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Navigating Your Medicaid Coverage
Medicaid is a cornerstone of the American health care system, providing essential health coverage to millions of people, including eligible low-income adults, children, pregnant women, elderly adults, and individuals with disabilities. It’s a partnership between the federal government and state governments; the program is jointly funded, but each state administers its own Medicaid program according to federal requirements. This state-level administration means that while federal rules provide a baseline, the specifics of eligibility, covered services, and how you get those services can vary significantly from state to state.
To deliver health care services to beneficiaries, states primarily use two different approaches, often called “delivery systems”: Fee-for-Service (FFS) and Managed Care. Many states actually use a combination of both systems, sometimes using one system for certain groups of people or certain types of services, and the other system for others.
Understanding which system your state uses for your Medicaid coverage is important. It affects fundamental aspects of your health care experience, such as how you find doctors and specialists, whether you need approvals for certain treatments, and how your overall care is coordinated. This article explains the differences between Medicaid Fee-for-Service and Medicaid Managed Care and what those differences mean for you as a beneficiary.
Medicaid Fee-for-Service (FFS): The Traditional Model
How it Works: Paying Per Service
Medicaid Fee-for-Service (FFS) is the traditional model for delivering Medicaid benefits. In this system, the state Medicaid agency pays health care providers—doctors, clinics, hospitals, labs—directly for each specific, covered service they provide to a Medicaid beneficiary. Think of it like taking your car to a mechanic: under FFS, the state pays the mechanic for each individual part replaced and each hour of labor performed.
Under FFS, providers generally do not bear financial risk for the cost of care; they submit a claim for the services they render, and the state pays them according to pre-established rates. The state Medicaid agency determines these payment rates, often referred to as “fee levels” or listed in “fee schedules,” for all covered services.
Your Choice of Providers: Freedom to Choose
A defining characteristic of the FFS model is the principle of “freedom of choice” for beneficiaries. This generally means that if you are covered under Medicaid FFS, you can seek services from any qualified health care provider—doctor, specialist, hospital, or clinic—that is enrolled in your state’s Medicaid program and is willing to accept you as a patient. You typically present your state-issued Medicaid identification card (for example, the “mihealth” card in Michigan) when you receive services.
However, this freedom comes with a significant practical consideration. While you have the right to choose among participating providers, the actual number of providers participating in FFS Medicaid, particularly specialists, can sometimes be limited. Finding a provider who accepts Medicaid FFS and is taking new patients can be a challenge in certain areas or for certain types of care, an issue tied closely to how providers are paid under this system.
How Care is Managed (or Isn’t): Potential for Fragmentation
Historically, the FFS payment model rewards the quantity or volume of services provided, rather than necessarily focusing on the quality of care or patient health outcomes. Because the state pays for each individual service, there isn’t typically a single entity responsible for coordinating a beneficiary’s care across different providers and settings. This can lead to care that is “fragmented,” meaning your primary care doctor might not easily know what tests a specialist ordered, or vice versa, potentially resulting in duplicated tests or gaps in care. In most FFS systems, the responsibility for coordinating care often falls primarily on the beneficiary or their primary care provider.
Some states use a variation within FFS called Primary Care Case Management (PCCM). In PCCM programs, beneficiaries are enrolled with a specific primary care provider who receives a small additional monthly fee to help manage and coordinate their care. However, the underlying payment structure remains FFS – the provider is still paid separately for each medical service delivered.
FFS Payment Rates and the Reality of Access
A critical factor influencing the FFS system is provider payment rates. State Medicaid programs generally have broad flexibility in setting FFS payment rates for physicians and other providers. Numerous studies and reports indicate that these FFS rates are often substantially lower than the rates paid by Medicare or private health insurance companies for the same services. A national analysis using 2019 data found that, on average, Medicaid FFS physician fees were about 72 percent of Medicare fees, a ratio that has remained largely unchanged since 2008, though there is significant variation between states.
These lower payment rates have direct consequences for beneficiary access. Research suggests an association between lower Medicaid payment rates and lower physician willingness to accept new Medicaid patients. National surveys have shown that fewer physicians report accepting new Medicaid patients compared to those accepting new Medicare or privately insured patients. Therefore, the “freedom of choice” theoretically available under FFS can be constrained by the economic reality that fewer providers may participate in the program due to lower reimbursement. This can make it particularly difficult to find specialists or providers in certain geographic areas willing to accept Medicaid FFS patients.
