State Payments for Medicaid Managed Care Vary Widely

By John Holahan, the Urban Institute

The first nationwide comparison of how much states pay for Medicaid managed care shows more than a two-fold variation in rates. A new survey by the Urban Institute measures capitation rates, which refer to the amount per Medicaid enrollee that the state pays to the managed care plan per month.

Of the 36 states responding to the survey, the highest managed care capitation rates occur in Connecticut, Hawaii, Kentucky, Massachusetts, New Hampshire, New Mexico, Texas, Utah, and the District of Columbia; the lowest rates occur in California, Florida, Georgia, Indiana, Kansas, Nevada, South Carolina, Tennessee, and Wisconsin.

Rates vary for many reasons. States with low Medicaid fee-for-service rates tend to have lower capitation rates. States where Medicaid managed care enrollment is predominantly in urban areas generally have higher rates. States with strict eligibility criteria are also likely to have higher capitation rates.

On the other hand, states that put a priority on cost savings (versus increased access) in moving Medicaid recipients to managed care tend to have lower capitation rates. States with more mature managed care plans also tend to have lower capitation rates. Finally, states where Medicaid managed care is mandatory tend to have lower capitation rates.

What does the variation in the Medicaid capitation rates paid by states imply for health care consumers? If states with low rates have many plans participating and satisfactory levels of access, then rates in other states may be too high. But states are probably getting what they pay for and this is most likely reflected in the number of managed care organizations participating and in levels of beneficiary access.

For a copy of Medicaid Managed Care Payment Methods and Capitation Rates: Results of a National Survey contact the Urban Institute at 202-261-5666. For further information, visit the Urban Institute website at www.urban.org.