July 15, 2025 • 22 mins
Health Affairs' Rob Lott interviews Bohan Li of Harvard University about her recent paper that explores substantial shifts in market landscape and acquisitions in Medicaid managed care.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Rob Lott (00:00):
Hello, and welcome to a health podocy. I'm your host,
(00:04):
Rob Lott. Medicaid is a hugeprogram. 78,000,000 Americans
are enrolled in it. That's alittle less than one in every
four Americans.
In 2023, about 40% of all birthsin America were financed by
(00:25):
Medicaid. 40%. That's a bignumber, and it's just this
really funky program thatfollows federal rules, but is
run by the states, and through areally complicated matching
program funded by both. Now somepeople may imagine that in each
state, there's a singularprogram operated by a group of
(00:46):
bureaucrats systematicallypaying claims and managing
benefits, a closed universe, ifyou will. But of course, that's
not really the case at all.
In reality, the vast majority ofMedicaid recipients are enrolled
in a Medicaid managed careprogram, a whole constellation
of third party insurers paid bythe state to ensure qualified
(01:10):
beneficiaries. This too is anenormous program, and believe it
or not, there's a lot we don'tknow about who is actually
covered and by whom. That's thesubject of today's health
policy. I'm here with Bohan Lee,a doctoral student in health
policy management at HarvardBusiness School. And together
(01:32):
with her coauthor, she has a newpaper in the July issue of
Health Affairs documentingsubstantial shifts in Medicaid
managed care market landscapeand acquisitions from 2006 to
2020.
I can't wait to learn more abouttheir work and to think with her
about its implications for thisprogram that occupies such a big
(01:56):
and important part of The UShealth care ecosystem. Bohan
Lee, welcome to A HealthOdyssey.
Bohan Li (02:03):
Thank you so much for having me. It's a pleasure to be
here.
Rob Lott (02:06):
So let's just dive right in. Maybe very briefly, we
can level set for our listeners,and you can tell us how Medicaid
managed care typically works.And I'm thinking about, states
responsible for operating theirown Medicaid programs. What are
the advantages or reasons whythey might do so through a
(02:31):
managed care universe?
Bohan Li (02:34):
Absolutely. So as you, very aptly already described,
there is essentially two waysthat states can choose to
provide Medicaid benefits. Oneis to choose to offer those
benefits directly through apublicly managed fee for service
program, And the second way iswhat we're talking about today,
which is managed care. And thishappens when states contract out
(02:57):
the provision of Medicaidbenefits to private firms, which
we call managed careorganizations or MCOs. So these
are private insurance companieslike Centene or UnitedHealth to
name a couple of the big ones.
And the way it works is thestates essentially pay these
MCOs a set capitation rate. Soit's typically a fixed payment
(03:20):
per member per month. The firmsessentially take this payment
and use it to deliver Medicaidhealth benefits. Now, there is
kind of a key implication fromall of this, which is that the
firm or the insurance company inthis case is the residual
claimant, on any spending thatgoes above or below the set
(03:40):
capitation rate. So in otherwords, if it costs the MCO less
than the received capitationrate, they get to pocket that as
profit.
And if they go over the receivedcapitation rate, then the firm
essentially internalizes thatloss. From the state's
perspective, there's a couple ofadvantages to this. The first
(04:03):
one being kind of greaterpredictability of Medicaid
spending. Right? You knowexactly how much you're paying
and for whom, and then it's upto the firms themselves to kind
of manage, the delivery of thesebenefits.
Of course, when we think aboutoutsourcing, to private firms,
there's always this argumentthat private firms can actually
(04:25):
save costs and provide, thesebenefits more efficiently than
the government can. Some reallybelieve that MCOs are just able
to do more, per dollar ofMedicaid funding. And one way
that they do that is theyleverage competition for these
contracts, in order toincentivize these private firms
to promise better products forbeneficiaries.
Rob Lott (04:49):
Got it. Okay. So before you conducted your study,
can you give us a sense of whatwas typical approach in the
field to characterizing themanaged care market,
understanding who was in and whowas out and what the players
were. And my sense is that thatwas a difficult task and maybe
(05:14):
you can give us a sense of whythat was so difficult.
