Managed Care Authorities

States can implement a managed care delivery system using three basic types of federal authorities:

  • State plan authority [Section 1932(a)]
  • Waiver authority [Section 1915 (a) and (b)]
  • Waiver authority [Section 1115]

Regardless of the authority, states must comply with the federal regulations that govern managed care delivery systems. These regulations include requirements for a managed care plan to have a quality program and provide appeal and grievance rights, reasonable access to providers, and the right to change managed care plans, among others.

All three types of authorities give states the flexibility to not comply with the following requirements of Medicaid law outlined in Section 1902:

  • Statewideness: Allows states to implement a managed care delivery system in specific areas of the state (generally counties/parishes) rather than the whole state.
  • Comparability of services: Allows states to provide different benefits to people enrolled in a managed care delivery system.
  • Freedom of Choice: Allows states to require people to receive their Medicaid services from a managed care plan.

List of approved managed care waivers.

1932(a) State Plan Basics

States can use a managed care delivery system by getting a state plan amendment approved by CMS. The state plan preprint includes information such as the types of entities that will be used and what groups of people will be enrolled. Once a state plan amendment is approved, the state can run its managed care program without needing a renewal on a periodic basis by CMS.

This authority does not allow states to require dual eligibles, American Indians, or children with special health care needs to enroll in a managed care program.

1915(a) Waiver Basics

States can implement a voluntary managed care program simply by executing a contract with companies that the state has procured using a competitive procurement process. CMS must approve the state in order to make payment.

13 states (and Puerto Rico) use 1915(a) contracts to administer 24 voluntary managed care programs.

1915 (b) Waiver Basics

States can also implement a managed care delivery system using waiver authority under 1915(b). There are four (4) 1915(b) waivers:

  • (b)(1) Freedom of Choice - restricts Medicaid enrollees from receiving services within the managed care network
  • (b)(2) Enrollment Broker - utilizes a "central broker"
  • (b)(3) Non-Medicaid Services Waiver - uses cost savings to provide additional services to beneficiaries
  • (b)(4) Selective Contracting Waiver - restricts the provider from whom the Medicaid eligible may obtain services

The Centers for Medicare & Medicaid Services (CMS) has started the process of "modularizing" its current 1915(b) waiver application to separate the various statutory authorities. First in this process is a streamlined application for States to selectively contract with providers under their fee-for-service delivery system. It simplifies the process for documenting the cost-effectiveness of the waiver but requires that States demonstrate maintenance of beneficiary access. Below are links to both the fillable PDF application as well as the technical guide for completing the application. 

The primary differences between a 1915(b) waiver program and a state plan program are that

  • States are able to require dual eligibles, American Indians, and children with special health care needs to enroll in a managed care delivery system.
  • States must demonstrate that the managed care delivery system is cost-effective, efficient and consistent with the principles of the Medicaid program.
  • The approval period for the state's 1915(b) waiver program is limited to 2 years. (Medicaid state plan authority does not have an expiration date

1115 Demonstration Basics

Section 1115 of the Social Security Act gives the Secretary of Health and Human Services authority to approve experimental, pilot, or demonstration projects that promote the objectives of the Medicaid and CHIP programs. The purpose of these demonstrations, which give states additional flexibility to design and improve their programs, is to demonstrate and evaluate policy approaches such as:

  • Expanding eligibility to individuals who are not otherwise Medicaid or CHIP eligible
  • Providing services not typically covered by Medicaid
  • Using innovative service delivery systems that improve care, increase efficiency, and reduce costs.