Your browser doesn't support JavaScript. Please upgrade to a modern browser or enable JavaScript in your existing browser.
Skip Navigation U.S. Department of Health and Human Services
Agency for Healthcare Research Quality
Archive print banner

This information is for reference purposes only. It was current when produced and may now be outdated. Archive material is no longer maintained, and some links may not work. Persons with disabilities having difficulty accessing this information should contact us at: Let us know the nature of the problem, the Web address of what you want, and your contact information.

Please go to for current information.

Strengthening the Health Care Safety Net

Medicaid Managed Care


Robert E. Hurley, Ph.D., Associate Professor, Medical College of Virginia, Virginia Commonwealth University, Richmond, VA.

Donna Checkett, M.P.A., M.S.W., Chief Executive Officer, Missouri Health Care Plans, Columbia, MO.

Peggy Bartels, Administrator, Division of Health Care Finance, Wisconsin Department of Health and Family Services, Madison, WI.

This session explained how the design and implementation of Medicaid managed care programs can have an impact on safety net providers (SNPs) and described the varying responses of SNPs to Medicaid managed care. The session also outlined ways that States can adjust their programs to meet the needs of both beneficiaries and SNPs.

Dr. Robert Hurley, Associate Professor at the Medical College of Virginia, opened his presentation with the question, "Why did States pursue managed care in Medicaid?" The reason, he explained, is to get better value regarding access, cost, quality, and accountability.

States have adopted (and adapted to) Medicaid managed care through two major approaches: prepaid health plans (e.g., health maintenance organizations); and primary care case management. The models selected are based upon Medicaid agency preferences and market circumstances. Today, more than half of all Medicaid beneficiaries are in managed care.

Dr. Hurley explained that the evidence on Medicaid managed care is mixed, yet encouraging. Evidence shows that Medicaid managed care improves access to care with regard to improved immunization levels, improved care coordination, and guarantee of a medical home. Although Medicaid managed care can generate a modest cost savings for States, such savings are "dissipating through growing market pressures," according to Dr. Hurley. With regard to quality, there have been major investments in performance measurement and monitoring. In terms of accountability, there is a strong sense among Medicaid agencies that managed care contracting gives them more leverage than fee-for-service.

Dr. Hurley further explained that although managed care threatens safety net providers in many ways, including providers' ability to cross-subsidize and cross-shift, self-interest in only paying for their own enrollees' care, and the risk of providing care for those who move in and out of Medicaid, States are becoming attentive to concerns and are responding in various ways by:

  • Developing contractual relations.
  • Sponsoring their own plans.
  • Banding together to negotiate.
  • Investing in infrastructure.
  • Improving customer responsiveness.

Key considerations in transitioning to Medicaid managed care, according to Dr. Hurley, include:

  • Continued efforts to expand health insurance coverage are critical. Policymakers should consider the various options of making, buying, or explicitly subsidizing indigent care, and realize that managed care makes indirect subsidies unsustainable.
  • Plans and providers need to be paid adequately.
  • Contracting has to be done well (e.g., State to plan, plan to providers).
  • Providers of uncompensated care must be compensated for it.

Dr. Hurley concluded by emphasizing that indigent care "eco-systems" are in danger. Approaches to providing uncompensated care vary widely by community. He added that there is concern over what will replace the "hidden tax" of cost-shifting, "repealed" by managed care. Lack of coherent and explicit public policy for indigent care is a significant issue.

As Chief Executive Officer of Missouri Health Plans, Donna Checkett offered a State perspective of the impact of Medicaid managed care on SNPs. Ms. Checkett explained that a State's perspective depends on the political power of SNPs, the potential contribution of these providers to the success of Medicaid managed care, and the reasonableness of financial and policy protections requested by them. Ms. Checkett emphasized that there is a greater potential for problems when there is a greater discrepancy between perceptions of the State agency and SNPs.

Ms. Checkett explained that SNPs need:

  • An action plan to address quality concerns.
  • Business practices to operate in a managed care world.
  • Quality improvement that permeates all aspects of the provider site.
  • Medical management programs such as immunizations and cancer screenings.
  • Focused studies, such as for persons with asthma and high-risk pregnancies.

