Medicaid's role surrounded by the many market for health care

INTRODUCTION

Mounting interest in the Medicaid Program for the poor and disabled is fueled by reports that it have become the single largest State expenditure, pays for one-sixth of health charge nationwide, and is a perennial budget issue surrounded by State legislatures (National Association of State Budget Officers, 2006).

Beyond experience of rising aggregate spending, little is known in the order of Medicaid's role as a purchaser of services. A paucity of data have been identified as a enclosure to the effective regulation of a program that, in 2003, served 42 million citizens at an expense of $276.2 billion (1) (Rowland and Tallon, 2003). Knowledge of the payer mix in condition care market is also a prerequisite for analyzing policy issues such as finding the right price for the purchase of services, encouraging improvements in quality, and predicting impact on industry organization and finances.

This article combines multiple information sources to present the first comprehensive analysis of Medicaid's role in the plentiful markets for strength care. We open by apportioning Medicaid spending among 30 provider markets contained by the acute care, LTC, and manage care sector. We then estimate Medicaid's share of respectively market. So far as we know, in attendance are no similarly detailed examinations of the roles played by Medicare or private plans.

We find that Medicaid plays two distinct roles as a purchaser. In 21 markets, where on earth Medicaid payments total $159.1 billion, Medicaid represents a modest share of overall provider revenue. We term this role "Medicaid surrounded by the market." In the other nine market, where Medicaid payments total $95.5 billion, Medicaid is the dominant payer. We residence this role "Medicaid is the market." In insert, there are momentous examples where Medicaid is the dominant purchaser in a submarket even though it has a modest share of a market overall. We explore the implication of the different roles on payment policy, industry society, data availability, and talent of care.

CONCEPTUAL FRAMEWORK

This analysis draws on and extends standard concepts from the economics and robustness services research literature on market definition and bazaar dynamics.

Definition of Markets

We use the terms souk and provider category of service interchangeably, reflecting the pervasive effect that legal definition have on the constraint and supply of health keeping. In other industries, defining a market typically involves analysis of cross-elasticities of constraint and supply (Glick, Cameron, and Mangum, 1997). For example, are bottled water and cola drinks in alike market? Analysts can investigate this interrogate by measuring the extent to which high prices for bottled water result within consumers shifting to cola and in cola suppliers entering the bottled water business.

Although no directive prevents a cola company from selling bottled water, frequent laws require license before specific robustness care services can be provided. Moreover, affairs of state agencies--Medicare, Medicaid, and others--are major purchasers of vigour care, and the services they buy are habitually described specifically in statute and regulation. To be sure, some provider boundaries are permeable. Both hospitals and ambulatory surgical centers (ASCs) bestow outpatient surgeries, for instance. Even this example, however, underscores the boundaries between market. Most procedures performed within ASCs are less costly than like procedures performed within hospitals, and this has be true for years (U.S. Government Accountability Office, 2006). Yet hospitals have absolutely not been pushed out of the outpatient surgery business.

Health nurture markets can also be defined geographically, and national averages, in point of fact, mask considerable flux at the State level. For example, Medicaid plans can buy hospital attention to detail directly from hospitals or indirectly through managed thought plans. States such as Arizona, Tennessee, and New Mexico spend large percentage of their Medicaid budgets on managed meticulousness plans, while other States have no manage care at adjectives (Centers for Medicare and Medicaid Services, 2006). States with substantial manage care can be expected to enjoy smaller shares of the fee-for-service (FFS) market for inpatient assistance. Though the extent of inter-state variation is beyond the breathing space of this study, the differences among States in how they purchase form care would be a fruitful nouns for further examination.

We aggregated market into the acute, long term, and manage care sector, using traditional groupings (Table 1). Because Medicaid purchases managed precision services directly, we examine this sector separately rather than combining it beside the FFS acute care sector or attempting to drill down into purchases by manage care organization (MCOs) of hospital care, prescription drugs, etc.

