In fiscal year 1995, Medicaid, a program jointly funded by the federal government and the states, provided health care coverage for about 40 million low-income individuals. Over the past 10 years, Medicaid expenditures have more than tripled to $159 billion. Under current projections, they will double again within 8 years. As budgetary pressures intensify, many states are increasing enrollment of Medicaid beneficiaries in managed care—as an alternative to the fee-for-service health care delivery system—in an attempt to control program costs. States also expect managed care to increase beneficiary access to health care services and to improve the quality and oversight of these services. Many states have attempted to maximize the benefits of managed care by requiring beneficiaries to enroll. As of June 30, 1995, 36 states have mandated enrollment for some or all of their Medicaid beneficiaries in managed care plans. To date, most states have largely targeted their mandatory enrollment managed care programs to low-income families who receive financial assistance under Aid to Families With Dependent Children (AFDC) and pregnant women and children who qualify for Medicaid. However, states are increasingly including managed care options for low-income elderly, blind, and disabled individuals receiving assistance under the Supplemental Security Income (SSI) program and who qualify for Medicaid. In some managed care programs—primarily those that are voluntary—states rely on participating MCOs to inform beneficiaries about managed care and to encourage them to enroll. To do this, MCOs use a variety of methods, including direct marketing. Allowing MCOs to market to and enroll beneficiaries can benefit both the state and the MCOs. With the staff and experience to promote managed care, MCOs can relieve the state of the administrative burden of reaching beneficiaries and convincing them to enroll in managed care. In addition, if a state chooses to expand its managed care programs to some uninsured, MCOs can help solicit these newly eligible individuals, who can be hard to reach. MCOs also benefit as they can actively seek a larger share of enrollees. However, MCO marketing activities are funded with part of their monthly capitation payments from the state—funds which might otherwise be used for medical services. In addition, delegating marketing and enrollment activities to MCOs in the five states we reviewed—California, Florida, Maryland, New York, and Tennessee—has enabled some MCOs and their sales agents to commit a number of marketing abuses. These abuses include deliberately misinforming beneficiaries about benefits or available providers, subjecting beneficiaries to high-pressure sales tactics, and fraudulently enrolling beneficiaries. In some cases, these abuses have become more prominent when states announce that they intend to go to mandatory enrollment and plans anticipate that direct marketing will be restricted or prohibited. Many of these abuses have resulted in access problems for beneficiaries—which are sometimes compounded by MCOs’ delays in processing beneficiaries’ requests to disenroll from their plan. For example, in August 1994, an MCO sales agent in California assured a newly enrolled beneficiary that she could continue to take her children to their current provider. However, in November 1994, this provider denied care for the beneficiary’s infant because the provider was not affiliated with her MCO. Unable to find a provider for her infant, she took action to disenroll her family from the managed care plan. After several weeks of contacting the MCO to determine the status of her disenrollment, she received disenrollment forms—which she had already completed and submitted to the MCO. In March 1995, the beneficiary learned that she was still enrolled in the MCO when she attempted to take her infant to her fee-for-service provider for needed care. The beneficiary then sought assistance from the local Legal Aid office to help her switch back to fee-for-service. As a result of allegations of marketing and enrollment abuses, California has banned door-to-door marketing and enrollment by MCOs. MCOs that use commissions to compensate their sales agents create an incentive for agents to increase enrollment. However, this incentive may also increase the likelihood for abuses to occur. A 1995 Tennessee audit of the marketing activities of a Medicaid MCO found that the MCO’s sales agents had used fraudulent or abusive enrollment practices to enroll about 4,800 individuals. One MCO agent inappropriately enrolled over 200 prisoners, who are ineligible for Medicaid benefits. Another sales agent forged over 140 Medicaid enrollment applications for individuals who were not eligible because they were employed and had private health insurance. The state audit also found that over 4,500 homeless individuals with the same address had been enrolled in the MCO. When the state could not verify their residence or eligibility, they were disenrolled from the plan. Some MCO sales agents illegally obtained confidential information on beneficiaries, which enabled them to target potential enrollees, meet enrollment quotas, and increase commissions. For example, in Maryland, sales agents from four MCOs bribed state Medicaid officials to obtain the names, addresses, dependent information, and benefit status of Medicaid beneficiaries eligible for enrollment in managed care. Each of the five states with