Ms. Checkett also discussed policy options for SNPs, such as:

  • Establishing federally qualified health centers (FQHCs); rural health centers, and community migrant health centers with cost-based reimbursement contracts.
  • Allowing safety net hospitals to receive disproportionate share hospital (DSH) and graduate medical education (GME) payments separate from capitation rates, and evaluation preferences for plans with safety net hospitals in networks.
  • Reimbursement of core public health functions and carve-outs of capitation rates and contracts.

According to Ms. Checkett, Missouri has had mixed experiences with managed Medicaid. After 2 solid years of planning, Missouri's managed Medicaid was rolled out quickly, covering almost 300,000 people in 18 months in St. Louis, Kansas City, and central Missouri. The largest safety net hospital in St. Louis contracted exclusively with one plan, which quickly became, and still is, the largest plan in the State. The plan, however, was not contracting exclusively with the hospital, and the hospital lost most of its Medicaid obstetrics business, and therefore its ability to cost-shift and cover indigent costs. Combined with a loss of city subsidies, the hospital closed. The city is still struggling for the answer to indigent hospital care.

Missouri's academic medical center developed its own managed Medicaid plan, experiencing adverse selection, and losing $3.8 million its first year. Ms. Checkett explained that after 3 years, the center is doing better; however, nationally, academic medical centers are struggling due to managed care, consumer preference for nonacademic settings, competition, and effects of the 1997 Balanced Budget Act cuts. FQHCs in St. Louis and Kansas City are doing well, despite a rocky start, and have maintained and increased their patient base.

Ms. Checkett described some of the changing health care dynamics that affect SNPs, including:

  • The primary reason Medicaid beneficiaries choose a health plan is access to a specific doctor or physician group. Safety net hospitals are rarely a single reason for plan selection.
  • Some Medicaid managed care plans organized by core SNPs are adding nontraditional providers. Medicaid beneficiaries often perceive more mainstream providers as offering higher quality of care.
  • Increased market competition raises the desirability of Medicaid to cover marginal costs, especially in high-Medicaid specialties.
  • Medicaid/State Children's Health Insurance Program (SCHIP) expansions brought beneficiaries into the system who are accustomed to more mainstream providers and systems of care.

Peggy Bartels is Administrator of the Division of Health Care Finance for the Wisconsin Department of Health and Family Services. She presented strategies to promote and protect the safety net in Wisconsin. Wisconsin has a very low rate of uninsured: 7 percent in 1999, of whom 45 percent live in rural areas. The State has the highest percentage of private insurance coverage in the Nation. Wisconsin's safety net consists of 130 hospitals, 24 FQHCs, and 51 rural health clinics to serve its almost 350,000 uninsured residents.

Wisconsin's safety net policy consists of three primary goals:

  1. Reduce the number of uninsured through the establishment of strong public programs such as Medicaid and its SCHIP counterpart, BadgerCare, and encourage employer-based coverage.
  2. Promote good health with an emphasis on prevention and improving access to quality dental services.
  3. Promote and protect SNPs through encouraging economy and efficiency with Medicaid managed care and additional purchasing strategies with FQHCs, and DSH and GME payments.

Wisconsin is engaging in several new strategies, such as the Health Resources and Services Administration's State Planning Grant and Community Access Program; a private employer purchaser pool; BadgerCare outreach; and monitoring crowd-out.

Ms. Bartel shared some lessons learned in Wisconsin's efforts to promote and protect its safety net, including:

  • Medicaid purchasing strategies can help SNPs.
  • A comprehensive strategy is essential—through promoting safety net programs, providing technical assistance, and developing business relationships in the community.
  • Consistent expectations and performance can be demonstrated through promoting political and financial support and developing organizational capacity for accountability.


Center for Health Care Strategies. The Robert Wood Johnson Foundation Medicaid Managed Care Program. List of Executive Summaries.

Hurley RE, Kuder JM. Adapting to Medicaid managed care: a tale of four cities. New York: Cornell University; 2000 Feb.

Kaiser Commission on Medicaid and the Uninsured. Henry J. Kaiser Family Foundation. List of Publications.

Previous Section Previous Section         Contents         Next Section Next Section

The information on this page is archived and provided for reference purposes only.

AHRQ Advancing Excellence in Health Care