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Marketplace Dynamics

The standard conceptual framework for studies of bazaar composition is to assume that each buyer and peddler manages revenue and cost to maximize profits. This framework continues to be adjectives in analysis the behavior of private-sector purchasers and of many providers, including providers that may be not for profit, but nevertheless inevitability revenue to exceed cost in direct to keep their doors widen.

For Medicaid plans, however, revenue and cost are separate topics and profit has no designation. We therefore conceive of Medicaid plans facing annual fixed-dollar budget constraints and next maximizing the volume of services provided to their beneficiaries. The budget constraint is commonly explicit, e.g., a line item within legislative appropriations or an agency budget. In a more perfect world, the Medicaid agency might after strive to maximize the improve ment within health status achieve by its beneficiaries. In practice, however, such a goal is exceedingly difficult to put into operation. Instead, we take in an intense focus on access to care, specifically, on the volume of services provided (Quinn, 2006).

A second difference from the standard model is that Medicaid purchases are almost always made at administered prices. These prices are typically public and available to all providers on like terms, which until not long have especially rarely included performance-based incentives. They also tend to be rigid in that they are not slickly or frequently adjusted. In contrast, purchases by private plans normally turn on prices that are confidential, changeable, erratic from provider to provider, and reflect incentives base on utilization, quality, or other criteria. Private plans mostly do business only beside providers in their networks, while a Medicaid Program usually purchases services from anyone of a mind to accept its price. Although providers must be enrol in Medicaid to be salaried, enrollment requirements are typically minimal, except for rare experiments surrounded by selective contracting.

On the supply side, Medicaid purchases services from dozens, hundreds, or even thousands of providers, depending on the market. Each provider have three decisions to clear: (1) whether to enter or exit the market because of Medicaid, (2) whether to enroll as a Medicaid provider, and (3) how much Medicaid business to pursue. In keeping near the standard model, we expect these decisions to be base largely on how average Medicaid payments compare with average provider costs. If a provider have excess capacity (an considerable assumption, but often a modest one), the provider has a financial incentive to embezzle Medicaid so long as payment covers average mutable cost, even if it does not cover average total cost. (Total cost equals the sum of variable and fixed costs. Variable costs include supplies, drugs, and direct thinking salaries, while fixed costs include depreciation, building expense, and rule salaries.) To stay contained by business, of course, providers must cover not merely average variable cost, but also average total cost.

Though the marketplace influence of most individual providers is modest, provider associations can wield considerable influence on how administrative prices are set by State legislature and Medicaid agencies. This is a third difference from the standard model. The political economy of Medicaid market is beyond the scope of this study, but we file its importance surrounded by gaining a full good judgment of marketplace dynamics.

In sum, our conceptual model is that Medicaid sets administered prices inside well-defined markets, subject to State budgetary conditions, near a goal of purchasing as copious services as possible from providers that respond so long as Medicaid payment covers at smallest their average variable cost.

Characterization of Medicaid Role

We develop two characterizations of Medicaid's role inwardly a market. The first is term Medicaid in the marketplace and applies to those markets dominated by Medicare and private plans. In these market, Medicaid tends to represent a modest share (under 20 percent) of provider revenue.

In purchasing other category of health protection, however, Medicaid is the market. This is one and only a slight exaggeration; when one payer's share exceeds 42 percent, that fact alone qualify a market as importantly concentrated under Federal Government guidelines (Hyman and Kovacic, 2004). This characterization applies to some market in their entirety and to some submarkets where on earth Medicaid has a mainly high share.

Characterizing more than $200 billion of monetary activity within just two ways is a simplification, and one that does not apply equally all right to every market. On the together, however, we were struck by how okay these simplified characterizations captured Medicaid's role contained by particular market. We discuss these observations after we define market and estimate market shares.

STUDY DESIGN AND METHODS

This study comprised three analytical steps: (1) specifying market, (2) estimating Medicaid spending by market, and (3) estimating Medicaid's share of total spending in respectively market. Our essential approach be to gather spending background from as many sources as possible, after contrast and combine those sources to arrive at the estimates in Table 1.

