This analysis is meaningful for three primary reasons:

• Medicaid managed care enrollment impacts MCO growth. For health plans, if the march to Medicaid managed care is finished, that eliminates one potential source of growth for Medicaid MCOs. MCOs would have less access to organic growth in the Medicaid market, reinforcing the need to capture market share in existing markets by sharpening cost control measures, enhancing care coordination, and bolstering preventive care. MCOs could also look to more innovative strategies and investments in telehealth platforms, data analysis tools, or patient portals.
• For providers, Medicaid managed care dynamics can impact payer mix. Just as payer mix from different lines of business impacts providers, payer mix between traditional Medicaid and managed Medicaid also impacts providers. In managed Medicaid, providers are typically working with multiple MCOs, which could increase the providers’ administrative burden. At the same time, MCOs typically support patients with non-clinical services, which could reduce the need for providers to offer certain redundant services.
• CMS is scrutinizing managed care practices across government LOBs. CMS is evaluating the effectiveness of managed care practices across government LOBs, including a variety of initiatives intended to maximize return on Medicaid funding specifically. For example, CMS is pushing states to streamline enrollment and renewal processes, as seen in the final rule Streamlining Medicaid, Children’s Health Insurance Program, and Basic Health Program Application, Eligibility Determination, Enrollment, and Renewal Processes.⁵

Steady growth in Medicaid MCO enrollment occurred from 2003 to 2008, increasing an average of 5% annually. 3 In 2008, we saw the start of a rapid uptick in MCO enrollment until 2016, increasing an average of 17% each year during that time.³ As we entered a more mature phase of MCO growth, from 2016 to 2019, enrollment slowed to an average of 0.9% each year.³ The rate of enrollment then had a small spike from 2019-2021, averaging an 11% annual increase in that period owing to the early phase of continuous enrollment during the public health emergency.³  Read on for more of our insights.

Hawaii, Michigan, Nebraska, Puerto Rico, and New Jersey lead the way regarding Medicaid MCO enrollment share. The first four have 100% of Medicaid beneficiaries enrolled in an MCO, with New Jersey just behind (96%).³ These high MCO enrollment rates reflect the state or territory's adoption of the managed care model and willingness to move care coverage to MCOs.

Leading states Hawaii, Michigan, and Nebraska all have statewide mandatory comprehensive managed care enrollment policies for low-income adults covered and not covered under the Affordable Care Act (ACA), children, and disabled enrollees (the three biggest eligibility groups by enrollment).⁶ New Jersey, the state's only option for any managed care, for these Medicaid enrollees, was for the state's comprehensive managed care program.⁷ In Puerto Rico enrollment is mandatory for low-income adults (covered and not covered under ACA) and disabled enrollees; however, it unclear if enrollment is mandatory or voluntary for eligible non-disabled children.⁷

In contrast, Arkansas (5%), Colorado (10%), North Dakota (27%) Massachusetts (41%), and Mississippi (61%) had the lowest MCO enrollment shares of the states that have employed the MCO model as of 2021.³ States with lower adoption rates either lack the mandates seen in other states, aren't statewide programs, or have alternate coverage options for eligible enrollees.​⁷

• Arkansas maintains three statewide MCO programs, and enrollment in these programs is voluntary for all eligible populations.⁷ Additionally, these three programs are Provider-led Arkansas Shared Savings Entities (PASSE) and are not led by a traditional private health plan like most MCOs.⁸
• In Colorado, the only source of state-sponsored comprehensive managed care comes from the Program of All-inclusive Care for the Elderly (PACE).⁷ PACE is a Medicare and Medicaid program that helps people meet their healthcare needs in the community instead of receiving institutionalized care and has strict eligibility requirements.⁹ These enrollment requirements limit the number of eligible individuals and consequently lead to low enrollment numbers.
• North Dakota maintains one statewide comprehensive care Medicaid program. Enrollment in that program is mandatory for only two discrete populations: American Indian/Alaska Native and individuals within the foster care system. For adults not covered under the ACA and a few other smaller populations, the state requires enrollment in a Primary Care Case Management Entity.⁷
• Massachusetts maintains a unique model in which low-income adults covered and not covered under ACA, children, and disabled beneficiaries required to enroll in statewide comprehensive managed care programs. These populations may be automatically enrolled in a Primary Care Accountable Care Organization, instead of a comprehensive MCO or ACO plan, the PCP they have used in the past utilized PCP is in that Primary Care ACO.¹⁰ Three of the state’s largest ACOs are enrolled in this Primary Care Model, which is a contractual relationship between an ACO and the state for the attributed Medicaid population.​¹⁰
• Mississippi maintains one statewide comprehensive Medicaid managed care program and reported mandatory enrollment only for low-income adults not covered under ACA and children. It does not indicate voluntary or mandatory enrollment for low-income adults covered under ACA and indicated enrollment mandates "varies" among disabled enrollees.¹²

While the overall enrollment trend in comprehensive Medicaid managed care is upward, some states are growing at a faster rate. The states that have seen the most growth in MCO enrollment share from 2016 to 2021 were the five shown in the graphic below.³

States that experience a rapid growth rate within Medicaid MCO enrollment typically do so for one of a few common reasons: 1) newly adopting the managed care model 2) expanding the MCO model geographically, 3) expanding MCO eligibility or 4) a change in reporting methodology. Further details on each of these dynamics is offered below.

