Abstract
States are increasingly adopting Medicaid managed care in efforts to address budgetary concerns. The intent is that by releasing Medicaid oversight to private organizations, competition will drive down healthcare expenditures so that savings may be passed to the state. Yet there are concerns that this competitive solution to cost savings might compromise safety-net hospitals. Managed care organizations cut costs by restricting the providers that enrollees are allowed to see. If movement in Medicaid patients disrupts safety-net hospitals’ casemix, this could affect their ability to cross-subsidize care. This study estimates the impact of Medicaid managed care on safety-net hospitals by exploiting a Florida pilot program that required Medicaid recipients in five counties to enroll in managed care. The results suggest this mandate led to a small reduction in safety-net hospitals’ average ratio of payment-to-cost. There is also some evidence that the effect on safety-net hospitals was disproportionate. This disproportionality was such that hospitals nearest the margin were pushed the furthest towards the edge.
This is a preview of subscription content, log in via an institution to check access.
Similar content being viewed by others
Notes
With the exception of emergency departments.
Per the Medicare Access and CHIP Reauthorization Act of 2015.
Under the ACA, Medicaid Disproportionate Share Hospital (DSH) payments were originally set to be reduced by $500M in FY2014, $600M in FY2015 and FY2016, $1.8B in FY2017, $5B in FY2018, $5.6B in FY2019, and $4B in FY2020. Medicaid DSH cuts have since been delayed. In the revised schedule outlined in the Medicare Access and CHIP Reauthorization Act of 2015, Medicaid DSH allotments will be reduced by $2B in FY2018, $3B in FY2019, $4B in FY2020, $5B in FY2021, $6B in FY2022, $7B in FY2023, and $8 in both FY2024 and FY2025.
PSNs’ fee-for-service rates were originally set to phase into capitated rates at a designated time. However, this change never occurred due to strong lobbying.
Over time, the list of Medicaid HMOs and PSNs available to Medicaid enrollees fluctuated. There were also changes in enrollment breakdowns, with increasing relative enrollment in PSNs. Additionally, an “Opt Out” program was made available so that individuals could use (what would have been) the dollar value of their Medicaid benefits to enroll in employer-provided coverage. There was little participation in this program.
http://safetynetsflorida.org/ (Accessed February 2014).
Other sources of payment account for 5.2% of the full sample.
Individuals without a recorded Florida county of residency account for 3.5% of the full sample.
A limitation of these uninsured statistics is that the payment and cost levels provided by the Kaiser Family Foundation include, but are not specific to, hospitals.
References
Aizer, A., Currie, J., & Moretti, E. (2007). Does managed care hurt health? Evidence from Medicaid mothers. Review of Economics and Statistics, 89(3), 385–399.
Baxter, R. J., & Mechanic, R. E. (1997). The status of local health care safety nets. Health Affairs, 16(4), 7–23.
Bragdon, T. (2011). Florida’s Medicaid reform shows the way to improve health, increase satisfaction, and control costs: The heritage foundation. http://www.heritage.org/research/reports/2011/11/floridas-medicaid-reform-shows-the-way-to-improve-health-increase-satisfaction-and-control-costs.
Coughlin, T. A., Holahan, J., Caswell, K., & McGrath, M. (2014). Uncompensated care for the uninsured in 2013. In K. F. Foundation (Ed.) Kaiser family foundation. https://kaiserfamilyfoundation.files.wordpress.com/2014/05/8596-uncompensated-care-for-the-uninsured-in-2013.pdf.
Cunningham, P. J. (1999). Pressures on safety net access: The level of managed care penetration and uninsurance rate in a community. Health Services Research, 34(1 Pt 2), 255–270.
Currie, J., & Fahr, J. (2005). Medicaid managed care: Effects on children’s Medicaid coverage and utilization. Journal of Public Economics, 89(1), 85–108.
Cutler, D. M., McClellan, M., & Newhouse, J. P. (2000). How does managed care do it? Rand Journal of Economics, 31(3), 526–548.
Duggan, M. (2004). Does contracting out increase the efficiency of government programs? Evidence from Medicaid HMOs. Journal of Public Economics, 88(12), 2549–2572.
Duggan, M., & Hayford, T. (2013). Has the shift to managed care reduced Medicaid expenditures? Evidence from state and local-level mandates. Journal of Policy Analysis and Management, 32(3), 505–535.
