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DataWatch

Tracking Medicaid Managed Care In Rural Communities: A Fifty-State Follow-Up

Abstract

 
This study updates a 1997 study examining implementation of rural Medicaid managed care programs. Most states operate Medicaid managed care programs for their beneficiaries, but the types of programs vary across urban and rural settings. Over the past four years the number of rural counties covered by Medicaid managed care, including fully capitated programs, has grown, although primary care case management (PCCM) remains the predominant program type in rural areas. Health plan withdrawals from rural areas have led some states with rural capitated programs to provide financial incentives or develop alternative approaches, such as enhanced PCCM programs.

At the time of our first study, managed care programs in many states were still evolving. In addition, the managed care landscape has changed recently. Since 1997 there have been reports that some health maintenance organization (HMO) providers have ended Medicaid managed care contracts and that states are rethinking their reliance on fully capitated plans.³ At the same time, Congress passed the Balanced Budget Act (BBA) of 1997, giving states new authority to implement Medicaid managed care programs without a waiver, to contract with Medicaid-only health plans, and to contract with a single managed care organization (MCO) in rural counties. Implementation of the State Children’s Health Insurance Program (SCHIP) in states where this program is coordinated with Medicaid may have raised the number of covered lives in rural areas, making it possible to contract with MCOs. This study assesses the effect of these recent developments on the implementation of Medicaid managed care in rural communities and examines the extent to which states were able to roll out their programs as they had planned in 1997.

Data and methods. Between October 2000 and March 2001 we conducted semistructured telephone interviews with each state Medicaid managed care director or a knowledgeable colleague in the managed care division. We collected information on changes in rural implementation strategies since our first study, whether states were interested in or took advantage of the BBA provisions, the long-term stability of Medicaid managed care plans in rural areas, and whether the implementation of SCHIP has affected states’ ability to implement Medicaid managed care in rural areas. We also collected information on the types of programs operating at the county level and program enrollment data, when available. Respondents were mailed a copy of their interview to verify the information we had obtained.

Study Findings

Top Study Findings Discussion And Policy... NOTES

 
State-level changes in types of programs. Between 1997 and 2001 the number of states with rural counties that operated statewide managed care programs grew to twenty-eight (Exhibit 1). However, the nature of these programs has changed. In the past four years all but one of the nine states that expanded their Medicaid managed care programs statewide relied on mixed or PCCM programs. Two states that had statewide programs in 1997 had to drop managed care in some rural parts of the state by 2001.

County-level changes in types of Medicaid managed care programs. Over the past four years there has been an overall increase in the percentage of counties, both urban and rural, with Medicaid managed care programs (Exhibit 2). In 1997 some form of Medicaid managed care operated in 57 percent of nonmetropolitan counties, increasing to 74 percent in 2001. During this same period the percentage of urban counties with Medicaid managed care programs increased from 74 percent to 85 percent.

Medicaid beneficiary enrollment in managed care. We were able to obtain county-level managed care enrollment data for all but three states with Medicaid managed care programs (Exhibit 3). We found that 19.9 percent of the reported 15.2 million Medicaid managed care enrollees live in nonmetropolitan counties, a percentage that is strikingly similar to that of these same states’ rural populations (18.7 percent).⁴ As with county-level program participation, rural enrollees are most likely to be enrolled in a PCCM program.

Financial incentives. Of the states that maintained their original program goals, many implemented new strategies to encourage coverage of rural areas. Eight states established financial incentives or plan to do so immediately. Florida, for example, pays a higher percentage of historical fee-for-service (FFS) costs in rural areas (100 percent) than it pays in urban areas (88 percent). Michigan pays HMOs an additional monthly fee to cover persons in certain rural counties. Utah and Oregon plan to eliminate their geographic adjustment used to calculate capitation rates, effectively increasing payments in rural areas. Wisconsin increased rates in rural communities by establishing regional capitation rates.

Regional contracting. The number of states with statewide or regional contracting arrangements doubled in the past four years, from five states in 1997 to ten in 2001. Three other states encourage but do not mandate regional contracts. Typically, as part of a regional contract, MCOs must cover some surrounding rural areas if they wish to contract for urban areas. Like statewide contracting, regional contracting has the effect of expanding fully capitated managed care coverage into rural areas. However, regional contracts have not proved to be a panacea for every state that hoped to cover rural areas with fully capitated health plans. Regional contracting failed in one state because health plans were unable to establish networks in some areas because of a lack of providers. In another state HMOs were not interested in covering the rural areas because there were too few covered lives.

