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Medicaid Health Plans Provide Cost Savings to States and High Quality and Value to Beneficiaries, New Analysis Shows

Lewin Group Report Finds that Health Plans Contain Costs and Provide Beneficiaries with Improved Access to Health Services

WASHINGTON, May 20 /PRNewswire-USNewswire/ -- Medicaid health plans are producing cost savings for states, increasing access to services for individuals covered by Medicaid, improving quality of care, and earning high satisfaction ratings from enrollees, according to a Lewin Group report released today by America's Health Insurance Plans (AHIP). Twenty-four existing studies were analyzed by the Lewin Group to determine the savings achieved when states have implemented private Medicaid health plans.

"This study provides validation that Medicaid health plans are improving quality and access while also containing costs," said Karen Ignagni, President and CEO of AHIP. "During these difficult economic times, Medicaid health plans provide states with tools that work and on which they can depend."

Since the early 1990s, state Medicaid programs have turned increasingly to private health plans because of their potential to provide high-quality, cost-effective care. According to Lewin, health plans offer an opportunity for Medicaid programs to stretch their dollars and achieve cost savings without cutting eligibility, benefits, or already-low provider payment levels as states look at ways to alleviate the economic pressure faced by their budgets.

Some highlights of the Lewin analysis of 24 studies include:

  • The studies strongly suggest that Medicaid health plans typically yields cost savings -- savings across the studies range from half of 1 percent to 20 percent.
  • The studies provide some evidence that Medicaid health plan savings are significant for the Supplemental Security Income (SSI) and SSI-related population while improving quality and value for beneficiaries. For example, Arizona saw that 60 percent of the $102.8 million savings achieved from 1983 to 1991 is from the SSI population.
  • Various studies demonstrated that states' Medicaid health plan cost savings are largely attributable to changing patterns in unnecessary inpatient utilization such as those in a study of preventable hospitalizations in California, which found that the rates of preventable hospitalization were 38 and 25 percent lower in health plans than in fee-for-service (FFS) programs for the Temporary Assistance for Needy Families (TANF) and SSI populations, respectively.
  • Pharmacy was also an area where Medicaid health plans yielded noteworthy savings -- a comparison of drug costs under FFS programs vs. Medicaid health plans in multiple states found that the costs per-member per-month (PMPM) were 10 to 15 percent lower for health plans than for FFS programs.
  • The studies also suggest that health plans with responsibility for certain populations or services are especially likely to generate savings in a health plan delivery system while providing and coordinating comprehensive care for beneficiaries.
  • The Lewin analysis found that Medicaid health plans were found to have improved Medicaid beneficiaries' access to services and earned high satisfaction ratings from enrollees in addition to containing costs.

"As stewards of public funds, quality accreditation ensures our state administrators that one of America's most financially vulnerable populations is receiving the quality care and service it needs and deserves," said J. Mario Molina, M.D., President and CEO of Molina Healthcare, Inc. "At Molina, we demonstrate this by ensuring all of our eligible health plans are quality accredited by NCQA."

"Medicaid managed care works -- it's that simple," said Daniel J. Hilferty, President and Chief Executive Officer of the AmeriHealth Mercy Family of Companies. "Medicaid recipients are among the most sick and vulnerable people in the United States. Using an integrated, proactive approach to health care, AmeriHealth Mercy has improved outcomes for our members and saved taxpayers millions of dollars. As the nation searches for high-quality, cost-effective health reform options, we offer a model that is proven to increase access to care and control costs."

"This study demonstrates what we see every day: that Medicaid managed care helps our most vulnerable citizens get the healthcare they need and, at the same time, saves money for State governments," said James G. Carlson, Chairman and CEO of AMERIGROUP Corporation. "At AMERIGROUP, our unique programs for people with disabilities and long-term illnesses help our members lead more independent lives by receiving proactive care to prevent unnecessary hospital stays or institutionalization. This approach helps them lead healthier and fuller lives and in the long run lowers the cost of Medicaid."

The study also noted that the FFS setting model makes coordination of care and cost-containment difficult, while health plans create savings opportunities without reducing eligibility and benefits.

For more information, the full Lewin Group report, Medicaid Managed Care Cost Savings - A Synthesis of 24 Studies, can be found here:

An overview of the value that Medicaid health plans provide for beneficiaries and states can be found here:

America's Health Insurance Plans - Providing Health Benefits to More Than 200 Million Americans

About AMERIGROUP Corporation

AMERIGROUP Corporation, headquartered in Virginia Beach, Virginia, improves healthcare access and quality for the financially vulnerable, seniors and people with disabilities by developing innovative managed health services for the public sector. Through its subsidiaries, AMERIGROUP Corporation serves approximately 1.7 million people in Florida, Georgia, Maryland, Nevada, New Jersey, New Mexico, New York, Ohio, Tennessee, Texas and Virginia. For more information, visit

About the AmeriHealth Mercy Family of Companies

The AmeriHealth Mercy Family of Companies is the industry leader in the delivery of quality health care to low-income populations covered by publicly funded programs, including Medicare, Medicaid, and State Children's Health Insurance Programs. The company's five lines of business -- health plans, management and administrative services, pharmacy management, care management, and behavioral health -- touch the lives of 6.7 million people in 14 states. For more information, go to

About Molina Healthcare

Molina Healthcare, Inc. is a multi-state managed care organization that arranges for the delivery of health care services to persons eligible for Medicaid, Medicare, and other government-sponsored programs for low-income families and individuals. Altogether, Molina Healthcare's 10 licensed health plan subsidiaries in California, Florida, Michigan, Missouri, Nevada, New Mexico, Ohio, Texas, Utah, and Washington currently serve approximately 1.2 million members. More information about Molina Healthcare, Inc. can be obtained at

SOURCE America's Health Insurance Plans
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