Medicaid
Medicaid was established in 1965 under the U.S. Social Security Act to provide
health care and long-term care services and support to low-income Americans. Although
jointly funded by federal and state governments, Medicaid is a state-operated
and state-implemented program. Subject to federal laws and regulations, states
have significant flexibility to structure their own programs in terms of eligibility,
benefits, delivery of services, and provider payments. As a result, there are
56 separate Medicaid programs—one for each U.S. state, each U.S. territory,
and the District of Columbia.
The federal government guarantees matching funds to states for qualifying Medicaid
expenditures based on each state’s federal medical assistance percentage
(FMAP). A state’s FMAP is calculated annually and varies inversely with
average personal income in the state. The average FMAP across all jurisdictions
is currently about 59%, and ranges from a federally established FMAP floor of
50% to as high as 74%.
The most common state-administered Medicaid program is the Temporary Assistance
for Needy Families program (TANF), which covers primarily low-income mothers
and children. In states that have elected to participate, Medicaid expansion
provides eligibility to nearly all low-income people under age 65 with incomes
at or below 138% of the federal poverty line. Another common state-administered
Medicaid program is for ABD Medicaid beneficiaries, which covers low-income
persons with chronic physical disabilities or behavioral health impairments.
ABD beneficiaries represent a growing portion of all Medicaid recipients, and
typically use more services because of their critical health issues. Additionally,
the Children's Health Insurance Program (CHIP) is a joint federal and state
matching program that provides health care coverage to children whose families
earn too much to qualify for Medicaid coverage. States have the option of administering
CHIP through their Medicaid programs.
Every state Medicaid program must balance many potentially competing demands,
including the need for quality care, adequate provider access, and cost-effectiveness.
To improve quality and provide more uniform and cost-effective care, many states
have implemented Medicaid managed care programs. These programs seek to improve
access to coordinated health care services, including preventive care, and to
control health care costs. Under Medicaid managed care programs, a health plan
receives capitation payments from the state. The health plan, in turn, arranges
for the provision of health care services by contracting with a network of medical
providers. The health plan implements care management and care coordination
programs that seek to improve both care access and care quality, while controlling
costs more effectively.
While many states have embraced Medicaid managed care programs, others continue
to operate traditional fee-for-service programs to serve all or part of their
Medicaid populations. Under fee-for-service Medicaid programs, health care services
are made available to beneficiaries as they seek that care, without the benefit
of a coordinated effort to maintain and improve their health. As a consequence,
treatment is often postponed until medical conditions become more severe, leading
to higher costs and more unfavorable outcomes. Additionally, providers paid
on a fee-for-service basis are compensated based upon services they perform,
rather than health outcomes, and therefore lack incentives to coordinate preventive
care, monitor utilization, and control costs.
Medicare
Medicare is a federal program that provides eligible persons age 65 and over
and some disabled persons with a variety of hospital, medical insurance, and
prescription drug benefits. Medicare is funded by Congress, and administered
by the Centers for Medicare and Medicaid Services (CMS). Medicare beneficiaries
may enroll in a Medicare Advantage plan, under which managed care plans contract
with CMS to provide benefits that are comparable to original Medicare. Such
benefits are provided in exchange for a fixed per-member per-month (PMPM) premium
payment that varies based on the county in which a member resides, the demographics
of the member, and the member’s health condition.
Since 2006, Medicare beneficiaries have had the option of selecting a new prescription
drug benefit from an existing Medicare Advantage plan. The drug benefit, available
to beneficiaries for a monthly premium, is subject to certain cost sharing depending
upon the specific benefit design of the selected plan.
Medicaid Management Information Systems
Because Medicaid is a state-administered program, every state must have mechanisms,
policies, and procedures in place to perform a large number of crucial functions,
including the determination of eligibility and the reimbursement of medical
providers for services provided. This requirement exists regardless of whether
a state has adopted a fee-for-service or a managed care delivery model. MMIS
are used by states to support these administrative activities. Although a small
number of states build and operate their own MMIS, a far more typical practice
is for states to sub-contract the design, development, implementation, and operation
of their MMIS to private parties. Through our Molina Medicaid Solutions segment,
we actively participate in this market.