Bohan Li (05:17):
Yeah, absolutely. I mean, first of all, I just
wanted to acknowledge all thegreat, wonderful studies that
have been done in this space,studying different facets of
both Medicaid and Medicaidmanaged care as that has kind of
grown in importance. Ourcontribution, we see it as
twofold. The first one is thatwe take a really broad lens.
(05:39):
Right?
We look at we look at thingsnationally, which is really hard
because, you know, this isessentially a state program.
It's a state by state program.If you see one Medicaid program,
you know, some say you've onlyseen one Medicaid program, which
is which is true. So we we takea broad lens. We look at,
national trends, and we alsolook at a pretty long time
(06:02):
frame.
We look at fifteen years between2006 and 2020. And, obviously, a
lot happened, in the healthpolicy space during those years.
So the second thing that we dois we move beyond the standard
focus, looking at fee forservice Medicaid versus managed
care. And instead we try toreally understand how the
(06:24):
Medicaid managed care market haschanged over time. And the
reason that it's been a littlebit tricky to kind of
characterize this market isbecause every state has a very
different procurement process.
And second of all, like a lot ofother areas of healthcare, data
on ownership is not alwaystransparent. And so it takes a
(06:45):
lot of kind of creative cobblingto put together a full picture,
of this market. And lastly,which we get into in the paper,
there's been a really highvolume of m and a activity in
this space, which has kind ofchanged the ownership of these
plans.
Rob Lott (07:02):
Okay. Great. Well, let's, let's hear about your
study. What did you measure?What did you find?
Bohan Li (07:07):
In our study, we set out to essentially paint this
comprehensive picture of theMedicaid managed care market. So
first, we actually focusspecifically on what we call
main market comprehensive riskbased MCOs. It's
Rob Lott (07:22):
Which about is like the world the the main kind of a
c MCO. Right?
Bohan Li (07:27):
Yeah. Exactly. It's plans that take on full risk for
their membership and that targetthe general Medicaid population
instead of, you know, a groupwith specific health conditions,
for example. And we set out tolay out a set of basic facts
that hopefully will inspirefuture work in this space. So
what we actually did is we usepublicly available Medicaid
(07:51):
managed care enrollment datafrom CMS and we supplemented it
with a decent amount of elbowgrease and some proprietary
sources to identify, M and Aactivity in this space.
And we measure essentially twothings. The first thing we look
at, is what we call the marketlandscape, so really enrollment
trends. Specifically, we lookedat kind of the parent firms that
(08:15):
owned these different plans. Andwe looked at those parent firms
across two dimensions. Onebeing, we call it ownership
type, but really understandingwhether it's mostly firms that
are primarily insurancecompanies that are owning these
plans or is it, you know,provider organizations that are
running these plans?
(08:36):
The second dimension that welook at is we look at the parent
firm's geographic footprint. Sowhat we mean by this is we look
at parent firms that arenational, so who operate, health
insurance plans in multiplestates versus local parents who
are more often than not singlestate plans. So beyond
enrollment, we were also reallycurious about, okay, how many
(08:59):
total parents were in thismarket? How many total issuers
were there? And how did theirmarket share kind of change over
time?
So that was the first part. Andwhat we found there was that,
there was a huge increase inenrollment during our study
period. So enrollment nearlytripled. But despite this
increase in enrollment, we saw apretty significant decrease in
(09:20):
number of total parent firms. Sothe total number of parent firms
actually decreased by about 25%from a 155 in 2006 to a 120 in
2020.
We also found that there was apretty significant shift in
enrollment from local firms tonational firms. So the split in
(09:43):
2006 was roughly about sixtyforty local to national, and
that completely reversed by2020. So the important takeaway
from this part of the study isthat despite this decline in
number of parent firms, thenumber of choices available to
beneficiaries didn't actuallychange all that much, but the
(10:05):
types of plans thatbeneficiaries were choosing from
really shifted. Specifically,beneficiaries have a lot more
national choices today and a lotfewer local choices.
Rob Lott (10:17):
Wow. Okay. A lot to unpack there. Really interesting
stuff. I wanna start with the,your your basic finding that the
enrollment really increased.
Is that tracking general growthin Medicaid writ large, or was
there something else going on?Sort of what do you attribute
that growth to?
Bohan Li (10:35):
Yeah. It's a it's a great it's a great question.
