State Medicaid Programs Respond to Meet COVID-19 Challenges: Results from a 50-State Medicaid Budget Survey for State Fiscal Years 2020 and 2021

Delivery Systems

Managed Care

Capitated managed care remains the predominant delivery system for Medicaid in most states. As of July 2019, 40 states were contracting with comprehensive risk-based managed care organizations (MCOs).1 MCOs provide comprehensive acute care (i.e., most physician and hospital services) and in some cases long-term services and supports (LTSS) to Medicaid beneficiaries. Among the 40 states with MCOs, 33 states reported that 75% or more of their Medicaid beneficiaries were enrolled in MCOs. As of July 1, 2019, 28 states were contracting with one or more limited benefit prepaid health plans (PHPs) to provide Medicaid benefits including behavioral health care, dental care, vision care, non-emergency medical transportation (NEMT), or LTSS. Twelve states reported operating a primary care case management (PCCM) program. PCCM is a managed fee-for-service (FFS) based system in which beneficiaries are enrolled with a primary care provider who is paid a small monthly fee to provide case management services in addition to primary care.

With 69% of Medicaid beneficiaries enrolled in MCOs nationally, MCOs play a critical role in responding to the COVID-19 pandemic and its fiscal implications for states.2 Given unanticipated costs related to COVID-19 testing and treatment, as well as depressed utilization affecting the financial stability of many Medicaid providers, many states are currently evaluating options to adjust current MCO payment rates and/or risk sharing mechanisms.3 CMS has outlined state options to modify managed care contracts and rates in response to COVID-19 including risk mitigation strategies, adjusting capitation rates, covering COVID-19 costs on a non-risk basis, and carving out costs related to COVID-19 from MCO contracts.4 States can also direct that managed care plans make payments to their network providers (known as “state directed payments”) using methodologies approved by CMS to further state goals and priorities, including COVID-19 response.5 States can therefore impose state directed payment requirements on MCOs to help mitigate the impacts of the PHE on providers that are experiencing decreased utilization and reimbursement while non-urgent services are suspended or patients are hesitant to seek care.

Survey Findings

On this year’s survey, states were asked to identify any acute care MCO policy changes in FY 2020 or planned for FY 2021, including changes to increase enrollment in MCOs or changes to the benefits or services carved-in or out of MCO contracts. States were also asked to describe any other managed care changes (e.g., implementing, expanding, reducing, or terminating a PCCM program or limited-benefit prepaid health plan (PHP)) made in FY 2020 or planned for FY 2021.

In response to the COVID-19 pandemic, states were also asked whether adjustments to FY 2021 MCO contracts or rates have been made or are planned in response to unanticipated COVID-19 related testing and treatment costs or depressed utilization and whether they have imposed or plan to impose new provider payment requirements on MCOs. Finally, states were asked to describe any other COVID-19 related MCO policy changes made in response to the pandemic and to identify any COVID-19 related initiatives newly offered by MCOs.

Non-Emergency Acute Care MCO Policy Changes

Reflecting nearly full MCO saturation in most MCO states, only three states reported changes to expand comprehensive managed care as a delivery system in FY 2020 or FY2021. In FY 2020, Pennsylvania implemented the third phase of Community HealthChoices (a program covering both acute care and LTSS for full benefit dual eligible beneficiaries and individuals receiving LTSS), to new geographic areas of the state, while West Virginia began mandatorily enrolling foster care youth into MCOs. In FY 2021, Nebraska reported plans to enroll all expansion adults into MCOs upon the implementation of its ACA Medicaid expansion in October 2020. North Carolina reported delays to its MCO implementation plans noting its new managed care contracts will be effective in FY 2022.

Although MCOs provide comprehensive services to beneficiaries, states may carve specific services out of MCO contracts to FFS systems or limited-benefit plans. Services frequently carved out include behavioral health, pharmacy, dental, and LTSS. However, there has been significant movement across states in recent years to carve these services in to MCOs.