Federal Medicaid Disproportionate Share Hospital (DSH) Allotments. (2014). Kaiser family foundation. http://kff.org/medicaid/state-indicator/federal-dsh-allotments/.
Gold, M. (1999). Making Medicaid managed care research relevant. Health Services Research, 33(6), 1639–1650.
Gold, M., Sparer, M., & Chu, K. (1996). Medicaid managed care: Lessons from five states. Health Affairs (Millwood), 15(3), 153–166.
Grogan, C. M., & Gusmano, M. K. (1999). How are safety-net providers faring under Medicaid managed care? Health Affairs, 18(2), 233–237.
Grogan, C., & Patashnik, E. (2003). Between welfare medicine and mainstream entitlement: Medicaid at the political crossroads. Journal of Health Politics Policy and Law, 28(5), 821–858.
Haberer, J. E., Garrett, B., & Baker, L. C. (2005). Does Medicaid managed care affect access to care for the uninsured? Health Affairs, 24(4), 1095–1105.
Herring, B., & Adams, E. K. (2011). Using HMOs to serve the Medicaid population: What are the effects on utilization and does the type of HMO matter? Health Economics, 20(4), 446–460.
Holahan, J., Zuckerman, S., Evans, A., & Rangarajan, S. (1998). Medicaid managed care in thirteen states. Health Affairs, 17(3), 43–63.
Horton, S., McCloskey, J., Todd, C., & Henriksen, M. (2001). Transforming the safety net: Responses to Medicaid managed care in rural and urban New Mexico. American Anthropologist, 103(3), 733–746.
Hurley, R. E., & Somers, S. A. (2003). Medicaid and managed care: A lasting relationship? Health Affairs, 22(1), 77–88.
Kim, A. S., & Jennings, E. (2012). The evolution of an innovation: Variations in Medicaid managed care program extensiveness. Journal of Health Politics Policy and Law, 37(5), 815–850.
Lipson, D. J., & Naierman, N. (1996). Effects of health system changes on safety-net providers. Health Affairs, 15(2), 33–48.
Medicaid Managed Care Enrollment Report. (2011). Centers for Medicaid & Medicare Services. http://www.medicaid.gov/Medicaid-CHIP-Program-Information/By-Topics/Data-and-Systems/Downloads/2011-Medicaid-MC-Enrollment-Report.pdf.
Medicaid Reform: Application for 1115 Research and Demonstration Waiver (2005). http://ahca.myflorida.com/Medicaid/medicaid_reform/waiver/pdfs/medicaid_reform_waiver_final_101905.pdf.
Medicare Access and CHIP Reauthorization Act of 2015 §412 (2015). https://www.congress.gov/114/plaws/publ10/PLAW-114publ10.pdf.
Sparer, M. S., & Brown, L. D. (2000). Uneasy alliances: Managed care plans formed by safety-net providers—Will Medicaid managed care be a nail in the coffin or a healthy stimulus for safety-net providers and plans? Health Affairs, 19(4), 23–35.
Trendwatch Chartbook 2015. (2015). Table 4.4: Aggregate Hospital Payment-to-Cost Ratios for Private Payers, 1993–2013 (Ed.): American Hospital Association. http://www.aha.org/research/reports/tw/chartbook/2015/table4-4.pdf.
Waitzkin, H., Williams, R. L., Bock, J. A., McCloskey, J., Willging, C., & Wagner, W. (2002). Safety-net institutions buffer the impact of Medicaid managed care: A multi-method assessment in a rural state. American Journal of Public Health, 92(4), 598–610.
Author information
Authors and Affiliations
Corresponding author
Additional information
Thanks to Sarah Hamersma, Jonathan Hamilton and Ann Stevens for helpful comments, and Roger Blair and the Florida Center for Health Information and Policy Analysis for assistance in obtaining the data used in this study. The Florida Agency for Health Care Administration disclaims responsibility for any analysis, interpretations, or conclusions created as a result of the data provided. Support for this project was provided by Grant Number T32HS022236 from the Agency for Healthcare Research and Quality (AHRQ) through the Quality, Safety, and Comparative Effectiveness Research Training (QSCERT) Program.
Rights and permissions
About this article
Cite this article
Woodworth, L. A Leak in the Lifeboat: The effect of Medicaid managed care on the vitality of safety-net hospitals. J Regul Econ 50, 251–270 (2016). https://doi.org/10.1007/s11149-016-9312-8
Published:
Issue Date:
DOI: https://doi.org/10.1007/s11149-016-9312-8