Specifically into this in thepaper, but you can think of it
as, you know, one of the bigdrivers of this growth is
Medicaid expansion, part of theAffordable Care Act that was
enacted in 2014. And then thesecond is that states actually
get to choose whether to provideMedicaid benefits themselves
(11:00):
directly or through managedcare. So we attribute this
growth to an increase ineligibility as well as an
increase in penetration ofmanaged care.
Rob Lott (11:12):
Okay. And subsequent finding you mentioned was that
there was this shift from localparents, if you will, to
national parents, perhaps adecrease in the number of
parents even as the choicesstayed about the same. How do
you explain that shift? Is itjust sort of part of these these
(11:34):
national trends that we'reseeing in everything from
grocery stores to to banks ofsort of general consolidation,
or is there something morenuanced going on in this
landscape?
Bohan Li (11:46):
Yeah. So something interesting that we found when
we kind of broke down theenrollment by ownership is we we
found that this kind of hugegrowth in national firm market
share was almost entirely drivenby the growth of a single payer.
It was it was Centene. AndCentene is a Medicaid focused
insurer that has been, you know,incredibly active in this space
(12:08):
and very innovative over thelast couple of decades. But I
did pull these numbers fortoday's podcast.
Their market share was onlyabout four percent in 2006 at
the start of our study period.In 2020, it was 21%. So that
means that one in fivebeneficiaries were actually
enrolled in a Centene ownedplant based on our calculations.
(12:30):
So we can't definitively saythat that this one firm's growth
in acquisitions kind of causedthe shift from local to
national, but the evidence doesseem to point in that direction.
And one of the things that Iwanted to mention too is the
second part of our study reallylooked at M and A activity in
(12:53):
the Medicaid managed caremarket, and we found a huge
volume of acquisitions.
So we found a 123 planacquisitions during our study
period. That means that one infour plans during our study
period was involved in at leastone acquisition, which was very
surprising. So Centene was noexception. They were our most
(13:18):
prolific acquirer during thistime period. They made many
acquisitions.
They acquired both local andnational plans. And so that
could also be one of the driversthat shifted kind of enrollment
from local to national payers.
Rob Lott (13:35):
Wow. What's I'm gonna mess up the quote here, but I
was it Margaret Mead who saidnever underestimate the power of
one individual to change theworld, something like that. I
guess you should neverunderestimate the power of one
parent company to change thebalance of the Medicaid managed
care marketplace. Right? In amoment, I want to ask you a
(13:58):
little more about the role thatcompetition plays in in all of
these dynamics.
But before we do, let's take aquick break. And we're back. I'm
(14:25):
here with Bohan Lee talkingabout her paper and the Medicaid
managed care market landscape.So just a few minutes ago you
described a lot of the shifts inthat landscape. And I'm
wondering if you can tell us alittle bit about how you see
competition through the lens ofall these changes.
(14:50):
How does competition function inthese markets? Is it sort of a
healthy competitive market? Andif so, what is the impact on
beneficiaries' sort of everydayexperiences of Medicaid?
Bohan Li (15:04):
This is an incredibly important question, and it's
actually at the heart of wherewe want this strand of work to
go next. So thank you so muchfor asking that. First, I wanted
to set the stage and say thatlike many other parts of the
health care industry, the MMCmarket is quite consolidated.
According to data from theKaiser Family Foundation, you
(15:25):
know, five national firms,Centene being one of them, have
about half of all MMCenrollment. But what I wanted to
kind of clarify is that thecompetitive dynamics play out
very differently in this marketbecause of a couple of the
institutional details.
So most states use a competitiveprocurement process to award MCO
(15:46):
contracts as part of the waythat they outsource the
provision of Medicaid benefits.So this means that, MCOs don't
have free entry into statemarkets. So this is what's
called managed or regulatedcompetition. The way it works
is, you know, these privateinsurance companies will bid
competitively for contractsawarded by the state government.
(16:09):
And then the state governmentwill choose the number and which
contracts to offer.
And then patients will thenchoose from this menu of state
contracted options. And I willmention here again, like
everything else in Medicaid,procurement timelines, rubrics,
the selection process varies alot across states. So from what
(16:30):
I just described, you can seethat there's two layers of
competition. The first layer isplans are competing against each
other to obtain a contract. Andthen the second layer is perhaps
the type of competition thatwe're more familiar with, which
is members are choosing inbetween plans.