In this section we document our data sources and proposal an overview of how the estimates were made. Full details on the methodology, including sources for respectively market, are available on request from the first author.

Data Sources

Eight notes sources were analyzed: (1) the National Health Expenditure Accounts (NHEA), (2) CMS Form 64 spending background, (3) CMS Form 372 spending data on Medicaid waiver services, (4) the Medicaid Statistical Information System (MSIS), (5) the Medical Expenditure Panel Survey (MEPS), (6) spending tabulations by provider category from nine States (2), (7) bazaar studies (often done by provider associations) for 16 markets, and (8) the Economic Census. The spending info in Table 1 sum to the CMS-64 total for Federal fiscal year 2003. (3) Because of differences among notes sources in bazaar definitions and time period, we show market share estimates as 10-point ranges. For example, the Medicaid share of the souk for physician services is shown as 5-15 percent, encompassing estimates based on the NHEA (7 percent), MEPS (8 percent), and the American Medical Association (13 percent).

Making Estimates

For 18 market, spending data be based at tiniest in fragment on the CMS-64 data. However, some chain items on the CMS-64 include quite different provider category. For waiver services, we therefore used the CMS-372 reports to compile spending information by provider category from all 252 waiver programs. The information were from 2002, so we applied percentage splits from 2002 to the CMS-64 waiver spending total from 2003. For market where payments be made both inside and outside of waivers, we combined CMS-64 and CMS-372 data. Examples include personal assistance, skin management, and skilled home vigour care.

In some cases (e.g., sight supplies, therapies, and behavioral vigour carveouts), data by provider category be not available from the CMS-64 or the CMS-372, but we were competent to estimate Medicaid spending from other Federal Government sources such as MSIS and MEPS. In the remaining cases (e.g., ambulance, ASCs, durable medical equipment [DME]), we distilled our estimates from the best available evidence, including extrapolations from State-level spending data, interpolations from national all-payer spending notes, and industry studies.

To estimate market shares, our first-line source be the NHEA, followed by MEPS. However, these sources were repeatedly not specific enough for our purposes. For 17 market, our estimates reflect other sources, outstandingly industry studies. For four small markets (other contemplation services, case nouns, other waiver services, and other carve-outs) we made assumptions based on Medicaid shares contained by related markets.

MEDICAID SPENDING AND MARKET SHARES

Table 1 presents estimates of Medicaid spending and marketplace shares. In the following discussion, we offer highlights of the estimates that are not available from standard sources.

Acute Care Sector

Medicaid spending in the 17 acute keeping markets totaled $121.5 billion, approaching one-half of total Medicaid spending. In comparison next to the CMS-64 data, Table 1 provides tentative detail on spending for community mental health centers; public robustness agencies; non-ambulance transportation, such as wheelchair vans; ambulance services; therapists (physical, job, speech-language and hearing); eyeglasses and other vision supplies; and ASCs. Hospital inpatient diligence continues to be the single largest Medicaid expenditure, despite the growth in managed prudence and in a variety of outpatient alternatives. It accounts for one-sixth of all Medicaid spending. Prescription drugs represented another 10 percent of spending in 2003, while payments for physician services represented 4 percent. In a program the size of Medicaid, it is personage how even small percentages of total spending represent hundreds of millions, or even billions, of dollars in payments for once in a blue moon studied services such as non-medical transportation, ambulance services, office-based therapy services, and an assortment of types of clinic services.

The acute care sector is dominated by Medicare and the private plans. Except for the prescription drug and dental market, the consumer's share is modest. For most markets, Medicaid's share is smaller number than 20 percent.

Mental health is the personage exception. Medicaid provides 75-85 percent of payments to community mental health centers, as okay as 15-25 percent of funding for inpatient psychiatric facilities. A Federal study that took a broader perspective (including also professional services, psychotropic drugs, and fastidiousness in broad hospitals) found that Medicaid provides 27 percent of total funding for mental health thought. When payments from other agencies are included, 50 percent of mental health funding comes from State and local government. Their role, and especially that of Medicaid, has grown steadily over days gone by decade (Mark et al., 2005).