States sometimes attempt to address low base rates by making additional “supplemental payments” to certain providers, like hospitals, but this adds another layer of complexity to the system and doesn’t always resolve access issues for all types of care.
Medicaid Managed Care (MMC): Using Health Plans
How it Works: Partnering with Private Plans
In contrast to the FFS model where the state pays providers directly, Medicaid Managed Care (MMC) involves the state contracting with private insurance companies, known as Managed Care Organizations (MCOs), to deliver Medicaid health benefits and services to enrolled beneficiaries.
If you are in a state or program using MMC, you will typically be required to enroll in one of the MCOs operating in your region. You will likely receive an insurance card from your specific MCO in addition to your regular state Medicaid ID card, and you’ll need both when accessing services. Under this model, the state’s role shifts from directly paying claims to overseeing the MCOs, ensuring they meet contract requirements related to access, quality, and financial performance.
Capitation Payments: Paying Per Person
The financial arrangement between the state and the MCO is fundamentally different from FFS. Instead of paying for each service, the state pays the MCO a fixed monthly fee for each person enrolled in the plan. This is called a “capitation” payment, often expressed as a “per member per month” (PMPM) rate.
This capitation payment is intended to cover the cost of all the contracted Medicaid services that an enrolled beneficiary might need during that month. This arrangement is often referred to as “risk-based” managed care because the MCO assumes the financial risk. If the total cost of a member’s care in a given period is less than the total capitation payments received for that member, the MCO may retain the difference (subject to certain regulations like Medical Loss Ratios). Conversely, if a member’s care costs more than the capitation payments, the MCO typically bears the loss.
This payment structure creates a distinct set of incentives for MCOs compared to FFS providers. The goal is to encourage MCOs to manage cost, utilization, and quality. On the one hand, the fixed budget can incentivize MCOs to invest in preventive care and care coordination to keep members healthy and avoid expensive emergency room visits or hospital stays. On the other hand, the same financial pressure could potentially incentivize MCOs to limit access to necessary but costly services, or to design provider networks that might discourage enrollment by people with complex and expensive health needs, particularly if the capitation rates set by the state are not adequately adjusted for the health risks of the enrolled population.
States attempt to balance these incentives through contract requirements, quality measures, and sometimes financial rewards or penalties tied to MCO performance. This underlying tension between cost management and ensuring robust access to care is a central dynamic within the MMC model and significantly shapes the beneficiary experience.
Provider Networks: Staying “In-Network”
A key feature of MCOs is that they establish their own networks of doctors, hospitals, specialists, pharmacies, and other health care providers through contracts. As a beneficiary enrolled in an MCO, you generally must receive your care from providers who are in your MCO’s network for the services to be covered at the lowest cost-sharing level (Medicaid often has very low or no cost-sharing, but using out-of-network providers could lead to services not being covered at all, except in emergencies).
Because access to care depends heavily on the MCO’s provider network, states and the federal government impose “network adequacy” standards. These rules require MCOs to have a sufficient number and mix of providers within a reasonable travel time or distance from their enrollees. Standards often vary depending on the type of provider (e.g., primary care vs. specialist) and geographic area (e.g., urban vs. rural). There is considerable variation in these standards from state to state.
Recognizing challenges with ensuring real access, the federal government has recently finalized new rules aimed at strengthening oversight. These include establishing national maximum appointment wait time standards for certain types of appointments (like primary care, specialty care, and mental health) and requiring states to use independent “secret shopper” surveys to verify whether network providers are actually available and offering timely appointments.
Despite these rules, ensuring adequate access through MCO networks remains a challenge. Studies and reports have highlighted issues with inaccurate provider directories, sometimes called “ghost networks,” where listed providers may no longer participate in the plan, are not accepting new patients, or cannot be reached at the listed contact information. Research has also shown relatively high rates of provider turnover within some MCO networks. Therefore, even with network adequacy standards on the books, beneficiaries may still face difficulties finding an available in-network provider or encounter long wait times for appointments. This gap between regulatory standards and the on-the-ground reality underscores the need for robust state monitoring, the new federal requirements for enhanced oversight, and often, persistence on the part of beneficiaries seeking care.
