Why Alabama Missed The Boat On Medicaid… And Which Southern State Got It Right

By Beth Clayton
Alabama Political Reporter

In 2011, then-Governor Steve Beshear implemented Managed Care Organizations in Kentucky, taking a trial-model that had been in place since 1997 and expanding it into a full program. Moving half a million Medicaid recipients into Managed Care Organizations (MCOs) was estimated to save the commonwealth $1.3 billion over three years, $375 million of which would be saved in the general fund budget.

At the time, Governor Beshear opted for the MCO system rather than making rate cuts in order to close a $142.4 million shortfall in the biennial Medicaid budget. Under the MCOs, each of the three providers would be given an amount of money per Medicaid patient, shifting the risk for increasing costs from the state onto the MCO–if patients stay healthy, MCOs make money; if patients need more medical treatment, MCOs lose money. The goal behind the MCOs is for the providers to take a greater interest in prevention, thereby encouraging prophylactic procedures over treating sickness. For example, it’s more cost efficient for the MCO to cover a mammogram for early cancer detection than to pay for chemotherapy and an eventual mastectomy if breast cancer develops.
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