Deliverance: A Study of Medicaid and Managed Care
Since the inception of Medicaid in 1965, the program has seen extraordinary growth in expenditures and enrollment. From 1989 to 1992, the increases in Medicaid spending were the largest since the program began in. Enrollment in Medicaid by AFDC families grew from 3.8 million in 1990 to 4.4 million in 1992, almost a nine percent annual increase (Coughlin et al. 1994). During this period, states were also experiencing the effects of a nationwide recession. Rapidly rising expenditure levels stretched revenue streams to their limits.
In efforts to save money, states looked primarily at the benefits of managed care, which was becoming a successful delivery and financing system (Ruggie 1996). Medicaid patients had a history of using emergency rooms for problems such as colds, flues, and other minor illnesses. Medicaid paid $75 for an emergency room visit in 1995, but only $29 for a physician’s office visit (Lutz 1995). Medicaid officials hoped that placing the patient in contact with a primary care physician would encourage the use of preventative medicine, thereby holding down costs.
States began Medicaid managed care programs using the AFDC population as guinea pigs. With waivers allowed under Section 1115 of the Social Security Act, states restructured their Medicaid programs (Rotwein et al. 1995). This was the single largest Medicaid innovation of the 1990s (Couglin et al. 1999). Between 1991 and 1996, enrollment of Medicaid clients in managed care increased by a factor of six (Thompson and DiIulio 1998). Many reasons accompanied the assertion that the AFDC population would benefit the most from managed care. The women and children of AFDC could take advantage of the preventative side of managed care such as yearly physical exams. Also, placing the AFDC population in managed care was attractive because they are one of the largest groups of medicaid enrollees. The total savings was attractive even though the overall percentage saved was small. States were eager to save whatever they could.
While managed care saves money, not all states were quick to adopt it, and the extent to which they did varied widely across states. Why states chose to adopt the programs they do has been the topic of much research, the most groundbreaking being by Walker (1969) and Gray (1973). They claim that each region of the United States has within it one or two states that are more likely to adopt new programs before others. Managed care adoption began in earnest in 1993. To use 1993 as a starting point for examining managed care adoption would confuse innovativeness with those factors which genuinely may make managed care a more appropriate policy choice. Hence, this paper focuses on the year 1996.
Hypotheses and Measurement
Due to variations in state public policy, several different independent variables will be used to examine the extent to which states have enrolled Medicaid recipients in...