Partial capitation. Two states have implemented partial capitation as part of a rural strategy.⁵ Oklahoma implemented a separate Medicaid managed care program for most of its rural counties that relies heavily on partial capitation: Providers are paid a monthly capitation rate for primary and preventive care services. Also, Medicaid recipients are allowed to change primary care providers up to four times a year. This strategy was considered important in medically underserved areas so that new providers could more easily enroll Medicaid patients into their practices. New York State encourages partial capitation in some rural areas as a transition to full capitation.

Impact of the BBA on Medicaid managed care expansion. Eliminating the waiver requirements. The BBA sought to make it easier to implement Medicaid managed care programs by giving states new authority to require most recipients to participate in managed care plans with a state plan amendment (SPA) absent an 1115 or 1915(b) waiver of specific Medicaid laws.⁶ However, states may not mandate that children with special health care needs, Medicare-related beneficiaries, or Native Americans participate in managed care without first seeking a waiver.

Generally, we found that states were not interested in using this provision. Eighteen states chose not to use the SPA because they covered children with special health care needs under a waiver in their existing managed care programs. Ten states with 1115 demonstration waivers chose to continue to operate under their existing waivers, because it gave them more flexibility to expand coverage to additional eligible persons or otherwise tailor programs to meet state needs. We identified only nine states that were operating under an SPA or that had plans to do so in the immediate future. Kentucky is using an SPA for its PCCM program only. In one region of the state there is a fully capitated program, which is covered under an 1115 waiver that includes special-needs kids. Maine is operating its managed care program under an SPA but has a 1915(b) waiver to cover special-needs kids.

Medicaid-only health plans. Only three states were relying on the BBA provision authorizing them to contract with Medicaid-only health plans. Nineteen states that had contracts with such plans had them prior to the BBA, through an 1115 or 1915(b) waiver. In most states there was little rural or urban difference in where these plans operated. Only respondents from Utah and Minnesota noted that they had Medicaid-only plans that primarily served rural areas.

Eliminating plan choice. Historically, states have been required to offer recipients a choice of two health plans, to mandate participation in a fully capitated program. The BBA allows states to waive this requirement in rural areas, as long as the states ensure that recipients have a choice of at least two providers.⁷ However, states cannot implement this provision until the secretary of the Department of Health and Human Services (HHS) issues regulations defining rural. Although at the time we conducted the interviews the BBA had been in effect for more than three years, the regulations implementing this provision had not yet been finalized and have been furthered delayed until 16 August 2002.⁸ We asked respondents whether they would be interested in implementing this provision once the regulations were finalized. Four states, eager to expand full capitation into rural areas, petitioned the Centers for Medicare and Medicaid Services (CMS, formerly HCFA) for permission to include rural counties in a fully capitated program with only one plan, but their requests were denied until the final regulations were promulgated. One of these states abandoned its goal of developing rural capitation programs after the CMS rejected its request for a one-plan exception.

Three states noted that they had operated or were operating mandatory, fully capitated programs with only one choice of health plans in some counties under a previous 1115 waiver. Five other states expressed an interest in the one-plan rural exception but were waiting to see the final regulations. Three additional states noted that they had not considered that option because the regulations were not finalized or specifically mentioned that they did not want to mandate coverage without offering recipients a choice of plans.

Health plan exodus. Although the number of rural counties with fully capitated Medicaid managed care programs grew between 1997 and 2001, our interviews suggest that this trend may not continue. Respondents in a number of states told us about the recent exodus of health plans. In twelve states the exodus has been more extensive or there has been a differential impact on less populated areas. In Washington, for example, health plans pulled out of both urban and rural areas, but the impact was greater in rural areas. In many of the rural Washington counties there was no other choice of health plans, so the HMO program had to be offered on a voluntary basis: 37 percent of rural counties, compared with 17 percent of urban counties, have a voluntary HMO program. In New York the plan pullout was not perceived as a rural problem because the number of people affected was more extensive in urban areas. However, plan pullouts created bigger "holes" in rural areas since there were no other plans to pick up enrollees, and some counties returned to FFS. Similar problems occurred in Michigan, Colorado, and Missouri, where the exodus has created vacuums in some rural counties, forcing these counties to move from mandatory to voluntary capitation or, in some cases, back to PCCM or FFS.

