Managed care and fee-for-service (FFS) are two possible models that states use to deliver benefits under their Medicaid programs. Most states provide a combination of these two delivery models, which offer different financial incentives. Nationally, more than half of Medicaid beneficiaries are enrolled in a managed care plan. States contract with MCOs to provide a specific set of Medicaid-covered services to beneficiaries, and MCOs are expected to report encounter data to state Medicaid programs that allow the Medicaid administrators to track the services received by enrolled beneficiaries. The state pays the MCO a predetermined amount per beneficiary per month—known as capitation—and, in turn, the MCO pays providers for their services. According to CMS, by contracting with various types of Medicaid MCOs to deliver services, states can reduce program costs and better manage utilization of health care services. However, since MCOs receive a fixed amount per beneficiary regardless of the number of services used, we have noted in our prior work that there may be financial incentives for MCOs to limit access to services, potentially compromising quality of care and leading to underutilization of services. Historically, most Medicaid programs relied on a FFS delivery model. Under the FFS model, states pay providers directly for each service provided to a Medicaid beneficiary and the data included on a Medicaid FFS claim includes a specific amount for services delivered to a beneficiary. Certain states continue to use the FFS model to provide Medicaid services, such as behavioral health and dental care. We have noted in our prior work that, unlike managed care, the FFS model may give providers an incentive to use more services than necessary. Despite the fact that states have been required to submit encounter data to CMS since 1999, little is known about the utilization of services by Medicaid beneficiaries in MCOs. Historically, encounter data have been relatively incomplete and unreliable; thus, little is known about these data. At the behest of CMS, Mathematica Policy Research published a number of studies focused primarily on the usability and completeness of 2007- 2010 Medicaid encounter data, as reported in MAX. These studies first reported that encounter data were suitable for research purposes in 2012. CMS has provided guidance to states on methods to improve the completeness and accuracy of encounter data. In 2012, CMS released a protocol for validating Medicaid encounter data that states receive from MCOs. The protocol specifies a procedure for assessing the completeness and accuracy of encounter data that Medicaid MCOs are required to submit. Additionally, PPACA strengthened the requirement that Medicaid MCOs provide encounter data to states by withholding federal matching payments from states that do not report encounter data to CMS in a timely manner. The service utilization patterns of beneficiaries enrolled in Medicaid managed care plans can vary substantially and be related to a variety of factors, including the characteristics of beneficiaries and the scope of state Medicaid benefits offered. Beneficiary participation in managed care: States vary in the populations enrolled in managed care plans. States that enroll their most medically needy beneficiaries into managed care plans are likely to have higher service utilization. Conversely, states that enroll broader, generally healthier populations—such as children—into managed care plans are likely to have a larger pool of beneficiaries and potentially lower service utilization. The amount, duration, and scope of services covered by MCOs: Consistent with federal requirements, a state may determine the amount, duration, and the scope of benefits covered in their Medicaid programs. Thus, variations in service utilization patterns could reflect states’ benefit choices that are independent of their service delivery choices. Variation in Medicaid managed care payments: Medicaid MCO payments to providers for specific services vary substantially across states and this variation could affect the service utilization of beneficiaries. Specifically, we previously reported that in 23 states where we compared MCO and private insurance payments for E/M services, managed care payments were 31 to 65 percent lower in 18 states. Access to Providers: Access to providers who serve beneficiaries enrolled in Medicaid managed care plans can vary substantially within a state, such as between urban and rural areas, and also across states. Geographic variation in provider access, which can be driven by the breadth of an MCO’s network and the availability of providers in a given geographic area, can affect the type and amount of services used by beneficiaries. Based on our analysis of encounter data, the number of professional services utilized by adult and child beneficiaries per year in the 19 selected states ranged widely, with adult beneficiaries typically receiving more services. States also varied in how adult and child service utilization for professional services were distributed across service categories, and by whether beneficiaries were enrolled in comprehensive managed care plans for all of 2010 or part of the year. A detailed, interactive display of the data used to