So plans are competing againsteach other conditional on having
a contract to attractmemberships. And here, what I
(16:53):
wanna point out is that, in somestates, enrollees are more
active at choosing plans than inothers. So in some states, auto
assignment rates or theproportion of members who don't
actually make an active choicein terms of which plan they
wanna enroll in and instead areassigned a plan by the state,
that that varies a lot. And soto us, this first layer, this
(17:16):
competition for contracts isprobably the most important
level of competition tounderstand. So to kind of, play
this out a little bit more, wedon't explore this directly in
the paper, but you could imaginethat a decrease in competition
in terms of the number ofbidders for these state
(17:38):
contracts could lead potentiallyto lower quality contracts.
So imagine there's a unnamednational insurer. Right? They're
competing for a state Medicaid,contract with the local or it
can be a nationally owned planthat it will acquire in the
future. So when they'recompeting, perhaps they have
(18:00):
more incentive to promise betterproducts. Right?
Wider provider networks, betterancillary services for
enrollees. However, after thisacquisition, this, you know,
acquiring National Insure nolonger has to compete with the
insurer that it acquired. Soperhaps there's kind of less
incentive to promise thesehigher quality products.
Rob Lott (18:22):
You also hinted at the sort of variation from state to
state, and I'm wondering if youcan talk a little bit about just
how extreme or or not thatvariation is and how you dealt
with that in your paper.
Bohan Li (18:40):
Absolutely. So since our goal was to kind of cast
this wide net and paint a verybroad picture, we don't spend
too much time looking at thestate by state variation. But as
you pointed out, we did findsome kind of interesting
differences across states interms of, where national pairs
dominate, versus where localplans tend to dominate even
(19:04):
towards the end of our sampleperiod. So we found that
nationals really dominated inthe Midwest and the Southwest,
whereas local plans were moreprevalent in terms of their
market share in states likeMassachusetts, Minnesota, and
Oregon.
Rob Lott (19:21):
So we're approaching the sixtieth anniversary of
Medicaid being enacted, andwe're doing a lot of reflection
here at Health Affairs and I'msure across the health policy
universe. I'm wondering if westart with the basic mission of
Medicaid to provide coverage, asafety net to low income
(19:45):
Americans, and for that coverageto be jointly funded by the
states and the federalgovernment, how should we think
about managed care in that sortof most fundamental kind of
baseline definition? Should welook at it as an important tool
advancing Medicaid's mission? Oris it sort of the creep of, you
(20:11):
know, for profit interests overtime? Is it a good thing or is
it a hindrance?
And what factors do you think weshould be considering as we make
that assessment?
Bohan Li (20:22):
This is a wonderful question, but also an incredibly
complex one. The first thingthat I will say here is that the
reality is most Medicaidbeneficiaries are already in
managed care. Managed managedcare penetration has been
increasing over time, and it'sdefinitely here to stay. So I
(20:45):
think the real question is howcan we do managed care better in
the Medicaid context in a waythat advances Medicaid's mission
that you very aptly, discussed?So for example, I think it's
really important to understandthe fundamentals of how this
market works, which we talkedabout a little bit previously,
(21:05):
how it's changing, which I hopethat our paper starts to kind of
get at, and then how the designof these managed care programs
and contracts might need tochange in response to what we
now know about this market.
Because at the end of the day,we want this program to deliver
maximum value for beneficiaries,but also for states. Lastly, one
(21:29):
thing that I've been thinking alot about is we should be
thinking about these privatefirms that operate these plans,
their objective function. Andthat objective function might
differ, across the for profit,versus non for profit plans for
the national plans or the localplans. It's really important to
understand how that how they'reresponding to different
(21:52):
incentives put together by thegovernment and policymakers. And
so so lastly, I would say thatanother another key takeaway
from our work is that perhapspolicymakers should no longer be
thinking of Medicaid as purely astate by state program since
there are common large nationalfirms operating across them.
Rob Lott (22:13):
That's great. Well, that's perhaps a good spot for
us to wrap up. Thank you so muchfor your work on this issue and
for taking the time to talk withus here today.
Bohan Li (22:25):
Absolutely. You so much for having me.
Rob Lott (22:29):
And with that, I'll encourage our listeners to
recommend the podcast to afriend. Leave a review.
Subscribe if you enjoyed thisepisode. Tune in next week.
Thanks, everyone.