The exodus of health plans was more of an urban phenomenon in eleven states where fully capitated Medicaid managed care programs mainly or only covered urban areas. In eight other states there was little differential impact between rural and urban areas.

Resulting program changes. Ten states changed their Medicaid managed care programs because of the changes in health plan participation. For example, Maine and Vermont ended their fully capitated programs altogether and are now concentrating on PCCM models. Two states have had to drop their original goals to establish a statewide capitation program because there were too few enrollees or providers to make this practical in some rural areas. Another three states ended HMO programs that operated in selected rural areas. Mississippi, for example, had offered participants an HMO as an alternative to its PCCM program in approximately ten rural counties. This program ended because there were not enough covered lives to make HMO participation financially viable. Kentucky ended its capitated program in one region that covered some rural counties because of an inability to reach agreements with HMOs over rates, and Ohio ended its only rural capitated program when the one physician-hospital organization (PHO) in the county ended its managed care contract.

Four states began relying more heavily on PCCM programs as alternatives to, or in addition to, full capitation. Oregon began relying more heavily on PCCM programs in rural areas when health plans began pulling out. Texas now offers a PCCM program as an alternative to full capitation in all of its expansion sites, as required by state law. Massachusetts returned to PCCM in its two nonmetropolitan counties when HMOs pulled out. Thirteen states, recognizing the precarious nature of their HMO programs, or wanting to enhance the care provided under their traditional PCCM program, have developed or are considering developing enhanced PCCM programs. These states are using some of the managed care strategies typically found in fully capitated plans, such as disease management, nurse triage telephone lines, and case management, to improve the care provided to Medicaid recipients.⁹

Impact of SCHIP. In thirty-three states some or all of the SCHIP populations are covered by the same plans and providers as offered to Medicaid-eligible children.¹⁰ However, the SCHIP expansion has had little impact on the operation of fully capitated Medicaid managed care programs in rural areas because the increased number of children covered has not been large enough to affect health plans’ participation. In eight states, however, respondents noted that the SCHIP expansion had a positive impact, because health plans liked having the additional covered lives. In two of these states, Wisconsin and Minnesota, respondents specifically mentioned that the new coverage encouraged plans to cover some rural areas.

Discussion And Policy Implications

Top Study Findings Discussion And Policy... NOTES

 
Nationally, the number of rural counties with some form of Medicaid managed care has grown. However, our analysis finds that although more counties have mandatory managed care programs, fewer states have mandatory programs in all participating counties now than was the case four years ago.

Looking only at the change in rural Medicaid managed care between two points in time could lead to a false impression. While the number of rural counties with fully capitated programs has increased since 1997, states’ more recent experiences suggest that health plans are pulling out of rural areas just as they are pulling out of urban ones. The recent stagnation in the commercial HMO market and large premium increases, coupled with the states’ budgetary crises, may make it difficult for states to find commercial HMOs willing to participate in Medicaid managed care arrangements at prices states can afford.¹¹

Advantages of one-plan contracting. Theoretically, some states may be able to use the BBA provisions for one-plan contracting in rural areas once the final regulations have been issued. Given health plans’ increased reluctance to cover rural areas, the one-plan exception could be a major factor in states’ ability to operate fully capitated programs in rural areas. However, the failure of the HHS secretary to issue regulations defining rural has forced some states to rethink their Medicaid managed care strategies—either by changing mandatory programs to voluntary ones or by re-focusing their energies on PCCM.

Improving PCCM. Many of the states that are focusing on PCCM are trying to use some of the lessons learned from capitation to improve their PCCM programs. For example, we are hearing of more states that have imported traditional health plan strategies into their PCCM programs. These strategies have particular relevance for rural Medicaid beneficiaries, as PCCM programs are the most prevalent form of managed care in rural areas. In addition, care management strategies may be well suited for rural communities, as they can relieve overworked physicians from some of the nonmedical components of their practice (such as arranging for or coordinating transportation); can improve access to specialty care, which may not be readily available in rural areas; and can improve the compliance of Medicaid recipients with care regimens (for example, disease management programs). To achieve these goals, care management and disease management programs must be adequately funded by either the health plan or the state. The current efforts to reduce Medicaid costs could negate any potential benefits that these programs might offer.