support our findings is available at http://www.gao.gov/products/GAO-15-481. For the 19 selected states, the number of services per beneficiary per year for adults ranged from about 13 to 55 services per beneficiary per year. (See fig. 1.) Services used by adult beneficiaries included E/M services, such as office visits and emergency room and critical care services; procedural services, such as surgery and ophthalmology; ancillary services, such as pathology and lab services and anesthesiology; and other professional services, such as oxygen therapy and hospital-mandated on-call service. Service utilization levels for adult beneficiaries are affected by many factors, including the extent to which they receive services on a FFS basis. Among the states in our analysis, the percentage of professional services that adult beneficiaries received on a FFS basis ranged from 0 to about 11 percent, with a median of 1 percent. Service utilization among adults was concentrated primarily in the ancillary and E/M categories. Specifically, ancillary services were the largest category in all but one state and accounted for 53 percent, on average, of all services utilized by adult beneficiaries across selected states. E/M services made up the second largest category (27 percent), followed by procedural services (15 percent) and, lastly, other professional services (4 percent). However, states varied considerably in how service utilization was distributed within service categories, as was shown in figure 1. Ancillary: Of total services, adult per beneficiary utilization of ancillary services ranged from 37 percent in Rhode Island to 65 percent in Washington and Illinois—a difference of about 28 percentage points. Pathology/lab services accounted for 63 percent, on average, of all ancillary service utilization across selected states. E/M: Of total services, adult per beneficiary utilization of E/M services ranged from 19 percent in Connecticut to 38 percent in Rhode Island—a difference of 19 percentage points. Office visits accounted for 68 percent on average, of E/M service utilization, while emergency room and critical care services accounted for 16 percent, on average. Procedural: Of total services, adult per beneficiary utilization of procedural services ranged from 8 percent in Illinois to 23 percent in Indiana—a difference of about 15 percentage points. Surgical services accounted for the largest portion—36 percent, on average— of all procedural service utilization across selected states. Other professional services: Of total services, adult per beneficiary utilization of other professional services ranged from 1 percent in Illinois, Kentucky, Nebraska, and Washington to 15 percent in Arizona—a difference of about 15 percentage points. For slightly more than half of the selected states, total service utilization among adults was higher for partial-year beneficiaries—those in comprehensive managed care plans for less than the full-year of 2010. Specifically, in 11 of the 19 states, the number of services utilized per year ranged from 2 to 78 percent higher for partial-year beneficiaries than for full-year beneficiaries. In the remaining 8 states, service utilization for partial-year beneficiaries was 3 to 15 percent lower than for full-year beneficiaries. Of the states that had comparatively higher service utilization for partial-year beneficiaries, there were generally no major differences in service utilization among partial-year beneficiaries based on the length of their enrollment. Specifically, partial-year beneficiaries who were enrolled for 1 to 3 months, 4 to 6 months, or 7 to 11 months generally had similarly high utilization rates. Further, we found that partial-year adult beneficiaries utilized more procedural and ancillary services than full-year beneficiaries in about two- thirds of the selected states. Among those states, partial-year adult beneficiaries used 19 and 26 percent more of these services, respectively, than full-year adult beneficiaries. (See fig. 2.) The utilization of professional services by children was generally lower than adults in selected states. In the 19 selected states, the number of services per beneficiary per year for children ranged from about 6 to 16. (See fig. 3.) Services used by child beneficiaries included E/M services, such as office visits and emergency room and critical care services; procedural services, such as surgery and ophthalmology; ancillary services, such as pathology and lab services and anesthesiology; and other professional services, such as oxygen therapy and hospital- mandated on-call service. Service utilization for child beneficiaries is affected by many factors, including the extent to which beneficiaries receive services on a FFS basis. Among selected states, the percentage of professional services that child beneficiaries received on a FFS basis ranged from 0 to about 29 percent, with a median of 9 percent. In contrast to adults, for which service utilization consisted mostly of ancillary services, utilization for children was distributed more evenly across service categories. For example, on average, E/M services were utilized most commonly by children (37 percent of services), followed by procedural services (33 percent), ancillary services (24 percent), and