Public Health Departments Adapt to Medicaid Managed Care

Originally published by the Center for Studying Health System Change (HSC). HSC was a nonpartisan policy research organization funded principally by the Robert Wood Johnson Foundation.

Issue Brief No. 16, November 1998 -- Rose Marie Martinez, Elizabeth Closter

Millions of Medicaid beneficiaries were being moved into private managed care plans across the country. Public health departments -- which had served as primary care providers for some Medicaid patients -- were frequently left out of contracts between states and designated Medicaid plans. Many of the roughly 3,000 city and county public health agencies nationwide were losing patients and revenue. Research from 1997 showed many departments de-emphasizing direct care delivery in favor of core public health functions, while some forged new partnerships with Medicaid managed care plans.

The Medicaid Managed Care Landscape

Public health departments had been key safety net components for decades. Medicaid recipients were an important patient base, reimbursed on a fee-for-service basis. As states moved Medicaid populations into managed care, beneficiaries increasingly obtained care from private providers. The impact varied: In Lansing, Michigan, the EPSDT program split between HMOs and health departments. In Little Rock, Arkansas, loss of EPSDT activities caused a 30 percent drop in Medicaid revenue. In Cleveland, the health department had long since stopped providing personal health services to Medicaid beneficiaries and experienced fewer changes.

Vague State Contracts

Most state Medicaid contracts failed to clearly define health department roles. Two models were emerging where clarity existed: reimbursing departments for services outside formal networks, and requiring plans to collaborate on infectious disease control. Contracts generally shifted communicable disease responsibility and revenue to plans, with departments required mainly to receive case reports. EPSDT services were especially complicated -- historically central to health departments but largely shifted to plans under managed care. Payment provisions were often vague, sometimes requiring prior authorization.

Three Partnership Models

Three sites developed formal memorandums of agreement. In Dade County, Miami, the MOA between the state, DCHD, and 10 HMOs specified reimbursement for immunization, family planning, and communicable disease services without prior authorization, plus detailed information-sharing requirements. In Syracuse, New York, where 50 percent of Medicaid beneficiaries were in managed care, MOAs with four plans covered preventive service monitoring, disease surveillance coordination, and TB control with plan reimbursement for population-based services. In Orange County, California, CalOPTIMA worked with the Health Care Agency on MOAs covering 12 service areas including HIV programs, pulmonary diseases, children's health, and epidemiology.

Health Departments Chart Their Own Course

Medicaid managed care posed both threats and opportunities. Departments oriented toward clinical services had to reassess their mission as plans assumed those responsibilities. States had not been proactive in clarifying health department roles, but assertive departments were carving out partnerships. Researchers were investigating implications of dividing previously integrated functions, the impact of plan mergers or withdrawals, and whether accommodating Medicaid managed care made it harder to serve uninsured populations.

Study Methods

Based on a 1997 study of 12 public health departments by Mathematica Policy Research, Inc., funded by HHS. The survey was linked to HSC's Community Tracking Study, covering the same 12 communities. Participating departments were in Phoenix, Little Rock, Orange County, Miami, Indianapolis, Boston, Lansing, Newark, Syracuse, Cleveland, Greenville, and Seattle.

Sources and Further Reading

Kaiser Family Foundation — Medicaid — State Medicaid program data.

CMS — Medicaid — Federal Medicaid program information.

Health Affairs — Peer-reviewed health policy research.

Robert Wood Johnson Foundation — Health policy research.

Commonwealth Fund — Research on Medicaid and public health.