Twelve states in FY 2020 and seven in FY 2021 reported notable changes in the benefits and services covered under their MCO contracts (Exhibit 1).

  • Pharmacy drugs. The most frequently reported changes were to carve in or carve out one or more pharmacy drug products (especially high cost/specialty drugs). Two states reported carve-outs of the entire pharmacy benefit (North Dakota in FY 2020 and California in FY 2021) and Missouri reported plans to carve out outpatient hospital drugs in FY 2021 (in addition to other covered outpatient drugs which were already carved out and covered on a FFS basis). (See Pharmacy Cost Containment Actions section for more information on pharmacy changes.)
  • Behavioral health services. Four states reported changes related to behavioral health services. In FY 2020, New Jersey added autism benefits; Washington carved in high intensity behavioral health benefits in three geographic regions, but also carved out out-of-state inpatient psychiatric services for children; Wisconsin added sub-acute psychiatric services as an in-lieu of benefit for the BadgerCare Plus population; and West Virginia added services authorized under its Substance Use Disorder (SUD) and Children with Serious Emotional Disorder (SED) waivers. In FY 2021, Oregon is adding care coordination for persons with severe and persistent mental illness (SPMI), children with SED, and individuals with SUD receiving medication assisted treatment (MAT).
Exhibit 1: MCO-Covered Benefit/Service Changes, FY 2020 and FY 2021 (n = 32 MCO states)
Benefit/Service Carve-ins FY 2020 FY 2021
Behavioral health NJ, WA, WI, WV OR
Pharmacy drugs MD, SC
Non-emergency medical transportation NE TX
Community supports HI, ND
Other6 MO, SC NJ
Benefit/Service Carve-outs FY 2020 FY 2021
Behavioral health WA
Pharmacy drugs HI, ND CA, MD, MO, SC, TX
Transplants AR, WA
Other 7 CA NJ
Other Non-Emergency Managed Care Changes – PCCM & PHP

Four states reported making changes to their PCCM programs or limited benefit PHP programs. In FY 2020, Alabama replaced its previous PCCM program (Patient 1st) and Maternity PHP program with a new PCCM entity program (the Alabama Coordinated Health Network) that covers care coordination services for most of the traditional Medicaid population including maternity, family planning, behavioral, and physical health care coordination services. In FY 2020, Washington reported eliminating its remaining three regional behavioral health PHP contracts, which had been providing non-integrated behavioral health benefits. As a result, Washington MCOs now provide integrated physical health and behavioral health statewide. In FY 2021, Texas will expand from two to three dental MCOs and Louisiana will move from one to two. Also, Texas will eliminate its NEMT PHP while adding NEMT services to its MCO contracts.

COVID-19 Related MCO Policy Changes & MCO Initiatives

Twelve MCO states (of 31 responding) indicated plans to make payment adjustments to FY 2021 MCO contracts or rates in response to both COVID-19 related depressed utilization and unanticipated treatment costs (Exhibit 2). Sixteen states reported plans to make payment adjustments to FY 2021 MCO contracts or rates in response to COVID-19 related depressed utilization while 14 states reported plans to make payment adjustments in response to unanticipated COVID-19 related testing and treatment costs. Many states remained undetermined about adjustments to FY 2021 MCO contracts at the time of survey completion. COVID-19 related payment adjustments could include risk corridors, capitation rate adjustments (upward or downward), carve-outs, or covering costs on a non-risk basis.8 States planning to make payment adjustments to FY 2021 MCO contracts were asked to describe the contract and/or rate adjustments planned. A majority of states described plans to implement or tighten risk corridors, often specifying two-sided risk corridors which aim to mitigate risk to both MCOs and states. In addition to adjustments planned for FY 2021 MCO contracts, several states also reported implementing retroactive risk mitigation and/or rate adjustment strategies for FY 2020 MCO contracts.9

