| Today managed care is the dominant service delivery model for Medicaid, with over half of all Medicaid recipients enrolled in managed care arrangements where states pay a monthly capitation fee to managed care organizations (MCOs) to provide health care services. In 2001, for the first time since the inception of Medicaid managed care programs, MCOs exited the Medicaid market in greater numbers than they entered, with inadequate capitation rates the most frequently cited reason for MCO exit. In spite of neutralizing capitation rates based on state differences in carved-out services, population differences, and federally-required rate adjustment methodologies, over two-fold variation among state Medicaid managed care organization capitation rates was found by Holahan (Holahan, Rangarajan & Schrimer, 1999). This paper explores reasons for this variation. Potential explanatory factors were tested relating to three domains, state policy choice, health care service utilization, and health care market competition using multiple regression analysis. State policy choice related to mandatory enrollment of Medicaid recipients into MCOs was found to be significantly related to higher capitation rates. Measures of neither Medicaid managed care market competition, Medicare market competition, nor commercial managed care competition were related to Medicaid MCO capitation rates. Due to the fact that capitation rates have been limited by spending in Medicaid fee-for-service programs and historically low Medicaid provider fees, a competitive Medicaid managed care environment based on price has not developed. |