Bye. Thanks for listening. Ifyou enjoyed today's episode, I
(22:50):
hope you'll tell a friend abouta health policy.
Hello, and welcome to a health podocy. I'm your host,
(00:04):
Rob Lott. Medicaid is a hugeprogram. 78,000,000 Americans
are enrolled in it. That's alittle less than one in every
four Americans.
In 2023, about 40% of all birthsin America were financed by
(00:25):
Medicaid. 40%. That's a bignumber, and it's just this
really funky program thatfollows federal rules, but is
run by the states, and through areally complicated matching
program funded by both. Now somepeople may imagine that in each
state, there's a singularprogram operated by a group of
(00:46):
bureaucrats systematicallypaying claims and managing
benefits, a closed universe, ifyou will. But of course, that's
not really the case at all.
In reality, the vast majority ofMedicaid recipients are enrolled
in a Medicaid managed careprogram, a whole constellation
of third party insurers paid bythe state to ensure qualified
(01:10):
beneficiaries. This too is anenormous program, and believe it
or not, there's a lot we don'tknow about who is actually
covered and by whom. That's thesubject of today's health
policy. I'm here with Bohan Lee,a doctoral student in health
policy management at HarvardBusiness School. And together
(01:32):
with her coauthor, she has a newpaper in the July issue of
Health Affairs documentingsubstantial shifts in Medicaid
managed care market landscapeand acquisitions from 2006 to
2020.
I can't wait to learn more abouttheir work and to think with her
about its implications for thisprogram that occupies such a big
(01:56):
and important part of The UShealth care ecosystem. Bohan
Lee, welcome to A HealthOdyssey.
Bohan Li (02:03):
Thank you so much for having me. It's a pleasure to be
here.
Rob Lott (02:06):
So let's just dive right in. Maybe very briefly, we
can level set for our listeners,and you can tell us how Medicaid
managed care typically works.And I'm thinking about, states
responsible for operating theirown Medicaid programs. What are
the advantages or reasons whythey might do so through a
(02:31):
managed care universe?
Bohan Li (02:34):
Absolutely. So as you, very aptly already described,
there is essentially two waysthat states can choose to
provide Medicaid benefits. Oneis to choose to offer those
benefits directly through apublicly managed fee for service
program, And the second way iswhat we're talking about today,
which is managed care. And thishappens when states contract out
(02:57):
the provision of Medicaidbenefits to private firms, which
we call managed careorganizations or MCOs. So these
are private insurance companieslike Centene or UnitedHealth to
name a couple of the big ones.
And the way it works is thestates essentially pay these
MCOs a set capitation rate. Soit's typically a fixed payment
(03:20):
per member per month. The firmsessentially take this payment
and use it to deliver Medicaidhealth benefits. Now, there is
kind of a key implication fromall of this, which is that the
firm or the insurance company inthis case is the residual
claimant, on any spending thatgoes above or below the set
(03:40):
capitation rate. So in otherwords, if it costs the MCO less
than the received capitationrate, they get to pocket that as
profit.
And if they go over the receivedcapitation rate, then the firm
essentially internalizes thatloss. From the state's
perspective, there's a couple ofadvantages to this. The first
(04:03):
one being kind of greaterpredictability of Medicaid
spending. Right? You knowexactly how much you're paying
and for whom, and then it's upto the firms themselves to kind
of manage, the delivery of thesebenefits.
Of course, when we think aboutoutsourcing, to private firms,
there's always this argumentthat private firms can actually
(04:25):
save costs and provide, thesebenefits more efficiently than
the government can. Some reallybelieve that MCOs are just able
to do more, per dollar ofMedicaid funding. And one way
that they do that is theyleverage competition for these
contracts, in order toincentivize these private firms
to promise better products forbeneficiaries.
Rob Lott (04:49):
Got it. Okay. So before you conducted your study,
can you give us a sense of whatwas typical approach in the
field to characterizing themanaged care market,
understanding who was in and whowas out and what the players
were. And my sense is that thatwas a difficult task and maybe
(05:14):
you can give us a sense of whythat was so difficult.
Bohan Li (05:17):
Yeah, absolutely. I mean, first of all, I just
wanted to acknowledge all thegreat, wonderful studies that
have been done in this space,studying different facets of
both Medicaid and Medicaidmanaged care as that has kind of
grown in importance. Ourcontribution, we see it as
twofold. The first one is thatwe take a really broad lens.
