ruling against its challenge of the procurement that resulted in the loss of its risk contract. In Kentucky, the state Supreme Court upheld a lower court ruling rejecting a challenge by Anthem to its loss of a risk contract during the state’s 2019 procurement. And in Texas, three MCOs affiliated with children’s hospitals have asked state courts to reverse the state Medicaid agency’s decision to award their current risk contracts to subsidiaries of national for-profit firms.
GAO and OIG issued reports that included findings about state Medicaid agency policies relating to the performance of MCOs. As noted above, GAO reviewed MCO prior authorization policies as applied to EPSDT services; among other findings, GAO determined that only two of the five states it examined (MA and UT) had processes for reviewing the appropriateness of at least some of the MCO denials of services requested for children. OIG found wide variation in state standards for MCO network adequacy relating to maternal health, concluding that “many States are not fully leveraging Medicaid managed care coverage and access requirements to promote access to maternal health care.”
On the transparency front, there does not appear to have been much progress at the state level. A CCF scan of 12 state Medicaid agency websites found there was not enough data about individual MCOs to make it possible to identify high performers for children age 0 to 6 on access, quality, or reducing health disparities. There is even less transparency with respect to performance on a key financial metric, the medical loss ratio. A CCF scan of all managed care state agency websites found that, as of March, only nine states posted detailed MLR data that enable a comparison of MCO performance on administrative costs. (Surprisingly, Nebraska, which has established a Medicaid Managed Care Excess Profit Fund, is not among them).
The potential of transparency is illustrated by an adroit piece of investigative reporting done by Henry Brannan for Virginia Public Media. Like all managed care states, Virginia is required to post on its website the Annual Technical Report prepared by its External Quality Review Organization. The 2024 ATR included the results of a secret shopper survey that tested enrollee access to prenatal care at each of the six MCOs with which the state contracts; of 1,844 calls, only 13 resulted in an appointment within the state agency’s wait time standards. The reporter dredged these findings out of the report and followed up with the MCOs and the state Medicaid agency; their responses were telling.
Industry
For the second year in a row, the PHE unwinding was the focus of attention for the Medicaid managed care industry. Mass eligibility redeterminations continued through much of 2024, resulting in enrollment declines for Medicaid programs generally and in MCOs in particular. CCF analysis of earnings reports of the “Big Five” national Medicaid managed care parent companies found a drop of 3 million in net enrollment during the first three quarters of 2024, from 39.9 million to 36.6 million enrollees. Only Molina was able to post a net enrollment increase during this period. Of the three companies that reported revenues, two—Molina and UnitedHealthcare—reported gains in Medicaid revenues over this period.
The enrollment declines prompted industry expressions of concern that capitation rates were no longer sufficient for MCOs to meet the needs of the remaining enrollees, whom they argued had higher acuity and used services at a higher rate. Not all state Medicaid agencies agreed.
In its review of health plan financial performance in 2023, KFF reported that gross margins (the amount by which total premium income exceeds total claims costs) per enrollee for Medicare Advantage plans were more than 2.5 times as large as those for Medicaid MCOs, while simple medical loss ratios (claims as a share of premium income) were 87 percent for both MA plans and Medicaid MCOs. Actuaries at Milliman published an analysis of financial results for 2023 that found, for a sample of 186 Medicaid managed care companies composite results were: MLR of 87.1 percent and Administrative Loss Ratio of 7.9 percent. The remaining 5 percent of the companies’ $285.3 billion in Medicaid premium revenue was evenly split between underwriting gain and taxes and fees.
A point of emphasis for oversight of Medicaid managed care, both by public agencies and investigative reporters, was the use of prior authorization to deny services. As noted above, GAO, OIG, and MACPAC all issued reports and recommendations relating to MCO prior authorization policies and practices. Pro Publica published an investigation of the denial of applied behavioral analysis therapy for children diagnosed with autism by UnitedHealthcare MCOs.
Research
A popular topic was the use of Medicaid managed care contracting to advance policy priorities such as health equity, health-related social needs, and maternal health. Bailit Health assembled for State Health & Value Strategies (SHVS) a compendium of managed care contract provisions used by state Medicaid agencies to promote health equity. Also for SHVS, Bailit updated a catalogue of approaches to addressing health-related social needs of MCO enrollees. The National Academy for State Health Policy released a toolkit for how states can leverage managed care contracts to address the housing needs of enrollees. Researchers at the GW School of Public Health published a comprehensive analysis of maternal health provisions in Medicaid managed care contracts in the Milbank Quarterly. They also synthesized the results of seven studies supported by RWJF on opportunities for addressing social determinants of health in Medicaid managed care.
The intersection of Medicaid managed care and behavioral health also received attention. Researchers at RAND compared racial and ethnic disparities in the use of mental health care among Medicaid enrollees in managed care with those in fee-for-service and found that, over the period 2007-2015, Medicaid managed care did not reduce these disparities. A survey of state Medicaid managed care policies vis-à-vis substance use disorder found that most states allow MCOs to restrict coverage of treatment services. A study of prior authorization requirements for coverage of buprenorphine for MCO enrollees with opioid use disorder found wide variation across MCOs and states, with for-profit MCOs and MCOs contracting in Republican states more likely to require prior authorization.
MACPAC increased its attention to Medicaid managed care. In addition to its work on denials and appeals noted above, it also posted issue briefs on directed payments and prior authorization in both fee-for-service and managed care. Going forward, MACPAC will be examining the tools available to state Medicaid agencies and CMS for holding Medicaid MCOs accountable for performance.
As in previous years, KFF’s Annual Medicaid Budget Survey covering SFYs 2024 and 2025 provides a wealth of data points on state Medicaid managed care policies. The survey includes information relating to MLR requirements, capitation rate amendments, social determinants of health, and financial incentives to reduce health disparities as of July 1, 2024. In March, Health Management Associates posted data on Medicaid managed care spending in 2023. And in December, MACPAC updated MACStats to reflect managed care enrollment by state and eligibility group in FY 2022.
Last but certainly not least, in addition to the 12-state scan mentioned above, our colleagues at CCF posted detailed findings from 11 focus groups of parents of children enrolled in MCOs and network providers who serve children. Among the take-aways: many MCOs restrict access to care through narrow provider networks, cumbersome prior authorization requirements, and poor care coordination; access to specialty care, especially mental and behavioral health services, is limited; and the EPSDT benefit is not well understood by parents or pediatric providers.
Looking Ahead
Our closer is John Baackes, the retiring CEO of L.A. Care Health Plan, the country’s largest Medicaid MCO. This is from his exit interview with KFF Health News:
“What I’ve learned and experienced is that health care is part of social justice, and we have to think of it that way. Any other way of thinking of it is going to create winners and losers.“
You’re not likely to hear this framing on a “Big Five” earnings call or, for that matter, from the incoming administration. But it speaks succinctly to what Medicaid managed care, and Medicaid generally, can achieve when they work well.