other professional services (5 percent). However, considerable state variation existed within service categories, as was shown in figure 3. E/M: Of total services, child per beneficiary utilization of E/M services ranged from 29 percent in Minnesota to 45 percent in Georgia and Rhode Island—a difference of 16 percentage points. On average, office visits (58 percent) and preventive visits (22 percent) comprised most E/M service utilization across selected states. Procedural: Of total services, child per beneficiary utilization of procedural services ranged from 25 percent in Arizona to 41 percent in Oregon and Texas—a difference of 16 percentage points. On average, immunizations and injections (60 percent) made up the majority of procedural service utilization across selected states. Ancillary: Of total services, child per beneficiary utilization of ancillary services ranged from 17 percent in Oregon to 36 percent in Illinois—a difference of 19 percentage points. On average, pathology and lab services (63 percent) made up the majority of ancillary service utilization across selected states. Other professional services: Of total services, child per beneficiary utilization of other professional services ranged from 1 percent in Georgia, Illinois, and New York to 21 percent in Arizona—a difference of 20 percentage points. Total service utilization among children was higher for partial-year beneficiaries—those enrolled in comprehensive managed care for less than the full year of 2010—than full-year beneficiaries for almost every selected state. For example, for all but one state, the number of services utilized per year was 4 to 44 percent higher for partial-year child beneficiaries than for full-year child beneficiaries. In the remaining state, the number of services utilized per year for partial-year child beneficiaries was 5 percent less than for full-year child beneficiaries. Further, partial-year child beneficiaries utilized more E/M and procedural services than full-year child beneficiaries across all selected states; specifically, partial-year child beneficiaries utilized 19 percent more E/M services and 22 percent more procedural services than full-year child beneficiaries. (See fig. 4.) Among selected states with higher utilization for partial-year child beneficiaries, most experienced the highest utilization for child beneficiaries who were enrolled for 1 to 3 months as compared with 4 to 6 months or 7 to 11 months. When compared with full-year child beneficiaries, partial-year child beneficiaries enrolled for 1 to 3 months utilized, on average, significantly more E/M and procedural services (61 percent and 34 percent, respectively). Furthermore, the increased utilization among child beneficiaries enrolled for 1 to 3 months was particularly pronounced for certain E/M, procedural, and ancillary services. We found the following examples: Inpatient visits: Across all selected states, utilization of inpatient visits ranged from 1.4 to over 15 times greater for child beneficiaries enrolled for 1 to 3 months than for full-year child beneficiaries. Preventive services: For all but one selected state, utilization of preventive visits ranged from 1.5 to almost 4 times greater for child beneficiaries enrolled for 1 to 3 months than for full-year child beneficiaries. Emergency room and critical care: For all but one selected state, utilization of emergency room and critical care services ranged from 1.2 to almost 3 times greater among child beneficiaries enrolled for 1 to 3 months than for full-year child beneficiaries. Surgery: For all but one selected state, utilization of surgery ranged from 1 to 2.5 times greater for child beneficiaries enrolled for 1 to 3 months than for full-year child beneficiaries. Radiology: Across all selected states, utilization of radiology ranged from 1.2 to 2.5 times greater for child beneficiaries enrolled for 1 to 3 months than for full-year child beneficiaries. We provided the Secretary of Health and Human Services with a draft of this report. The Department of Health and Human Services provided technical comments, which we incorporated as appropriate. As arranged with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days after its issuance date. At that time, we will send copies of this report to the Secretary of Health and Human Services. In addition, the report will be available at no charge on the GAO Web site at http://www.gao.gov. If you or your staffs have any questions about this report, please contact me at (202) 512-7114 or yocomc@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff members who made major contributions to this report are listed in appendix IV. We examined service utilization patterns for Medicaid beneficiaries enrolled in comprehensive managed care plans using Medicaid Analytic eXtract (MAX) encounter data for calendar year 2010, the most recent year for which encounter data were available for the majority of states at the time we began our analyses. Our analysis consisted of the following three steps: (1) state selection, which included assessing data reliability for our selected states; (2) beneficiary and service identification; and (3) utilization calculation. Lastly, we present limitations of this study and technical comments that we received