Exhibit 2: MCO States Reporting Adjustments to FY 2021 MCO Contracts or Rates in Response to COVID-19 (n = 31 MCO states)
  States reporting adjustments to reflect:
  Testing and treatment costs Depressed utilization
Yes 14 states AR, GA, HI, IN, KY, LA, MA, MD, MI, MS, NV, SC, TN, WV 16 states AR, GA, HI, IN, KS, KY, LA, MD, MI, MN, MS, NH, NJ, NV, SC, TN
No 5 states CA, MN, ND, OR, VA 3 states ND, OR, VA

Fourteen MCO states (of 32 responding) reported implementing directed payments to selected provider types in response to the COVID-19 pandemic. Under certain circumstances, federal regulations permit states to direct MCOs to make specific provider payments (“state directed payments”).10 In response to the COVID-19 pandemic, 12 states in FY 2020 and three in FY 2021 reported implementing state directed payments (usually noted as temporary) for selected provided types (Exhibit 3). The most frequently identified provider type was for certain home and community-based services (HCBS) (8 states) followed by nursing facilities (5 states). Six of the eight states noting HCBS-related directed payments (Arizona, Florida, Iowa, Kansas, Massachusetts, and Tennessee) reported requiring MCOs to make retainer payments to allow certain HCBS providers to continue to bill for individuals when circumstances prevent these individuals from receiving these services.

Exhibit 3: MCO Directed Payments Implemented in Response to the COVID-19 Emergency, FY 2020 and FY 2021 (n = 32 MCO states)
  FY 2020 FY 2021
Home and community-based services AZ, FL, IA KS, MA, MI, NJ, TN AZ
Nursing facility IA, MI, TN, VA AZ
Hospital MA, WV LA
Physician, PCP, or providers of evaluation & management services MA, TN, VA
Behavioral health MA, TN, WV
Ambulance MA, WV KY
Dental TN, WV
Laboratory MD
Other (unspecified provider types) NH, WV

MCO states reported a variety of other MCO policy changes implemented to respond to the COVID-19 pandemic. In many cases, MCO states reported that emergency authorities obtained by the states were applied to MCOs (see Introduction for more information on Medicaid emergency authorities). These include requirements to lift prior authorization requirements, waive cost sharing requirements, and relax certain provider credentialing requirements. Many MCO states also reported requiring MCOs to expand telehealth access, consistent with changes adopted for the FFS delivery system (see Benefits, Cost-Sharing, and Telehealth section for more information). Additional contract changes reported include:

  • restructuring of provider incentive arrangements or suspension of provider performance penalties;
  • changes to required MCO quality metric reporting and incentive programs;
  • relaxation of certain reporting requirements;
  • suspension of capitation withholds; and
  • adjustments to the minimum medical loss ratio (MLR) requirement from a three-year standard to a one-year standard.

Massachusetts also directed its MCOs to contract with Community Support Program providers working in emergency overnight shelters that were expanded as a result of the pandemic.11

Tennessee: Response to COVID-19 through Managed Care
Tennessee reported many MCO policy changes in response to COVID-19, including:

Provider Support

  • Refraining from denying claims or conducting normal utilization management-level of care reviews
  • Eliminating the requirement of authorization reviews before patients would be moved from an acute level setting to the appropriate post-acute care setting
  • Suspending requests of medical records to reduce administrative burdens on hospitals
  • Suspending site of service reviews and postponing manual collection of medical records for Healthcare Effectiveness Data and Information Set (HEDIS) and in-office reviews
  • Postponing audits and recoupments related to medical claims
  • Suspending all re-credentialing requirements for providers and refraining from denying services if they were provided in an unlicensed space or non-traditional location
  • Expediting the review of requests for use of experimental drugs and devices
  • Supporting hospitals in establishing new service locations in non-traditional areas
  • Creating new COVID-19 testing and diagnosis codes
  • Accelerating claims processing to decrease interruption to cashflow
  • Paying for all COVID-19 related services performed by hospital providers who do not yet have credentialing but do have a Medicaid provider ID