(05:39):
Right?
We look at we look at thingsnationally, which is really hard
because, you know, this isessentially a state program.
It's a state by state program.If you see one Medicaid program,
you know, some say you've onlyseen one Medicaid program, which
is which is true. So we we takea broad lens. We look at,
national trends, and we alsolook at a pretty long time
(06:02):
frame.
We look at fifteen years between2006 and 2020. And, obviously, a
lot happened, in the healthpolicy space during those years.
So the second thing that we dois we move beyond the standard
focus, looking at fee forservice Medicaid versus managed
care. And instead we try toreally understand how the
(06:24):
Medicaid managed care market haschanged over time. And the
reason that it's been a littlebit tricky to kind of
characterize this market isbecause every state has a very
different procurement process.
And second of all, like a lot ofother areas of healthcare, data
on ownership is not alwaystransparent. And so it takes a
(06:45):
lot of kind of creative cobblingto put together a full picture,
of this market. And lastly,which we get into in the paper,
there's been a really highvolume of m and a activity in
this space, which has kind ofchanged the ownership of these
plans.
Rob Lott (07:02):
Okay. Great. Well, let's, let's hear about your
study. What did you measure?What did you find?
Bohan Li (07:07):
In our study, we set out to essentially paint this
comprehensive picture of theMedicaid managed care market. So
first, we actually focusspecifically on what we call
main market comprehensive riskbased MCOs. It's
Rob Lott (07:22):
Which about is like the world the the main kind of a
c MCO. Right?
Bohan Li (07:27):
Yeah. Exactly. It's plans that take on full risk for
their membership and that targetthe general Medicaid population
instead of, you know, a groupwith specific health conditions,
for example. And we set out tolay out a set of basic facts
that hopefully will inspirefuture work in this space. So
what we actually did is we usepublicly available Medicaid
(07:51):
managed care enrollment datafrom CMS and we supplemented it
with a decent amount of elbowgrease and some proprietary
sources to identify, M and Aactivity in this space.
And we measure essentially twothings. The first thing we look
at, is what we call the marketlandscape, so really enrollment
trends. Specifically, we lookedat kind of the parent firms that
(08:15):
owned these different plans. Andwe looked at those parent firms
across two dimensions. Onebeing, we call it ownership
type, but really understandingwhether it's mostly firms that
are primarily insurancecompanies that are owning these
plans or is it, you know,provider organizations that are
running these plans?
(08:36):
The second dimension that welook at is we look at the parent
firm's geographic footprint. Sowhat we mean by this is we look
at parent firms that arenational, so who operate, health
insurance plans in multiplestates versus local parents who
are more often than not singlestate plans. So beyond
enrollment, we were also reallycurious about, okay, how many
(08:59):
total parents were in thismarket? How many total issuers
were there? And how did theirmarket share kind of change over
time?
So that was the first part. Andwhat we found there was that,
there was a huge increase inenrollment during our study
period. So enrollment nearlytripled. But despite this
increase in enrollment, we saw apretty significant decrease in
(09:20):
number of total parent firms. Sothe total number of parent firms
actually decreased by about 25%from a 155 in 2006 to a 120 in
2020.
We also found that there was apretty significant shift in
enrollment from local firms tonational firms. So the split in
(09:43):
2006 was roughly about sixtyforty local to national, and
that completely reversed by2020. So the important takeaway
from this part of the study isthat despite this decline in
number of parent firms, thenumber of choices available to
beneficiaries didn't actuallychange all that much, but the
(10:05):
types of plans thatbeneficiaries were choosing from
really shifted. Specifically,beneficiaries have a lot more
national choices today and a lotfewer local choices.
Rob Lott (10:17):
Wow. Okay. A lot to unpack there. Really interesting
stuff. I wanna start with the,your your basic finding that the
enrollment really increased.
Is that tracking general growthin Medicaid writ large, or was
there something else going on?Sort of what do you attribute
that growth to?
Bohan Li (10:35):
Yeah. It's a it's a great it's a great question.
Specifically into this in thepaper, but you can think of it
as, you know, one of the bigdrivers of this growth is
Medicaid expansion, part of theAffordable Care Act that was
enacted in 2014. And then thesecond is that states actually
get to choose whether to provideMedicaid benefits themselves
(11:00):
directly or through managedcare. So we attribute this
growth to an increase ineligibility as well as an
increase in penetration ofmanaged care.
