This week, Physicians for a National Health Program (PNHP) released a report, Removing the Middlemen from Medicaid, with recommendations for states in response to the federal Medicaid funding reduction of $1 trillion over the next decade brought about by H.R.1. The recommendations urge states with “managed care” contracts with large insurers to cancel those contracts and use the savings to protect state Medicaid programs.
“States that rely on managed care organizations (“MCOs”) to administer their Medicaid programs can substantially offset the federal cuts if they stop MCO contracting and instead directly administer their Medicaid programs. We estimate that if states shifted from MCOs to direct payment of Medicaid providers, they could reduce their Medicaid MCO expenditures by 10 percent to 17 percent. Savings stem from reduced administrative costs and improved care coordination.
States can operate their Medicaid programs in a manner that encourages primary care practices to manage care. This is called “managed fee for service” (Connecticut Medicaid) or “enhanced Primary Care Case Management” (North Carolina and Oklahoma prior to recent conversion to MCOs). These models include enhanced payment to primary care practices, care coordination programs to improve management of complex and high-risk patients in the community beyond the doctor’s office, and specialized programs for patients with complex care needs.” (emphasis in original)
The report holds Connecticut out as a model for this approach, highlighting the cost savings for the state. “The state of Connecticut offers a solid example of the financial and health benefits of removing MCOs from Medicaid. In 2012, the state terminated its contracts with MCOs and began paying providers directly. In the 13 intervening years, the state reports that it has saved taxpayers more than $4 billion.” (emphasis in original)
September 9, 2025 – K. Kertesz