Care Coordination & Management: A Potential Plus
One of the primary goals states cite for using managed care is to improve the coordination and management of care for beneficiaries, potentially leading to better health outcomes and more efficient use of services. MCOs are typically expected to play an active role in this coordination.
Many MCOs offer care management services, particularly for members identified as having significant or complex health needs. A care manager, often a nurse, social worker, or licensed counselor employed by the MCO, works directly with the beneficiary, their family, and their providers. The care manager can help in numerous ways, including:
- Answering questions about Medicaid benefits and how to use them
- Helping schedule appointments with primary care doctors or specialists
- Coordinating care among different doctors and services to ensure everyone is on the same page
- Developing a personalized care plan with the member to address health goals and needs
- Helping manage chronic conditions like asthma or diabetes
- Connecting members with community resources for needs like transportation, housing, or food assistance
- Assisting with transitions between care settings, like after a hospital stay
- Advocating for the member’s needs within the health care system
States may also require or encourage MCOs to implement specific care coordination programs, such as Patient-Centered Medical Homes (PCMHs), Health Homes for individuals with chronic conditions, or specialized programs for populations like children with special health care needs, individuals needing long-term services and supports (LTSS), people with serious mental illness or substance use disorders, or high-risk pregnant individuals. Some MCOs also partner with community health workers (CHWs) to provide culturally competent support and connect members to resources.
While the potential for enhanced care coordination is a key argument for MMC, the actual experience can vary. Access to intensive care management is often not automatic for all members; it may be triggered by results from a health screening conducted after enrollment, a referral from a provider, or the member proactively requesting assistance.
Furthermore, research comparing outcomes between FFS and MMC has yielded mixed results regarding whether managed care consistently leads to better coordinated care or improved health outcomes across the board. Beneficiaries should be aware that they may need to actively engage with their MCO or ask for care management support if they feel they need it. It’s also relevant to remember that the care manager, while an advocate for the member, is ultimately an employee of the MCO, which operates under the financial incentives of the capitation model.
Comparing FFS and Managed Care: What It Means for You
The choice between FFS and managed care represents fundamentally different approaches to organizing, paying for, and delivering Medicaid services. Here’s a summary of the key differences from a beneficiary’s perspective:
Provider Payments & Your Access
FFS: The state pays providers directly for each service. These rates are often lower than Medicare or private insurance, which can limit the number of providers willing to participate, potentially restricting your choice despite the “freedom of choice” principle.
MMC: The state pays the MCO a fixed monthly amount per member (capitation). The MCO then pays the providers in its network. MCOs have flexibility in setting provider rates, but they often use state FFS rates as a benchmark. Low FFS rates can therefore indirectly impact MCO network adequacy. States can mandate higher MCO payments through complex mechanisms called State Directed Payments (SDPs), highlighting the persistent challenge of ensuring adequate payment in both systems. New federal rules aim to increase transparency regarding how MCO payments compare to FFS and Medicare rates.
Provider Choice: Flexibility vs. Networks
FFS: Offers potentially broader choice, allowing you to see any provider enrolled in Medicaid who is accepting patients. The main hurdle is finding such providers.
MMC: Restricts choice primarily to the providers within the MCO’s specific network. The main hurdle is ensuring the network is truly adequate and that listed providers are accessible (addressing issues like inaccurate directories and appointment availability). Notably, federal law protects your freedom to choose any qualified Medicaid provider for family planning services, even if they are outside your MCO’s network.
Getting Care Coordinated
FFS: Coordination generally falls on you and your providers, leading to potential fragmentation. PCCM programs offer some coordination support but aren’t universal.
MMC: MCOs are expected to coordinate care, often providing care managers for members with higher needs. This is a potential advantage, but the effectiveness varies, and intensive support isn’t automatic for everyone.
Access to Specialists & Prior Authorization
FFS: You may need a referral from your primary doctor, but you can typically choose any participating specialist. The state Medicaid agency may require prior authorization (pre-approval) for certain expensive services or medications.
MMC: You must use specialists within your MCO’s network. Both referrals and prior authorization are commonly required by MCOs as tools to manage utilization and costs. MCO prior authorization rules and processes may differ from the state’s FFS rules and can sometimes be more restrictive. Prior authorization, while intended to prevent unnecessary care, can be a significant source of frustration and delay for beneficiaries and providers in both systems, but particularly within managed care due to the MCOs’ financial incentives. Concerns have been raised about inappropriate denials of medically necessary care by some MCOs. It is crucial for beneficiaries to understand their right to appeal if a prior authorization request is denied.
