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3. The Role of Private Enforcement in an Age of Medicaid Managed Care
In addition to challenging state practices, Medicaid litigation has also
challenged the actions of private companies who contract with the state
agency. During the 1990s, states began altering the structure of their Medicaid programs.90 Traditionally, Medicaid was structured in a fee-for-service
model.91 The state agency essentially acted as an insurer for Medicaid beneficiaries: physicians who provided care to patients sent the bill to the Medicaid agency, and the agency directly reimbursed each provider for the service provided.92 But states, concerned about the rising cost of care, began to
utilize managed care organizations.93 In the most common form of managed care, states contract with private insurers, called “managed care organizations” (“MCO”), who provided coverage to beneficiaries.94 Under an
MCO structure, the state pays the MCO a flat fee for each beneficiary.95
The MCO contracts with doctors and hospitals to develop a network of providers and those medical providers bill the MCO, rather than the state.96
This structure allows states to pay a predictable amount of money per beneficiary and shifts the financial risk of beneficiaries utilizing expensive medical services to the MCO.97 The shift to managed care has been dramatic.98
Between 1991 and 2011, states recognized the potential budget savings of
using managed care and made dramatic shifts: in that timeframe, the percentage of Medicaid beneficiaries enrolled in some form of managed care
has increased from nine percent to seventy-four percent.99
Although this model is attractive to states because it provides a way to
lower costs and makes them more predictable, managed care often limits
the services available to Medicaid beneficiaries. First, beneficiaries cannot
afford to simply pay more to go out of network.100 Second, MCOs are frequently unfamiliar with federal requirements and do not always comply
90. See SMITH ET AL., supra note 22, at 34.
91. Sara Rosenbaum, Medicaid at Forty: Revisiting Structure and Meaning in a Post-Deficit Reduction Act Era, 9 J. HEALTH CARE L. & POL’Y 5, 21 (2006) [hereinafter Medicaid
92. See Ctrs. For Medicare & Medicaid Servs., Fee-for-Service, MEDICAID.GOV,
Systems/ Fee-for-Service.html (last visited Oct. 16, 2014).
93. SMITH ET AL., supra note 22, at 34.
94. Id. at 35.
98. See id. at 34.
100. See Medicaid at Forty, supra note 91, at 22 (“Medicaid managed care today parallels the use of network-style insurance coverage found in the employer-sponsored market,
which conditions some or all contractual coverage on use of specified provider networks.”).