Further details on each of these dynamics is offered below.

Reasons why a state may experience rapid growth in Medicaid MCO enrollment
 

• Adopting managed care: States logically see large increases in comprehensive Medicaid managed care enrollment upon implementation of a new MCO contract. North Carolina went from a primarily state-run Medicaid program to an MCO model operated through five MCO contracts in July 2021.¹¹ New Hampshire entered three new MCO contracts that began serving Medicaid members in 2019.^12​
• Expanding geographically: Other states may have historically limited the Medicaid managed care model based on geography, creating an opportunity for geographic expansion to drive an increase in Medicaid MCO enrollees. Missouri expanded its Medicaid managed care offerings from 54 counties to statewide in May 2017.¹³
• Expanding eligibility: States may experience an increase in Medicaid MCO enrollment directly correlated to the Medicaid expansion and overall Medicaid eligibility. For example, in 2018 Virginia expanded Medicaid to cover low-income adults who were not parents, increasing enrollment by about 400,000,¹⁴ and then expanded eligibility again in 2019¹⁵, under the ACA. Both expansions resulted in meaningful increases to the number of people eligible to enroll in Virginia's established managed care programs.
• Updating reporting methodology: Increased in Medicaid managed care may occur strictly as the result of methodology and calculation changes. Michigan updated their reporting methodology in 2020 to more accurately calculate overall Medicaid and Medicaid managed care enrollment. This resulted in a significant increase in the relative share of Medicaid beneficiaries in managed care between 2019 and 2020.³

The overall enrollment trend in comprehensive Medicaid managed care is upward. Once adopted, states tend to maintain or increase MCO managed care enrollment rates, but some states do experience a decline. The five states in the chart below have seen the greatest reduction from 2016 through 2021. ³

Overall, there were no decreases as significant as the Medicaid MCO enrollment increases, and the drops are attributable to: 1) states moving members to FFS Medicaid or ACO programs or 2) an increase in overall Medicaid enrollment growing the denominator. Further detail on each of these dynamics is offered below. 

The state with the largest reduction in Medicaid managed care enrollment, Mississippi (where enrollment fell by 8%), didn’t renew Medicaid MCO coverage during the public health emergency. Instead, the state Division of Medicaid moved enrollees on MCO plans who lost coverage due to circumstance or failure to update their eligibility information, to traditional fee-for-service Medicaid.¹⁶

In March 2018, Massachusetts began its fee-for-service Primary Care Accountable Care Organization program, in which beneficiaries were automatically enrolled if the PCP they used in the past was in that Primary Care ACO.¹⁰ This new program explains the dip in Medicaid MCO enrollment, as the state reported an enrollment increase from 0 to 339,000 members in Primary Care Case Management Medicaid and a 102,000 member decrease for comprehensive managed care for that same time.¹⁷

Texas saw its largest Medicaid MCO enrollment percentage decrease from 2020-2021.³ This can be attributed to the large increase, an additional 706,000, Medicaid enrollees due to the public health emergency. A much smaller increase (17,000) in Medicaid comprehensive managed care enrollment during this same time¹⁷, shrinking the overall MCO enrollment percentage. 

The MCO enrollment share decreases seen in Florida and Kentucky were small. Given that there was an increase in total number of enrollees in both states during this time, the percentage decrease can likely be attributed to an overall increase in Medicaid enrollees due to the public health emergency.¹⁷

When states adopt a managed care model for their Medicaid program, it tends to stick, but enrollment share can still increase or decrease based on certain dynamics.

What would increase Medicaid MCO enrollment share?​

• New Medicaid MCO contracts with mandates: States who sign a net new contract with an MCO and have mandatory enrollment for low-income adults, children, and disabled beneficiaries will see growth in the percentage of Medicaid enrollees enrolled in MCOs.
• Expanded eligibility or geography: If a state expands Medicaid MCO eligibility, the state would see an increase in MCO share of Medicaid enrollees. This increase will be more significant if the state has MCO enrollment mandates for new beneficiaries.

What could decrease MCO enrollment share?​

• Managed care options outside of MCOs​: If more states create alternative managed care options outside of MCOs (for example: Primary Care Case Management in Massachusetts), then membership from MCO plans can be transitioned to these alternative options. 
• Increases in overall Medicaid enrollment​: If a state has a substantial increase in Medicaid beneficiaries (for example, due to new eligibility standards) but no mandates or automatic attribution, then MCO enrollment share can decrease relative to the increase in overall Medicaid enrollment.

Select states have chosen to remain Medicaid MCO contract-free and self-administer their Medicaid managed care, often by partnering with local PCPs, health systems, and ACOs. Will they make the switch to MCO-managed Medicaid? It’s possible.

As CMS looks to maximize health outcomes and contain program costs, states will have to approach care in a more holistic and coordinated fashion.

States with less experience in managed care or value-based care could turn to the MCO model to help

facilitate the move away from fee-for-service driven incentive structures, in hopes of lowering overall spending and improving health outcomes.

Any of these states could also adopt an approach that is unique to their state to deliver on these results without transitioning to the MCO model. One of the defining features of the Medicaid program is its ability to have state-specific, unique models, such as Connecticut’s ASO contracts or the many 1115 waivers.¹⁸