States Turn to Managed Care To Constrain Medicaid Long-Term Care Costs


At least 26 States now contract with managed care organizations (MCOs) to provide long-term services and supports (LTSS) for older adults and people with disabilities. MCOs receive a monthly payment per member to provide comprehensive care and assume the risk of managing the cost of care within that capitated rate.

The goal of managed LTSS is to improve the quality of care for people who need these services while containing costs. In addition, many of these programs create financial incentives for MCOs to keep individuals in their communities rather than in more expensive institutional settings such as nursing homes. In fiscal year 2011, Medicaid spent $136 billion on LTSS, representing one-third of all Medicaid spending. While Medicaid spending on noninstitutional LTSS has increased in recent years, institutional LTSS represents 72 percent of Medicaid LTSS spending, including $52 billion spent on nursing home care in fiscal year 2011.

– Agency for Healthcare Research and Quality

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