The market share background in Table 1 apply to provider market broadly defined, but Medicaid's share of important submarkets can be significantly sophisticated. Examples are obstetrics within the hospital and physician market, where Medicaid pays for 41 percent of adjectives births (Merrill and Steiner, 2006), children's hospitals, where Medicaid pays for 50 percent of inpatient days (National Association of Children's Hospitals and American Academy of Pediatrics, 2006); sanctuary net hospitals, where on earth Medicaid represents 37 percent of revenue (National Association of Public Hospitals and Health Systems, 2004); anti-psychotic drugs, where Medicaid pays for nearly 80 percent of retail pharmacy prescriptions (Duggan, 2003); psychiatric support for children and adolescents, where Medicaid represents 42 percent of pediatric patients served by mental condition programs (Pottick et al., 2004); and care for empire with AIDS, more than one-half of whom own Medicaid coverage (Weil, 2003).

LTC

Medicaid spending in the 10 LTC markets totaled $92.9 billion, or one-third of total Medicaid spending. In comparison next to the CMS-64, Table 1 presents detailed estimates on payments for personal assistance, adult time services, case regulation, residential support, skilled home health perfectionism, DME, and miscellaneous waiver services.

Many of these services are paid for below home and community-based waivers, which give States broad discretion to cover services that can prevent placement surrounded by residential facilities, such as nursing services and intermediate care services for the mentally retarded (ICF-MRs). In recent years, spending on these waivers has grown almost twice as hastily as Medicaid spending in general, on the other hand only a few sources provide essential data. It is set, for example, that three-quarters of waiver spending goes to programs serving folks with mental retardation and developmental disabilities (MR/DD). Almost adjectives of the remainder is spent on programs for people need help due to age and/or disability. Nationwide enrollment contained by waiver programs totaled 978,155 people contained by 2003, with annual spending per participant averaging $35,888 in the MR/DD waivers and $7,933 in the aged/disabled waivers (Kitchener et al., 2006).

Table 2 presents background on the services that waiver programs pay for. The highest categories are mature day services, personal assistance, and residential support. Adult morning services emphasize habilitation, specifically, training in the activities of daffy living. Essentially all of these waiver payments are in MR/DD waivers. Two-thirds of payments for assisted living arrangements and other forms of residential support are also in MR/DD waivers. (4) Two-thirds of waiver payments ~or personal assistance, instead, are in aged/disabled waivers.

Our estimates distinguish between personal assistance (help next to bathing, dressing, and other activities of on a daily basis living) and skilled home health perfectionism (skilled nursing care and/or therapy). Available information sources often comingle the two types of guardianship, which in certainty may be provided by the same agencies. Nevertheless, near are important differences between the market in tenet and in practice. While both Medicare and Medicaid must cover skilled care, Federal statute tightly limits the Medicare benefit for personal assistance while making it an not compulsory benefit for Medicaid Programs. States may also cover personal assistance under an HCBS waiver, and almost adjectives do (Kitchener, Ng, and Harrington, 2005). While Medicare providers must be agencies primarily involved in providing skilled care, Medicaid providers usually need not contribute skilled care and may be individuals, including relatives members (Summer and Ihara, 2005).

In practice, the Medicare benefit for services contained by the home emphasizes skilled exactness, often during repossession from a hospitalization, while the Medicaid benefit emphasizes personal assistance, normally on a continuing basis. The difference comes through within the data: Among beneficiaries unloading either skilled attention to detail or personal assistance, the median length of home health service is seven times longer for Medicaid (339 days) than for Medicare (47 days) (National Center for Health Statistics, 2005).

A similar distinction matter in the open market for nursing facility services. Medicare pays for skilled nursing care after a hospital stay; average length of stay (LOS) is 24 days and payment exceeds $300 a time (Medicare Payment Advisory Commission, 2005; American Health Care Association, 2005). Medicaid, meanwhile, is the major funder for population needing intermediate perfectionism. LOS is measured in months and years and return rates average $100-$130 a day (Grabowski et al., 2004). A massive gray zone exists at the definitional boundary between skilled nursing care and intermediate consideration, however. We therefore speak of one flea market for nursing facility services, but we will return to the distinction between the submarkets.

