Medicaid patients tend to be sicker, are less likely to have access to specialist care, and have generally worse outcomes than patients funded by other insurance types. As states move most of their Medicaid beneficiaries to managed care plans, it is important to examine access to specialist care for a population that generally requires it. While specialists and primary care physicians are equally likely to accept Medicaid patients, specialists prefer fee-for-service enrollees to those with managed care. This makes sense – managed care pays a fixed rate with necessary risk adjustments. This means that for most specialists, Medicaid managed care (MMC) patients are not just less profitable, they may even cause them to lose money. But the question for me is whether MMC patients have timely access to quality specialist care.

A recent study (working paper) caught my attention this week: What happens when an MMC plan adds a well-known specialist provider to its network? In this paper, the authors use data from New York to examine what happens when a well-known cancer specialist practice is included in the network of an MMC:

1. The plan’s market share of cancer patients increased by 50% when the hospital was added for the year 2005. The plan dropped the cancer hospital the following year (2006) and that market share fell roughly equally.

2. Utilization within the plan increased dramatically over the period.

3. Increased utilization of the new hospital caused approximately a 15% reduction in the plan’s profit margin.

There are a couple of lessons. Policymakers have generally been wary of the lack of access to specialists in MMC plans. Managed care plans are required to ensure the adequacy of their networks, i.e., have a sufficient number of specialists available to enrollees within their covered geographical area. Yet, the capitated payment approach of most states means that expensive specialists may actually be a financial drain on plans. As we see in the New York example, it is simply not profitable to include a “high quality, well-known specialist” in the plan. Simply mandating network adequacy isn’t enough to ensure the availability of specialists.

The study authors suggest paying an incentive to individual plans to include more specialist providers in their network. In fact, they simulate that even a $10 monthly payment per enrollee to plans would ensure break-even, given that the share of beneficiaries who needed the specialist care in the study was small. In addition, it is important to simply pay for quality. If a specialist center can provide high quality care, it must not be subjected to the same capitation payments even though the amount to the plan is risk adjusted.

Overall, we often try to legislate quality only to get at best middling results if there are countervailing incentives. Take nursing homes, for example. They are highly regulated with an emphasis on quality. Yet, the government reports that about 82% of inspected nursing homes consistently report significant deficiencies. Mandating quality doesn’t ensure quality; competition does.