Study: Benefits of Medicaid managed care unproven

Research on the topic is scant and inconclusive report says

0 | KanCare, Medicaid-CHIP

— A study of existing research on Medicaid managed care suggests that officials in Kansas and across the country may be overestimating the extent to which it can save money and lead to better health outcomes.

Michael Sparer is a professor at Columbia University’s Mailman School of Public Health. He recently completed a comprehensive review of the research done on Medicaid managed care for the Robert Wood Johnson Foundation. He concluded in a report published in September 2012, that managed care initiatives have not substantially reduced Medicaid costs nor improved the quality of care.

“The peer-reviewed literature on the cost implications of Medicaid managed care is quite thin, especially given the anecdotal claims of cost savings by policymakers at both the state and federal levels,” Sparer wrote.

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Michael Sparer, professor at Columbia University’s Mailman School of Public Health

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While a few studies found modest savings, Sparer said that virtually all the others he examined showed that Medicaid managed care initiatives were either cost neutral or “end up costing more than traditional fee-for-service programs.”

Many of the state-specific studies that showed cost savings and the report that summarized them were done by consulting firms on behalf of health plan associations, Sparer noted in the report.

Kansas Medicaid officials have estimated that Gov. Sam Brownback’s KanCare managed care initiative will reduce projected increases in Medicaid spending by at least $1 billion over the next five years. Currently, the program costs approximately $3.2 billion a year. The state is responsible for about $1.3 billion of that cost, the federal government the rest.

In an interview with the KHI News Service, Sparer said some savings are possible given that the state is seeking to start managing the care provided to its most expensive Medicaid populations – the elderly, disabled and chronically ill. But the existing evidence indicates policymakers in Kansas and elsewhere should temper their expectations, he said.

“State after state is promising significant decreases and I’m very skeptical that managed care is going to save the kind of money that people are talking about,” Sparer said. “It costs money to take care of older, sicker people and we’ve been sort of getting by on the cheap in a low-cost program like Medicaid. So, it’s hard to say we’re both going to do right by these people and save money at the same time.”

States that have achieved what Sparer refers to as “modest savings” in his report have done so in part by cutting provider rates, something that Kansas officials have vowed not to do. The contracts the state negotiated with three Medicaid managed care companies prohibit the companies from reducing provider rates in order to meet their cost-saving targets.

In addition to saving money, Brownback and others in his administration have said they expect KanCare to improve the quality of care provided to the approximately 380,000 Kansans on Medicaid, particularly for those high-cost, high-need populations.

Setting improved quality as a twin objective to reduced costs is laudable but may not be realistic, Sparer said.

“There are trade-offs between cost, access and quality,” he said. “If you are actually going to improve access so that you can improve quality – that could cost more money. I think there is a lot of evidence that suggests managed care could be a good way to go but it’s not magic. So, I think you really do have to be cautious in your estimates of how it’s going to play out.”

KHI News Service coverage of KanCare

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New KanCare info included on state website (11/20/12)
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KanCare Confidential (9/10/12)
KanCare contracts awarded (6/27/12)
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Hospital administrator to chair KanCare Advisory Council (3/29/12)
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KanCare bidders heavily courting Medicaid providers (3/19/12)
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