How Activists Ended Insurer Managed Care in a State Medicaid System, and What They Built Instead

• In Event: Privatization, Policy Instability, and the Pursuit of Effective Public Service

Abstract

This project investigates the mechanisms behind a significant and largely unprecedented and unstudied policy change: the removal of private insurers from Connecticut’s Medicaid system. Drawing on a year of in-depth interview data with legal activists, bureaucrats, and state legislators, I analyze (1) the process, tools, and conditions whereby significant policy shift occurred; and (2) the design of the new state-administered model. Related quantitative evidence suggests it improved healthcare access and outcomes for beneficiaries, and internal state data indicates substantial fiscal savings. This study thus examines the conditions and actions that supported the policy transformation to identify replicable approaches for other states grappling with lagging quality and fiscal strain in Medicaid.

Sustained legal activism served as primary catalyst for the policy disruption. Legal aid lawyers employed Freedom of Information (FOI) requests to obtain data on the reimbursement rates that Medicaid insurers were paying to physicians and provider organizations. While insurers insisted these rates were proprietary, courts sided with the legal activists. Under political pressure drummed up in the local press, including from key elected leaders, the state’s governor eventually mandated disclosure of payment rates regardless of the upcoming state supreme court ruling. All private insurers swiftly dropped out of the state’s Medicaid program. Ultimately, it was a new gubernatorial administration that made the shift to an entirely new kind of Medicaid delivery system, in one out of a series of post-2008 budget-focused moves.

The success of earlier pilot programs served as the model for what would come next, helping translate the legal activists’ disruption into substantive policy. Like the preceding pilots, the replacement system retains some private contracting through an Administrative Services Organization, which carries out some of the previous insurers’ functions. A defining distinction of the new contractual relationship is its exclusion of medical expenditure decisions: no private entity profits from the denial or authorization of medical services. Furthermore, the contract explicitly limits the administrator's profit margin, mandates in-state customer service and utilization management, and requires the return of unspent funds to prevent understaffing. 

The data reveal a network of public servants, including executive and legislative actors, who critically engaged with the information and perspectives brought forth by activists. While some aspects of this case study are specific to its context, including overarching political movements and the local media environment, nevertheless, the underlying principles of strategic advocacy, evidence-based policymaking, and innovative contract design offer valuable lessons for other jurisdictions seeking to improve healthcare delivery and cost-effectiveness in Medicaid. 

Authors

• Naomi Bethlehem Zewde, University of California - Los Angeles
  Presenting Author

• Colleen M Grogan, University of Chicago
  Non-Presenting Co-Author