from 13 of the 19 selected states. Step 1: State Selection To assess the reliability and usability of the MAX data for our purposes, we reviewed related documentation and studies that assessed the reliability of or analyzed MAX data, and we interviewed officials from the Centers for Medicare & Medicaid Services (CMS) and its contractor responsible for processing the MAX data (Mathematica Policy Research, We determined that 19 states reported data that were reliable for Inc.).our purposes: Arizona, Connecticut, Delaware, Florida, Georgia, Illinois, Indiana, Kentucky, Michigan, Minnesota, Nebraska, New Mexico, New York, Oregon, Rhode Island, Tennessee, Texas, Virginia, and Washington. We excluded the remaining 31 states and the District of Columbia because we determined their data were unreliable or not usable for our purposes for one or more of the following reasons: (1) no adults or children were enrolled in comprehensive managed care plans, according to MAX (13 states); (2) MAX data were unavailable at the time we began our analysis (11 states); (3) the data were unreliable, such as if fewer than 30 percent of beneficiaries used at least one service—one of the thresholds established by Mathematica when evaluating the completeness and usability of MAX data (6 states); and (4) services were not reported using a standard coding convention, namely the Health Care Common Procedural Coding System (HCPCS) (2 states). (See table 1.) Step 2: Beneficiary and Service Identification Based on eligibility information in the MAX Person Summary file, we restricted our study to adults and children who (1) were eligible to receive full Medicaid benefits and were enrolled for any given month during calendar year 2010, and (2) did not have other sources of health coverage during the calendar year in addition to Medicaid, such as coverage from Medicare or private insurance.95 percent of the adults and children in comprehensive managed care among the 19 states in our analysis in 2010. We used the MAX Other Services file to identify professional services used by beneficiaries while they were enrolled in a comprehensive managed care plan. We, in large part, used the Health Care Cost Institute’s methodology for grouping professional services based on a range of HCPCS codes. These codes are used by providers to bill for professional services. We grouped the professional services in our analysis into four broad categories. (See table 2.) We excluded dental and behavioral health services from our analysis because these services may be contracted out by managed care organizations (MCO) and provided on a fee-for-service (FFS) basis. Additionally, Mathematica reported concerns regarding the quality of managed care behavioral health data. Step 3: Utilization Calculation For each service provided to each beneficiary described in steps 1 and 2 above, we calculated the number of services per beneficiary per year. This is defined as the number of services that beneficiaries enrolled in comprehensive managed care plans used in a year (includes users and nonusers enrolled in comprehensive managed care plans within the state). We presented service utilization patterns for adults and children by state, by service category, and by the length of beneficiary enrollment—in particular, whether beneficiaries were enrolled in a comprehensive managed care plan for a full or partial year. We then further grouped partial-year beneficiaries into monthly increments—1-3, 4-6, and 7-11 months—to determine whether there were differences in utilization patterns by the varying lengths of enrollment. In addition to services used by beneficiaries enrolled in a comprehensive managed care plan, we also calculated the extent to which the beneficiaries in our analysis received professional services paid on a FFS basis while they were enrolled in a comprehensive managed care plan. See http://www.gao.gov/products/GAO-15-481 for further detail on these measures and the FFS data. The results we present are based on data reported to CMS by the 19 states in our analysis. We did not independently verify whether the individual MCOs in these states submitted complete and accurate data on the enrollment and services for beneficiaries enrolled in comprehensive managed care. To better understand the factors that may affect service utilization, we asked representatives from each state to comment on the accuracy and completeness of the state’s 2010 managed care data submitted to CMS. Thirteen of the 19 selected states responded to our request. These states met our criteria for inclusion, as well as the minimum threshold for the number of services per adult or child beneficiary used by Mathematica to assess the completeness of each state’s data. Nevertheless, of these 13 states, 4 states indicated that they may have submitted incomplete enrollment or encounter data in 2010, citing a variety of reasons. For example, 1 state indicated its Medicaid managed care program was in the process of major changes and service data were likely not complete. Another state indicated that, in calendar year 2010, some of the state’s managed care data were not reported due to quality problems. Officials from the remaining 9 states noted their results either seemed reasonable based on their knowledge of their