Although there is variation across states in the reliance on fully capitated models and the ability to sustain such programs over time, it appears that managed care models can be implemented and maintained in rural areas of the United States. Research should now focus on how such models of care have affected the beneficiaries they are designed to serve.

Editor's Notes

 
Pam Silberman is associate director for health policy analysis at the Cecil G. Sheps Center for Health Services Research in Chapel Hill, North Carolina. Stephanie Poley is a research associate there. Kerry James is study supervisor for Coda, Inc., in Durham, North Carolina. Rebecca Slifkin is director of the North Carolina Rural Health Research and Policy Analysis Center of the Sheps Center.

This work was supported by Cooperative Agreement no. 1-U1C-RH-00027-01 with the federal Office of Rural Health Policy. The authors thank state Medicaid officials and their project officer Joan Van Nostrand for assistance on many facets of this work. Very preliminary results of this study were presented at the National Rural Health Association meeting, May 2001, in Dallas, Texas.

NOTES

Top Study Findings Discussion And Policy... NOTES

 

1. S. Felt-Lisk et al., "Medicaid Managed Care in Rural Areas: A Ten-State Follow-Up Study," Health Affairs (Mar/Apr 1999): 238–245.
2. R.T. Slifkin et al., "Medicaid Managed Care Programs in Rural Areas: A Fifty-State Overview," Health Affairs (Nov/Dec 1998): 217–227.
3. S. Felt-Lisk, The Changing Medicaid Managed Care Market: Trends in Commercial Plans Participation (Washington: Kaiser Commission on Medicaid and the Uninsured, May 1999); and R.E. Hurley et al., Partnership Pays: Making Medicaid Managed Care Work in a Turbulent Environment (Princeton, N.J.: Center for Health Care Strategies, January 2000).
4. We would have liked to compare the proportion of Medicaid eligibles that are in Medicaid managed care across urban and rural counties but were unable to get total Medicaid eligibles from the states at the county level.
5. South Carolina also has a partial capitation program, but it is statewide and not part of a rural managed care strategy.
6. 42 U.S. Code, sec. 1396v.
7. 42 U.S. Code, sec. 1396v(a)(3)(B).
8. Federal Register 66 (17 August 2001): 43090. The notice delays the proposed regulations until 16 August 2002. The new proposed regulations can be found at Federal Register 66 (20 August 2001): 43613. Rural has been defined in the proposed regulations as any area that does not fall into a metropolitan statistical area, as defined in the Medicare regulations at 42 CFR sec. 412.62(f)(1)(ii).
9. J. Rawlings-Sekunda et al., "Emerging Practices in Medicaid Primary Care Case Management," June 2001, aspe.hhs.gov/health/reports/PCCM/index.htm (14 February 2002); and V. K. Smith et al., Exemplary Practices in Primary Care Case Management: A Review of State Medicaid PCCM Programs (Princeton, N.J.: Center for Health Care Strategies, June 2000).
10. Twenty-six states that operate fully capitated Medicaid managed care programs cover SCHIP children through a Medicaid expansion or combination of Medicaid expansion and separate state program. Seven of the states with fully capitated Medicaid managed care programs operate stand-alone SCHIP programs, but these states use the same delivery system for both their Medicaid and their SCHIP children.
11. J. Gabel et al., "Job-Based Health Insurance in 2000: Premiums Rise Sharply While Coverage Grows," Health Affairs (Sep/Oct 2000): 144–151; and V. Smith et al., Medicaid Budgets under Stress: Survey Findings for State Fiscal Years 2000, 2001, and 2002 (Washington: Kaiser Commission on Medicaid and the Uninsured, October 2001). States with large numbers of enrollees in fully capitated health plans reported that increased HMO premiums were one of the factors driving up Medicaid expenditures. States did not intend to rely on capitation contracts as a means of reducing future Medicaid costs but reported the goal of implementing disease management programs as potential methods of controlling rising Medicaid expenditures.

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