The spike is driven in part by the expansion of Medicaid under the Patient Protection and Affordable Care Act. Roughly half the states have opted to allow residents who make up to 138% of the federal poverty threshold to be eligible for Medicaid. Nearly 4 million Americans have signed up for the government healthcare program since the state and federal exchanges began operating Oct. 1. It's unclear how many of them are newly eligible and even new to the program or simply re-enrolling. Just three of the 26 states expanding Medicaid don't utilize managed-care organizations.
The trend represents a rapid shift away from traditional fee-for-service programs. By 2016, just 23% of Medicaid enrollees will receive fee-for-service coverage, down from 34% last year, according to Avalere. There are now 38 states that utilize managed-care plans for at least part of their Medicaid program.
The fixed costs that come with private contracts are attractive to states, and states are hoping that coordinated-care delivery will deliver better health outcomes for enrollees, Eyles said. “When you think about fee for service, it's essentially unmanaged care.”
In California, roughly half of Medicaid enrollees were in fee-for-service programs as recently as two years ago, said Gerald Kominski, a health policy expert at the University of California at Los Angeles. But now all individuals have been shifted into managed-care plans. “Costs are the primary driver,” Kominski said.
UnitedHealthcare, the country's largest insurer, indicated in its fourth-quarter earnings report that the company added 205,000 Medicaid enrollees in 2013, bringing its total Medicaid enrollment to 4 million. The company expects Medicaid revenue to exceed $7 billion in 2015.
Joseph Swedish, CEO of WellPoint, told investors at the JPMorgan Healthcare Conference earlier this month that Medicaid enrollees now account for more than a quarter of the company's customers, and that he expects the firm's government business to continue growing. “The rollout of public exchanges and the expansion of Medicaid under the Affordable Care Act will accelerate enrollment growth opportunities in the years ahead,” Swedish said.