Overall, Medicaid is the single largest payer for LTC, representing 30-40 percent of payments. Its share is particularly luminary for ICF-MR services and personal assistance. The presence of Medicare is felt contained by the markets for nursing facility support, skilled home health prudence, and DME. The other major sources of funding for LTC are typically consumers. Consumers (or their families) provide 35 percent of the funding for mature day services, for example (Cox, Starke, and Holmes, 2005). In the LTC market, private plans play a minor role--just 5-15 percent of spending across the sector.

Managed Care

Medicaid spending on managed thinking was $40.2 billion, or 15 percent of Medicaid total spending. This percentage is in contrast beside national data that show that 59 percent of Medicaid beneficiaries be enrolled surrounded by managed trouble in 2003 (Centers for Medicare & Medicaid Services, 2006). The adjectives disconnect has two explanations. First, the standard definition of Medicaid manage care includes 6 million beneficiaries enrol in primary thought case regulation (PCCM) plans in which primary guardianship providers (typically physicians) are paid a small monthly charge for coordinating the care received by Medicaid enrollees, beside services such as hospital care continuing to be compensated on an FFS basis (Garrett and Zuckerman, 2005). Because adjectives services are paid FFS and the PCCM is not at financial risk for utilization, this is fairly a loose definition of managed prudence. In our analysis, PCCM fees and other services provided to PCCM enrollees are included within the an assortment of acute care market.

Second, the 17 million Medicaid enrollees in comprehensive, capitation-funded plans operate by MCOs tend to be children and their able-bodied parents. More expensive populations--the elderly and people next to disabilities--continue to be largely the responsibility of FFS Medicaid.

Medicaid has a 20-30 percent share of the countrywide market for comprehensive manage care, though general variation exists at the State even. Spending by Medicaid MCOs, like spending on acute effort in nonspecific, can be presumed to be heavily weighted toward hospitals, prescription drugs, and physician care, but no further detail is available.

In 2003, Medicaid also spent an estimated $2.9 billion on manage care carve-out plans for behavioral form care. Sixteen States reported beneficiaries enrol in these plans (Centers for Medicare and Medicaid Services, 2006). Medicaid's share of this marketplace (5-15 percent) is less than its share of mental form services overall. Another $600 million was spent on miscellaneous manage care carve-out plans, such as dental services.

MEDICAID'S ROLE AS A PURCHASER

In Table 3, we characterize respectively market by Medicaid's influence as a purchaser. In most cases, the characterization reflect market share. In three cases (nursing services, inpatient mental health services, and adult hours of daylight services) we characterize the market as dominated by Medicaid even though the program's open market share is under 50 percent. For nursing services, long Medicaid LOS means that Medicaid pays for 70 percent of bed-days (Grabowski et al., 2004). (Medicaid's influence is larger in the submarket for intermediate carefulness than in the submarket for post-acute precision, however.) For inpatient mental health services, State mental health policy (Medicaid plus other agencies) affects more than one-half of industry revenues. For full-size day services, Medicaid is by far the single largest payer.

Medicaid in the Market

Most, but not adjectives, of these markets are for acute supervision services. These services tend to be traditional health effort, increasingly high-tech, with a medium role for physician decisionmaking. The services received by Medicaid beneficiaries are similar to those received by other populations: office visit, hospital stays, drugs, and dental checkups.

In most of these markets, Medicare and the private payers set the gait. For example, Medicare is the single largest payer to hospitals, physicians, DME suppliers, and ASCs, and its payment methods and rates recurrently serve as benchmarks for other payers (Dyckman and Hess, 2003). Data on industry organization and finances are usually at hand. Medicaid is just one among several influences on whether providers enter the market, how the industry is organized, the breathing space of services offered by providers, and the quality of effort.