state’s Medicaid managed care program or that the managed care data they submitted to CMS for 2010 was believed to be accurate. The results we present for the 19 states in our analysis are not representative of all states and their managed care programs, nor do our results draw any conclusions regarding whether the level of service utilization identified is appropriate. There are a number of state-specific factors—such as differences in beneficiary health status and provider supply—that could contribute to variation in service utilization across the states. For example, officials from 1 state noted that the state’s MCOs were limited to certain geographical areas of the state. As such, geographic variation in provider access, which can be driven by the breadth of an MCO’s network and the availability of providers in a given geographic area, can affect the type and amount of services used by beneficiaries in Medicaid managed care. The tables below provide the number of services per beneficiary per year for adults and children by state, service category, and length of enrollment. Based on our analysis of encounter data, the number of professional services utilized per beneficiary per year reported by the 19 selected states for adults enrolled in comprehensive managed care plans in 2010 ranged from about 13 to 55; the range for children was generally lower, from about 6 to 16. States varied in how adult and child utilization of professional services were distributed across service categories. In addition, service utilization for both adults and children varied by whether beneficiaries were enrolled in comprehensive managed care plans for all of 2010 or part of the year. In particular, for nearly all states in our analysis, partial-year child beneficiaries utilized significantly more services overall than those enrolled for the full year. In addition to the contact named above, William Black, Assistant Director; Christine Brudevold, Assistant Director; Ramsey Asaly; Stella Chiang; Greg Dybalski; Sandra George; Drew Long; Jessica Morris; and Vikki Porter made key contributions to this report.

Summary: Medicaid, a federal-state health financing program for low-income and medically needy individuals, covered 65 million beneficiaries at an estimated cost of $508 billion in fiscal year 2014. More than half of Medicaid beneficiaries are enrolled in managed care plans, a health care delivery model where states contract with managed care organizations to provide covered services for a set cost. Historically, states have submitted relatively unreliable managed care service utilization data, also known as encounter data, to the Centers for Medicare & Medicaid Services, the federal agency that oversees Medicaid. However, recent evidence suggests that encounter data may be improving. Information on beneficiaries' service utilization could serve as a baseline for future analyses of utilization trends over time. GAO was asked to examine the level of services provided to these beneficiaries. In this report, GAO describes what encounter data indicate about the service utilization of Medicaid beneficiaries in managed care plans. To do this work, GAO analyzed state-reported data included in CMS's 2010 Medicaid Analytic eXtract data and determined that 19 states had data that were reliable for its purposes, but excluded the remaining 31 states and the District of Columbia. For these 19 states, GAO calculated service utilization rates for adult and child beneficiaries enrolled in comprehensive managed care plans by state, service category, and length of enrollment. GAO received technical comments on a draft of this report from HHS and incorporated them as appropriate. Based on GAO's analysis of 2010 encounter data reported by 19 states, the number of professional services utilized by adult beneficiaries ranged from about 13 to 55. For children, the number of professional services utilized per beneficiary was lower, ranging from about 6 to 16 among the 19 states. Professional services included four categories of services: (1) evaluation and management (E/M) services, such as office visits and emergency room and critical care services; (2) procedural services, such as surgery and ophthalmology; (3) ancillary services, such as pathology and lab services; and (4) other professional services, such as oxygen therapy. States varied considerably in how service utilization was distributed within service categories. For example, of total services, adult per beneficiary utilization of ancillary services ranged from 37 percent in Rhode Island to 65 percent in Washington and Illinois; and child per beneficiary utilization of E/M services ranged from 29 percent in Minnesota to 45 percent in Georgia and Rhode Island. Service utilization for both adult and child beneficiaries also varied by the length of enrollment. When compared with beneficiaries enrolled for a full year, total service utilization for adults was 2 to 78 percent higher for partial-year beneficiaries—those enrolled in a comprehensive managed care plan for less than the full year—in slightly more than half of selected states. For children in all but one selected state, service utilization was 4 to 44 percent higher for partial-year beneficiaries compared with full-year beneficiaries.