As Colorado faces a billion-dollar TABOR-driven budget shortfall, spending for Colorado Medicaid is in jeopardy. Because Medicaid costs about a third of the state budget, strategies for controlling cost sound appealing — even though Medicaid is the most efficient form of health coverage available and per capita spending in Colorado is already less than the national average. States often shift to managed care in search of a fiscal solution. The managed care model proposes that by giving an entity limited funding up-front, the entity will be incentivized to keep patients healthy and avoid more costly services, like emergency room visits and inpatient care. Where Medicaid is concerned, states that look to managed care may also aim to relieve themselves of the administrative burden of enrolling providers, coordinating care, creating formularies, undertaking utilization management, and communicating about the Medicaid program.
Despite these theoretical advantages, as demonstrated below, research shows that states do not save with managed care and struggle to provide meaningful oversight. Additionally, evidence is lacking that managed care improves health outcomes. In addition, because most managed care entities are for-profit corporations, those scarce state dollars devoted to Medicaid go to pad the profits of for-profit entities, rather than to health care services. This issue brief examines the available research on Medicaid cost management, finding that the realities of managed care models don’t meet the giant promises made.
