Faced with challenging budgetary environments, many states are looking for options to constrain their overall Medicaid expenditures, including potentially making reductions or restrictions in coverage and eligibility for Medicaid. With Medicaid community engagement (a.k.a. work requirements) set to be implemented in most expansion states within the next year, Medicaid rolls are likely to be reduced even further. While covering fewer beneficiaries will generally reduce total Medicaid expenditures, assessing the net fiscal impact to states due to changes in Medicaid enrollment is complicated, particularly in states with managed care programs.

At first glance, it seems reasonable to assume that if Medicaid managed care plans are paid $500 per member, then states would save $500 for each member that exits the Medicaid program. However, the reality is that the relationship is not so simple. When members exit a managed care program, states must consider not only the reduction in volume (i.e., net decrease in enrollees), but also the relative health of the members leaving the program, as this impacts the overall capitation rates. For example, the per member managed care capitation rates would increase if low-cost members transition out of managed care and leave a greater proportion of high utilizers enrolled. Other considerations also factor into the fiscal impact of any enrollment shifts, such as the interplay between state and federal financing, managed care tax rates, health plan and state administrative expenses, and the efficiency of the managed care program.

This paper’s focus is on the impacts associated with state decision-making on Medicaid eligibility and enrollment changes in a managed care environment, with the aim of helping states make informed decisions as these new program changes begin to take effect. To aid readers in understanding the math behind these calculations and to illustrate how the effects may not always be intuitive, we have included a graphical user interface. This tool illustrates the effects for a hypothetical population of 10 members enrolled in managed care and demonstrates the impacts of various coverage policies on total payments.

Test the tool below, and download our paper for the full results of our research.
The interactive tool is also available in a widescreen format here.