Medicaid--a joint federal-state program that provides health benefits to over 70 million people with low income--accounted for $375 billion of federal spending and $230 billion of state spending in fiscal year 2017. States typically use two types of payment systems to provide those benefits: fee for service and managed care. Under the fee-for-service system, states reimburse health care providers for the services that they deliver to beneficiaries. By contrast, under Medicaid managed care, states pay a fixed per capita fee, or capitation payment, to private health insurance plans or to provider groups, known as managed care organizations (MCOs), that provide services to enrollees. Some MCOs provide those services themselves, but others reimburse health care providers for services that they deliver. The scope of services covered by MCOs ranges from a small subset of services--for example, nonemergency medical transportation or case management (the approving and monitoring of health care services for an individual)--to all health care services that its enrollees might need. States might implement Medicaid managed care for a variety of reasons. Two of the most often cited are to increase the predictability of spending and to improve the coordination of care. Proponents of managed care suggest that competition between MCOs reduces spending and improves outcomes. To date, however, studies of managed care have not found consistent evidence to support those claims. This report presents information on managed care's enrollment and spending and analyzes the various factors that affect them. The Congressional Budget Office estimates that between 1999 and 2012 (the most recent year for which data on beneficiaries are available), the portion of all Medicaid beneficiaries who were eligible for full benefits that was enrolled in managed care (that is, the enrollment rate) grew from 63 percent to 89 percent, while the share of total Medicaid spending that went to managed care increased from 15 percent to 37 percent (see the figure on page 2). The high rate of enrollment in managed care prompted the authors of one study to describe it as "the predominant delivery system for Medicaid." Indeed, the large percentage of Medicaid beneficiaries already enrolled in MCOs has led some analysts to speculate that there is limited capacity for further expansion of the program. But managed care's relatively small share of total Medicaid spending suggests that further growth in managed care's share of spending, if not its enrollment, is possible. Thus, analyses, such as this one, of patterns of enrollment in and spending for managed care may aid policymakers considering proposals to change the role of managed care in Medicaid and the analysts charged with evaluating those proposals.
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