Medicaid Managed Care and High Quality

MEDICAID HAS EMBARKED on a major transition. Accelerating cost pressures in recent years have prompted states to initiate large-scale conversion of their Medicaid programs from traditional fee-for-service coverage to managed care. As a result, the number of Medicaid enrollees cared for in managed care has increased from approximately 2.5 million in 1991 to more than 13 million in June 1996.¹Most of the enrollees have been from the nondisabled, nonelderly, Aid for Dependent Children/Temporary Assistance for Needy Families population.²The fastest growth has been in fully capitated plans, which now care for approximately 70% of the Medicaid managed care market.³ Growth of managed care for those who are privately insured has led to substantial controversy because of the financial disincentives for managed care organizations to provide sufficient medical services when these lead to increased costs. The potential impact of these disincentives on quality of care is arguably