reported marketing and enrollment abuses has taken a number of enforcement actions or levied fines against fraudulent and abusive MCOs. For example, Tennessee prosecuted and imprisoned two sales agents for fraudulent enrollments and recouped over $1.9 million in payments made to the MCO that had inappropriately enrolled homeless individuals. Maryland convicted 24 individuals—including sales agents and state workers—on charges related to bribery, unlawful disclosure of confidential information, and Medicaid fraud. According to a Maryland official, the state recouped over $25,000 in MCO overpayments. Florida imposed over $520,000 in fines on MCOs found to have fraudulently enrolled beneficiaries. (App. II contains more detail about recently reported abuses and corrective actions in California, Florida, Maryland, New York, and Tennessee.) In addition to these actions, four states—California, Florida, New York, and Tennessee—have since banned or restricted door-to-door marketing by MCOs. Banning direct marketing, however, has resulted in significant declines in managed care enrollment in Florida and New York. As a result, New York has temporarily suspended its ban on direct marketing in order to increase enrollment again and is implementing certain steps to help avert marketing abuses by MCOs. Mandatory managed care programs obviate the need for states to convince beneficiaries to switch to managed care from fee-for-service. Therefore, as states transition from voluntary to mandatory managed care programs—or move directly to mandatory managed care—they can reassess the value of delegating marketing and enrollment activities to MCOs. Each of the four states we visited as examples of innovative enrollment programs has prohibited or significantly restricted MCOs from initiating contact with beneficiaries not enrolled in their plans. Each state also has elected to assume—either directly or through its counties or enrollment broker—the enrollment function and, as part of this process, to concentrate its resources on educating beneficiaries about managed care and helping them select a health plan rather than be assigned to one by default. Table 1 shows the marketing and enrollment strategies and other selected characteristics of the managed care programs in the four states we visited. Because of their concern about potential marketing and enrollment abuses, Minnesota, Missouri, Ohio, and Washington prohibit MCOs from marketing door-to-door and at public assistance offices to beneficiaries in their mandatory programs. Beyond this prohibition, these states have adopted somewhat different approaches as to what type of direct contact the MCOs are allowed to initiate with beneficiaries. Missouri and Ohio allow limited contact with beneficiaries because each state believes that some types of marketing have a role in outreach and education. For example, Missouri allows MCOs to make presentations to groups if all participating MCOs are present and to distribute nominal gifts if they are given to all Medicaid beneficiaries, not just to those who enroll with the MCO. Ohio allows MCOs to display marketing materials at enrollment centers and to mail promotional materials to beneficiaries via the state. Missouri and Ohio also review and approve marketing materials to ensure that they are accurate and understandable. Missouri further requires that MCO materials meet certain content and presentation standards. For example, Missouri requires that MCO marketing materials be written at a sixth-grade reading level. Minnesota and Washington prohibit MCOs from initiating contact with Medicaid beneficiaries before enrollment. Both states review any materials that MCOs provide beneficiaries upon request and require that these materials meet certain criteria, such as reading-level and translation standards. When implementing mandatory programs or enrolling new beneficiaries, the four states we visited assume the task of informing beneficiaries about how to access care in a managed care system and of counseling them on important choices they must make in selecting a specific plan and a primary care provider. Most beneficiaries are accustomed to fee-for-service care, where they may select services from any qualified provider. In contrast, managed care requires enrollees to select a primary care provider, or gatekeeper, who authorizes all care, including access to specialists. These states believe that the more beneficiaries understand managed care principles, the better the managed care system works for them. For example, the four states believe that when beneficiaries understand the role of the primary care provider and the availability of services, their use of more costly emergency room services for nonemergency care will decrease. In the states we visited, one approach used to inform beneficiaries about the requirement to enroll in managed care is to provide this information when they come to their local public assistance office to apply for or seek redetermination of eligibility for financial assistance. Each state then provides an overview of managed care, which generally emphasizes the benefits of developing a relationship with a primary care provider, the importance of primary and preventive care, and the appropriate use of emergency room services. Beneficiaries also are informed of the MCOs they can choose from, how and where to enroll, and their rights and responsibilities as a participant in managed care.