ABSTRACT:The Medicaid program made a major commitment to managed care during the past decade. Following turbulent early years, the marriage matured and stabilized because managed care models responded well to a number of the states' goals and Medicaid purchasers were willing to make key trade-offs on behalf of their beneficiaries that conformed to the designs of managed care products. The relative tranquility in Medicaid managed care contrasts sharply with turmoil in both the commercial and Medicare sectors. But continuing changes in the managed care marketplace and financial distress in state budgets present new challenges to the strength and durability of this relationship.
T h e r e w e r e n o g o o d o l d days in Medicaid.This assertion is key to understanding why state Medicaid agencies have so ardently embraced managed care models to try to improve the troubled federal-state partnership program for low-income and disabled persons. Wistfulness about pre-managed care days may prevail among privately insured patients and their physicians, but nostalgia has little place in Medicaid. From the program's beginnings in the mid-1960s, Medicaid policymakers struggled with adequate financing and coverage, sufficient provider participation, and appropriate access and service use for covered beneficiaries.1 By 1980 Medicaid's problems had snowballed and created huge challenges for federal and state officials to provide necessary services to nearly twenty million beneficiaries. These challenges set in motion a search for new methods and models for financing and delivery of care. Managed care, with its focus on cost-conscious consumption and provision of services, seemed to make for an especially good match for Medicaid.By 2002 more than 58 percent of Medicaid's beneficiaries were enrolled in managed care arrangements, with approximately 40 percent, or more than fifteen million, enrolled in health maintenance organizations (HMOs) and other prepaid health plans.2 While managed care in Medicaid encountered considerable turbulence in its early years, its relative tranquility in recent years compares favorably with commercial and Medicare managed care, which have been buffeted by con-M a n a g e d C a r e H E A LT H A F F A I R S~Vo l u m e 2 2 , N u m b e r 1 7 7