Rob Lott (11:12):
Okay. And subsequent finding you mentioned was that
there was this shift from localparents, if you will, to
national parents, perhaps adecrease in the number of
parents even as the choicesstayed about the same. How do
you explain that shift? Is itjust sort of part of these these
(11:34):
national trends that we'reseeing in everything from
grocery stores to to banks ofsort of general consolidation,
or is there something morenuanced going on in this
landscape?
Bohan Li (11:46):
Yeah. So something interesting that we found when
we kind of broke down theenrollment by ownership is we we
found that this kind of hugegrowth in national firm market
share was almost entirely drivenby the growth of a single payer.
It was it was Centene. AndCentene is a Medicaid focused
insurer that has been, you know,incredibly active in this space
(12:08):
and very innovative over thelast couple of decades. But I
did pull these numbers fortoday's podcast.
Their market share was onlyabout four percent in 2006 at
the start of our study period.In 2020, it was 21%. So that
means that one in fivebeneficiaries were actually
enrolled in a Centene ownedplant based on our calculations.
(12:30):
So we can't definitively saythat that this one firm's growth
in acquisitions kind of causedthe shift from local to
national, but the evidence doesseem to point in that direction.
And one of the things that Iwanted to mention too is the
second part of our study reallylooked at M and A activity in
(12:53):
the Medicaid managed caremarket, and we found a huge
volume of acquisitions.
So we found a 123 planacquisitions during our study
period. That means that one infour plans during our study
period was involved in at leastone acquisition, which was very
surprising. So Centene was noexception. They were our most
(13:18):
prolific acquirer during thistime period. They made many
acquisitions.
They acquired both local andnational plans. And so that
could also be one of the driversthat shifted kind of enrollment
from local to national payers.
Rob Lott (13:35):
Wow. What's I'm gonna mess up the quote here, but I
was it Margaret Mead who saidnever underestimate the power of
one individual to change theworld, something like that. I
guess you should neverunderestimate the power of one
parent company to change thebalance of the Medicaid managed
care marketplace. Right? In amoment, I want to ask you a
(13:58):
little more about the role thatcompetition plays in in all of
these dynamics.
But before we do, let's take aquick break. And we're back. I'm
(14:25):
here with Bohan Lee talkingabout her paper and the Medicaid
managed care market landscape.So just a few minutes ago you
described a lot of the shifts inthat landscape. And I'm
wondering if you can tell us alittle bit about how you see
competition through the lens ofall these changes.
(14:50):
How does competition function inthese markets? Is it sort of a
healthy competitive market? Andif so, what is the impact on
beneficiaries' sort of everydayexperiences of Medicaid?
Bohan Li (15:04):
This is an incredibly important question, and it's
actually at the heart of wherewe want this strand of work to
go next. So thank you so muchfor asking that. First, I wanted
to set the stage and say thatlike many other parts of the
health care industry, the MMCmarket is quite consolidated.
According to data from theKaiser Family Foundation, you
(15:25):
know, five national firms,Centene being one of them, have
about half of all MMCenrollment. But what I wanted to
kind of clarify is that thecompetitive dynamics play out
very differently in this marketbecause of a couple of the
institutional details.
So most states use a competitiveprocurement process to award MCO
(15:46):
contracts as part of the waythat they outsource the
provision of Medicaid benefits.So this means that, MCOs don't
have free entry into statemarkets. So this is what's
called managed or regulatedcompetition. The way it works
is, you know, these privateinsurance companies will bid
competitively for contractsawarded by the state government.
(16:09):
And then the state governmentwill choose the number and which
contracts to offer.
And then patients will thenchoose from this menu of state
contracted options. And I willmention here again, like
everything else in Medicaid,procurement timelines, rubrics,
the selection process varies alot across states. So from what
(16:30):
I just described, you can seethat there's two layers of
competition. The first layer isplans are competing against each
other to obtain a contract. Andthen the second layer is perhaps
the type of competition thatwe're more familiar with, which
is members are choosing inbetween plans.