Much of the Federal regulatory framework, which was established when Medicaid played a much smaller role contained by the health carefulness system, continues to fit these markets resourcefully. Coordination of benefits law requires that Medicaid be the payer of later resort, for example. As well, within defining adequacy of Medicaid payments, Federal decree specifically compares access to services by Medicaid beneficiaries with access by the standard population (Social Security Act, [section] 1902 (a) (30) (A)).

In setting payment rates, Medicaid Programs can, within effect, presume the availability of services and then set rates simply high plenty that providers will incur the incremental costs of serving Medicaid beneficiaries. This is exactly what we see in the market for hospital services, where on earth Medicaid payment rates are consistently more than average inconsistent costs, but less than average total costs (American Hospital Association, 2005).

In submarkets where on earth Medicaid has a larger share than within the overall market, low pay rates may be less sustainable and adjustment necessary. This prediction is also validate in the souk. For example, the average State sets overall physician fees 21 percent below Medicare levels, but make an exception for obstetric services, where the split is only 6 percent (Zuckerman et al., 2004).

This observation--that Medicaid may retribution more generously when it have a larger market share--is not predicted by the standard financial model, which predicts that purchasers with high market shares will earnings lower prices (Hirshleifer, 1988). This behavior does make sense, however, within a model where Medicaid is see as maximizing the volume of precision subject to a fixed budget constraint. In this case, Medicaid donation must cover average variable cost if beneficiaries are to own any access to care at adjectives. If that access is to continue over time, later Medicaid also needs to cover some portion of average fixed cost. When Medicaid have a larger part of the marketplace, its responsibility to cover average fixed cost is commensurately larger and its rates therefore difficult.

This reasoning was explicitly employed by the Mississippi Medicaid Program when the State set 2008 rates for inpatient hospital exactness. Citing "... the importance of Medicaid funding in ensure continued access to acute mental health nurture, ..." rates were set so that payment-to-cost ratio would be higher for mental strength than for inpatient care overall (Mississippi Division of Medicaid, 2007).

Medicaid Is the Market

Of the nine market in which Medicaid is the dominant purchaser, the largest ones are in the LTC sector. Many of these services, such as personal assistance, extend traditional conceptions of form care. The services are normally received by beneficiaries with significant, continuing conditions, such as mental retardation, serious mental virus, and stroke. Physician decision maker are usually in the conditions. Despite technology, much of the care remains high-touch in the amount of contact between lenient and provider.

In many of these market, providers have a relatively low public profile. Some reader of this article may be surprised to learn that Medicaid pays almost as much for full-size day services ($9.6 billion) as for physician strictness, for example. Because Federal Government and private-sector data collection pains are geared to markets dominated by Medicare and private plans, information can be sparse on market dominated by Medicaid. The recent advances contained by the MSIS---which is much more comprehensive and useful than it be 5 years ago--will help States order their Medicaid Programs. Nevertheless, significant data gap remain, such as the overly broad categories for waiver services, clinics, and other.

When Medicaid is the marketplace, the Federal regulatory framework often does not fit. For these services, Medicaid's role is recurrently akin to the payer of first resort, because people in need Medicaid can have great difficulty affording these services. Judging return adequacy by considering access by non-Medicaid populations may not be expressive.

As a purchaser, Medicaid may be almost a monopsonist. Medicaid purchases almost all fastidiousness for people next to MR/DD conditions, most of the LTC for people next to physical disabilities, most of the care for associates with AIDS, and much of the prudence for people beside serious mental illness (Vladeck, 2003; Mark et al., 2005). In the bunking off of reference points from Medicare and private payers, States setting gift rates usually only own each other to look to. As previously noted, we would predict that Medicaid money rates would cover a higher percentage of provider cost than when Medicaid is one among heaps payers in a open market. Yet, in market dominated by Medicaid it can be circular to compare costs and payments, because providers whose costs exceed Medicaid rates have trouble staying in business. Few studies exist on how Medicaid uses its purchasing power in these market.