Overall Experience: Access, Quality, Satisfaction
Extensive research comparing FFS and MMC has yielded mixed results, and there is no definitive conclusion that one system consistently delivers better access, quality, or satisfaction across all populations and measures.
Some studies associate MMC with improvements like having a usual source of care, reduced emergency room use (for some), better medication adherence, or shorter office wait times. Satisfaction in some MMC plans can be high.
However, other studies link MMC to difficulties accessing specialists, higher rates of hospitalization for conditions manageable with good primary care, network adequacy issues, and even potential widening of health disparities.
Beneficiaries in FFS generally have better access than the uninsured and sometimes comparable access to the privately insured on certain measures (like annual doctor visits), but often report more difficulties obtaining care overall, potentially due to provider participation issues. Unmet needs can also be significant in FFS.
The reality is that Medicaid managed care has become the dominant delivery system nationally, with roughly three-quarters of all beneficiaries enrolled in comprehensive MCOs as of 2022. Yet, this widespread adoption appears driven significantly by states’ desires for budget predictability and cost containment, rather than conclusive evidence of superior outcomes for beneficiaries compared to FFS. Ultimately, a beneficiary’s experience in either system can vary greatly depending on the specific state, the MCO (if applicable), the individual’s health needs, and the availability of providers in their community. Neither system is inherently “better” for everyone.
Key Differences: Medicaid Fee-for-Service (FFS) vs. Managed Care (MMC)
| Feature | Fee-for-Service (FFS) | Managed Care (MMC) |
|---|---|---|
| How Providers Are Paid | State pays provider directly for each service. | State pays MCO a fixed monthly fee per member (capitation); MCO pays provider. |
| Your Choice of Doctors/Hospitals | Generally free choice among providers who accept Medicaid. | Usually must use providers in the MCO’s network. |
| How Care is Coordinated | Usually relies on you and your doctor(s); can be fragmented. | MCO is responsible for coordination; may assign a care manager, especially for complex needs. |
| Who Manages Your Benefits | State Medicaid agency directly. | Private insurance company (MCO) under contract with the state. |
| Key Potential Benefit for You | Wider choice of participating providers (if available). | Potential for better care coordination; extra benefits offered by some plans. |
| Key Potential Challenge for You | Finding providers who accept Medicaid; coordinating own care. | Network limitations; getting approvals (prior authorization); ensuring network providers are actually available. |
Which System Am I In? How States Decide
While Medicaid managed care is the most common way beneficiaries receive services nationally—covering about 75% of the Medicaid population in 2022, with 42 states plus DC using comprehensive MCOs as of July 2024—it’s not the only way. Some states rely primarily on FFS, others use managed care almost exclusively, and many employ a hybrid approach, using different systems for different groups of people or different types of services.
Crucially, states have significant flexibility in designing their managed care programs. They decide:
- Which populations are enrolled in managed care. Historically, managed care often focused on children and non-disabled adults. However, states are increasingly including populations with more complex needs, such as people with disabilities and seniors requiring long-term services and supports (LTSS), although enrollment rates for these groups may still be lower than for children and adults.
- Which services are included in the MCO contract (often called “carved in”) versus those handled separately, perhaps through FFS or a specialized limited-benefit plan (“carved out”). Common services that states sometimes carve out include behavioral health, dental care, pharmacy benefits, and LTSS, though the trend in recent years has been for more states to carve these benefits into their MCO contracts.
Because of this state-level variation, the best way to know which system applies to you and what rules govern your care is to consult information specific to your state and, if applicable, your managed care plan. You can usually find this information by:
- Checking your state Medicaid agency’s official website (often found by searching “[your state] Medicaid”).
- Reviewing the enrollment materials or member handbook you received when you qualified for Medicaid or enrolled in a plan.
- Looking at your insurance cards – if you have a card from a private insurance company (like Centene, Elevance Health, UnitedHealth Group, Molina, Aetna/CVS, or a local plan) in addition to your state Medicaid card, you are likely in managed care.
- Calling your state Medicaid agency’s helpline or your MCO’s member services number if you are enrolled in a plan.
Our articles make government information more accessible. Please consult a qualified professional for financial, legal, or health advice specific to your circumstances.