MCO states reported a variety of programs, initiatives, or value-added services newly offered by MCOs in response to the COVID-19 emergency. Although federal reimbursement rules prohibit expenditures for most non-medical services, plans may use administrative savings or state funds to provide these services. “Value-added” services are extra services outside of covered contract services and do not qualify as a covered service for the purposes of capitation rate setting. The most frequently mentioned offerings and initiatives were food assistance and home delivered meals (11 states) and enhanced MCO care management and outreach efforts often targeting persons at high risk for COVID-19 infection or complications or persons testing positive for COVID-19 (8 states). Other examples include states reporting MCO provision of personal protective equipment (4 states), expanded MCO telehealth and remote supports (3 states), expanded pharmacy home deliveries (3 states), and MCO-provided gift cards for members to purchase food and other goods (2 states).12 Texas, a state with a uniform preferred drug list (PDL) across FFS and its MCOs, reported coordinating with its MCOs to identify drug shortages to enable the state to adjust its formulary and uniform PDL accordingly.

Social Determinants of Health

Social determinants of health (SDOH) are the conditions in which people are born, grow, live, work, and age that shape health.13 Addressing SDOH is important for improving health and reducing longstanding disparities in health and health care. SDOH include but are not limited to housing, food, education, employment, healthy behaviors, transportation, and personal safety. Within the health care system, there are multi-payer federal and state initiatives as well as Medicaid-specific initiatives focused on addressing social needs. Although federal Medicaid reimbursement rules prohibit expenditures for most non-medical services,14 states have been developing strategies to identify and address enrollee social needs both within and outside of managed care. Medicaid MCOs may use administrative savings or state funds to provide some of these services.15

The pandemic has exacerbated the challenges for state Medicaid programs related to health care access and other SDOH and has shined a light on persistent health inequities and disparities due to the disparate impact of COVID-19 on people of color.16 Access to food, for example, is one area of growing need as many people have lost jobs and income and many children have lost access to school-provided meals due to school closures. At the same time, community food resources are facing higher service demands. Among Medicaid adults, 23% reported food insufficiency in the week ending July 21, 2020.17


Nearly two-thirds of responding states reported implementation, expansion, or reform of a program or initiative to address Medicaid enrollees’ SDOH in response to COVID-19 (27 states).18 States were asked whether the COVID-19 emergency caused their state to implement, expand, or reform a program or initiative to address enrollees’ SDOH, particularly related to housing and/or food insecurity. States reported a variety of initiatives, including many initiatives which are broader than Medicaid but may help Medicaid enrollees. Sixteen states reported efforts to address food insecurity and nine states reported efforts to address housing insecurity and homelessness. Four states implemented or enhanced technology platforms and phone call-in lines that support assistance identifying community resources to address SDOH (Exhibit 4).

Exhibit 4: SDOH Programs and Initiatives Implemented in Response to COVID-19 (n = 43 states)
  # of States States
Food insecurity 16 AK, AZ, HI, IA, IN, KS, MA, MI, MN, MT, NC, ND, NH, NJ, SC, VA
Housing insecurity and homelessness 9 AZ, CA, CT, HI, MA, MI, MN, NH, WA
Technology platforms or phone call-in that support identifying community resources to address SDOH 4 MI, NE, NC, PA
Increased SDOH survey, screenings, and assessments 4 KY, PA, VA, WV
Targeting social needs of people under quarantine 2 ME, NC

Examples of new initiatives or policies states reported related to SDOH implemented during the public health emergency (PHE) include:

  • Food Insecurity. Arizona expanded home-delivered meals to people with intellectual and developmental disabilities (I/DD). Minnesota created the Food Security Work Group, an interagency governmental structure to strategize, share information and leverage funds. This group will work to support food banks; to support and expand access to SNAP and school meals; and to increase access to food for seniors, individuals in homeless shelters, and Native American Indians.19 Montana, through the state’s Senior and Long-Term Care Division, sends frozen meals to very isolated individuals on the Northern Cheyenne and Crow reservations.
  • Housing/Homelessness. Michigan put an eviction and foreclosure ban in place through July 15, 2020 and set up an eviction diversion program for households up to 100 percent of Area Median Income (AMI)20 facing eviction after the ban expired. California implemented Project RoomKey to fund hotel and motel rooms around the state that provide non-congregate shelter options for the sick and medically vulnerable who lack stable housing.21
  • Social Services Referrals. North Carolina fast-tracked22 the rollout of NCCARE360, the country’s first statewide technology platform connecting health care and human services. This platform makes it easier for providers, insurers, and community-based organizations to connect residents with the community resources they need during the COVID-19 pandemic. Pennsylvania added requirements to Medicaid MCO agreements that MCOs must work with community-based organizations to address key SDOH, with their reimbursement tied to moderate and high-risk value-based payment arrangements which will increase over time. Virginia’s Medicaid MCOs have created a grant program for community- and faith-based organizations to support outreach programs related to SDOH.

Managed Long-Term Services and Supports

About half of the states have a capitated managed long-term services and supports (MLTSS) program in place. As of July 1, 2019, 27 states reported having an MLTSS program.23 Two states (Alabama and Washington) reported having a managed fee-for-service MLTSS model while the remaining 25 states covered LTSS through one or more of the following types of capitated managed care arrangements: Medicaid MCO covering Medicaid acute care and LTSS; PHP covering only Medicaid LTSS; MCO arrangement for dual eligible beneficiaries covering Medicaid and Medicare acute care and Medicaid LTSS services in a single, financially aligned contract under the federal Financial Alignment Initiative (FAI).

Non-Emergency MLTSS Policy Changes

States were asked to identify MLTSS policy changes in FY 2020 or planned for FY 2021 including changes to increase enrollment in capitated MLTSS contracts or to carve benefits/services in or out of MLTSS contracts.

Six states reported changes to their MLTSS programs in FY 2020 or FY 2021 (Exhibit 5). No states reported implementation of capitated MLTSS contracts or making enrollment mandatory for an additional population for the first time in FY 2020 or in FY 2021.

  • Geographic expansions. Two states (Idaho and Pennsylvania) reported MLTSS expansion into new geographic regions in FY 2020 while one state (Massachusetts) reported geographic expansion in FY 2020 and planned geographic expansion in FY 2021. Idaho expanded IMPlus to an additional 13 counties in April 2020, while Pennsylvania completed the third phase of implementation of its MCO-based MLTSS program, Community HealthChoices, on January 1, 2020. One Care, Massachusetts’ MCO-based capitated FAI,24 expanded to an additional county in FY 2020 and proposed to fully expand to another two counties in FY 2021.
  • Benefit/service changes. Three states (Arizona, Massachusetts, and New Jersey) carved in additional benefits/services to MLTSS contracts in FY 2020 while one state (Wisconsin) carved out benefits in FY 2020. Massachusetts added services to One Care (transitional living program, high intensity residential services, enhanced residential rehabilitation services to ensure member medical, mental health, and addiction needs are addressed, and recovery coaching). Arizona integrated behavioral health services into contracts with the Arizona Department of Economic Security Division of Development Disabilities (DDD). Arizona DDD contracted with MCOs effective October 1, 2019 to offer eligible members physical and behavioral health services, children’s rehabilitative services, and limited LTSS.25 New Jersey carved in autism services and some SUD services. In FY 2020, Wisconsin carved out most prescription outpatient drugs from Family Care Partnership, its integrated Medicare-Medicaid MLTSS program serving frail elderly and people with disabilities.26
Exhibit 5: MLTSS Policy Changes, FY 2020 and FY 2021 (n = 19 states)*
  FY 2020 FY 2021
Implemented MCO contracts for the first time
Made enrollment mandatory for additional population(s)
Expanded MLTSS to new geographic region(s) ID, MA, PA MA
Carved in additional benefits/services AZ, MA, NJ
Carved out benefits/services WI
*n=19 states only include states that cover LTSS through MCO and/or PHP
Provider Rates and Taxes Long-Term Services and Supports

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