Evaluating the Impact of Statewide Implementation of Medicaid Managed Care in Kentucky

In November 2011, with approval from the Center for Medicaid and Medicare Services (CMS), Kentucky transitioned about 550,000 Kentucky Medicaid patients from a fee-for-service delivery system with a primary care case management component (PCCM) into risk-based managed care coverage administered by three external Managed Care Organizations (MCOs), Centene, Coventry, and WellCare.   Kentucky, like other states, viewed risk-based managed care as a means of promoting better quality and greater access to care while containing Medicaid costs through enhanced management of medical and behavioral health services. 

This transition to Medicaid managed care took place in seven of the state’s eight Medicaid regions which accounted for about 69% of the state’s Medicaid population.  In the remaining region, which operated in Jefferson county and in 15 surrounding counties, the Medicaid program had been operating under a locally formed risk-based MCO, known as Passport, since the state began the Kentucky Health Partnership Program demonstration in 1995.

The purpose of this paper is to evaluate the early impacts of this change in Medicaid delivery on enrollee utilization, expenditures, and health outcomes.  Our primary source of data for the analysis is the universe of inpatient hospital discharges from Kentucky in the years 2011 and 2012.  This data allows us to compare roughly one year of pre-reform hospital discharges with one year of post-reform discharges.  While focusing on hospital discharges excludes many other forms of utilization, it does allow us to focus on a specific sub-population of interest – Medicaid recipients with health conditions that required a hospitalization.  In addition, hospitalizations account for a large portion of overall medical expenditures.  Hospital discharge data allow us to measure hospital charges directly as one measure of health care expenditures.  We can also measure health outcomes indirectly through the use of ambulatory care sensitive (ACS) hospital admissions, which are admissions that should have been avoided if the patient was receiving adequate primary care. 

Our identification strategy is essentially a difference-in-differences approach, where we compare Medicaid recipient discharges in those regions impacted by the managed care expansion with several potential control groups: i) Medicaid recipient discharges in the Passport region already covered by a MCO, ii) Commercially insured patient discharges in the regions impacted by the managed care expansion, and iii) Medicaid recipient discharges from neighboring states (pulled from the HCUP dataset).  This is similar to the approach employed in the Kolstad and Kowalski (2012) analysis of the Massachusetts health care reform.  The results of this evaluation should be of interest to academics as well as state policymakers looking to introduce or expand managed care within their own Medicaid programs as a means of improving quality and lowering costs.

We supplement this hospital discharge analysis with additional analysis using confidential Kentucky Medicaid enrollment and claims micro-data.

“The project is funded by a grant from the Foundation for a Healthy Kentucky.  The Foundation’s mission is to address the unmet health care needs of Kentucky, by developing and influencing health policy, improving access to care, reducing health risks and disparities and promoting health equity.”