Managed Care as Medicaid’s Administrative Architecture: Does It Still Provide Value to States?

Abstract

After three decades of expansion, managed care organizations (MCOs) — health insurance plans that contract with state governments — now finance and deliver care for more than 70% of Medicaid enrollees. Yet MCOs have largely assumed this role by default rather than design. As states brace for federal funding cuts and potentially large disenrollments in Medicaid, this report assesses the extent to which Medicaid managed care delivers value across its core functions: reducing financial risk for states; utilization management; network formation; care management; quality improvement; and paying for claims. We conclude that many of the functions MCOs perform, including care management, quality oversight, and utilization control, could be carried out more transparently and at potentially lower administrative cost through centralized, standardized processes. We examine alternative administrative approaches states could pursue to strengthen accountability, efficiency, and outcomes in the Medicaid program — and offer key questions for states to consider as they assess the value that MCOs bring to their programs.