So plans are competing againsteach other conditional on having
a contract to attractmemberships. And here, what I
(16:53):
wanna point out is that, in somestates, enrollees are more
active at choosing plans than inothers. So in some states, auto
assignment rates or theproportion of members who don't
actually make an active choicein terms of which plan they
wanna enroll in and instead areassigned a plan by the state,
that that varies a lot. And soto us, this first layer, this
(17:16):
competition for contracts isprobably the most important
level of competition tounderstand. So to kind of, play
this out a little bit more, wedon't explore this directly in
the paper, but you could imaginethat a decrease in competition
in terms of the number ofbidders for these state
(17:38):
contracts could lead potentiallyto lower quality contracts.
So imagine there's a unnamednational insurer. Right? They're
competing for a state Medicaid,contract with the local or it
can be a nationally owned planthat it will acquire in the
future. So when they'recompeting, perhaps they have
(18:00):
more incentive to promise betterproducts. Right?
Wider provider networks, betterancillary services for
enrollees. However, after thisacquisition, this, you know,
acquiring National Insure nolonger has to compete with the
insurer that it acquired. Soperhaps there's kind of less
incentive to promise thesehigher quality products.
Rob Lott (18:22):
You also hinted at the sort of variation from state to
state, and I'm wondering if youcan talk a little bit about just
how extreme or or not thatvariation is and how you dealt
with that in your paper.
Bohan Li (18:40):
Absolutely. So since our goal was to kind of cast
this wide net and paint a verybroad picture, we don't spend
too much time looking at thestate by state variation. But as
you pointed out, we did findsome kind of interesting
differences across states interms of, where national pairs
dominate, versus where localplans tend to dominate even
(19:04):
towards the end of our sampleperiod. So we found that
nationals really dominated inthe Midwest and the Southwest,
whereas local plans were moreprevalent in terms of their
market share in states likeMassachusetts, Minnesota, and
Oregon.
Rob Lott (19:21):
So we're approaching the sixtieth anniversary of
Medicaid being enacted, andwe're doing a lot of reflection
here at Health Affairs and I'msure across the health policy
universe. I'm wondering if westart with the basic mission of
Medicaid to provide coverage, asafety net to low income
(19:45):
Americans, and for that coverageto be jointly funded by the
states and the federalgovernment, how should we think
about managed care in that sortof most fundamental kind of
baseline definition? Should welook at it as an important tool
advancing Medicaid's mission? Oris it sort of the creep of, you
(20:11):
know, for profit interests overtime? Is it a good thing or is
it a hindrance?
And what factors do you think weshould be considering as we make
that assessment?
Bohan Li (20:22):
This is a wonderful question, but also an incredibly
complex one. The first thingthat I will say here is that the
reality is most Medicaidbeneficiaries are already in
managed care. Managed managedcare penetration has been
increasing over time, and it'sdefinitely here to stay. So I
(20:45):
think the real question is howcan we do managed care better in
the Medicaid context in a waythat advances Medicaid's mission
that you very aptly, discussed?So for example, I think it's
really important to understandthe fundamentals of how this
market works, which we talkedabout a little bit previously,
(21:05):
how it's changing, which I hopethat our paper starts to kind of
get at, and then how the designof these managed care programs
and contracts might need tochange in response to what we
now know about this market.
Because at the end of the day,we want this program to deliver
maximum value for beneficiaries,but also for states. Lastly, one
(21:29):
thing that I've been thinking alot about is we should be
thinking about these privatefirms that operate these plans,
their objective function. Andthat objective function might
differ, across the for profit,versus non for profit plans for
the national plans or the localplans. It's really important to
understand how that how they'reresponding to different
(21:52):
incentives put together by thegovernment and policymakers. And
so so lastly, I would say thatanother another key takeaway
from our work is that perhapspolicymakers should no longer be
thinking of Medicaid as purely astate by state program since
there are common large nationalfirms operating across them.
Rob Lott (22:13):
That's great. Well, that's perhaps a good spot for
us to wrap up. Thank you so muchfor your work on this issue and
for taking the time to talk withus here today.
Bohan Li (22:25):
Absolutely. You so much for having me.
Rob Lott (22:29):
And with that, I'll encourage our listeners to
recommend the podcast to afriend. Leave a review.
Subscribe if you enjoyed thisepisode. Tune in next week.
Thanks, everyone.
Bye. Thanks for listening. Ifyou enjoyed today's episode, I
(22:50):
hope you'll tell a friend abouta health policy.
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