States may also need to run action to minimize their vulnerability to provider schedule that take assistance of Medicaid policies in ways that are view as undesirable. Medicare has face this challenge repeatedly, for example within skilled home health attention to detail, oxygen therapy, and post-acute skilled nursing thinking (Newhouse, 2006). Though this vulnerability could develop for any payer, public-sector payers may be more susceptible because of the sticky nature of administered pricing regimes.

A dedicated problem can arise when codified payment formulas assume that Medicaid is one among copious payers when in reality it is dominant. For example, in 2003 Medicaid had 15-25 percent of the prescription drug open market overall, but almost 80 percent of the market for antipsychotic drugs. An nouns of the market for the top 200 drugs countrywide found that antipsychotics, HIV/AIDS drugs, and other drugs with illustrious Medicaid market shares tend to have high prices than drugs with low Medicaid souk shares (Duggan and Scott-Morton, 2006). The result was predictable because Medicaid Programs hold typically paid a percentage of capitalist prices. When a manufacturer sets a big price for a drug that has a high-ranking Medicaid market share, any loss within sales to non-Medicaid purchasers is outweighed by difficult revenues from Medicaid. Similar traps await Medicaid Programs that calculate payments base on provider charges or cost. Paying ICF-MRs based on their cost is plausible to lead directly to superior cost, for example.

Standard economic and regulatory premise would suggest that in market and submarkets dominated by Medicaid, the program may have strong influence over issues including access to aid and quality of strictness. A main use why almost all ICF-MRs enjoy fewer than 16 residents, for example, is that Medicaid Programs looked-for to shift care to home-like living situations (Bishop, Visconti, and Long, 2003). Less progress have been made on using purchasing muscle to promote the quality of watchfulness in any ICF-MRs or nursing homes (Kitchener and Harrington, 2004). In all the recent general discussion on quality, mention of personal assistance, mental strength, MR/DD services, and other Medicaid-dominated markets have been personage by its absence.

Purchasing Managed Care

Although we characterize the typical Medicaid Program as "in the market" for manage care, a few secondary comments are appropriate. State-to-State variation surrounded by Medicaid market share ranges more widely for manage care than for FFS caution. While some States had no Medicaid MCO enrollees within 2003, Medicaid represented more than one-half of MCO enrollment in States such as Arizona, Tennessee, and Oklahoma.

In concerned marketplace dynamics, it also matter that the number of MCO providers is small. Of the 39 States with comprehensive Medicaid manage care plans surrounded by 2003, 23 had 5 or a lesser amount of plans (Centers for Medicare & Medicaid Services, 2006). More and more, these plans exist to serve Medicaid; there are a smaller amount examples of MCOs adding on Medicaid enrollees to their other business (Draper et al., 2004).

This souk structure approaches that of bilateral monopoly, where transactions, expressions, and prices are notoriously difficult to predict (Friedman, 1990). In certainty, Holahan and Suzuki (2003) did find extraordinary variation contained by managed trouble payment rates among States. Even after they undertake extensive adjustments for differences within plan design, substantial variation (twofold) surrounded by prices persisted. They also describe an eccentric price-setting process that typically reflects a blend of administered prices, individual negotiation, and competitive bidding.

CONCLUSION

It is recurrently remarked that Medicaid offers at smallest two distinct programs to its beneficiaries. One program is coverage of acute care services completely similar to traditional insurance. The other is coverage of LTC, where Medicaid coverage is much more comprehensive than that of other payers.

This analysis have shown that Medicaid also plays two distinct roles as a purchaser. In the markets for most acute prudence services, its modest share makes it something of a follower. In the market for most LTC services and in lasting acute care submarkets, however, its dominant role give it greater opportunities and responsibilities. Understanding this difference is essential when conducting analysis and making decision with respect to access, coverage, payment, and feature of care.

ACKNOWLEDGMENTS

We greatly appreciate comments we received from Jessica Banthin, Mary Carol Barron, Robert E Coulam, Nancy Ellery, Michael Hanshew, Kathleen Martin, Julie Pollard, Candida Quinn, Arthur Sensenig, and Rita Vandivort. We would also resembling to acknowledge the many specific notes points we received from industry association personnel and other sources too numerous to mention specifically.