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Carve-Ins vs. Carve-Outs: The Future of Managed Care

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Managed care is the new “name of the game” in Medicaid. More states turn to managed solutions every year, as they struggle to contain costs for beneficiaries.

The struggle to keep utilization low means states are constantly brainstorming new ways to work with Managed Care Organizations (MCOs). Risk sharing and quality incentives are increasingly popular—according to the Kaiser Family Foundation, 39 states have risk-based MCOs as of 2019.

With the rise of risk sharing, states face a difficult challenge. Risk sharing is a type of agreement that allows those involved in care such as providers, pharmaceutical companies, and even medical device makers, to share associated risk and opportunities in the ever-changing field of reimbursement. In an ideal world, risk-sharing arrangements should be effective, yet fair. It’s a difficult balance to strike, especially considering the behavioral health issues that face a large part of the Medicaid population. 

In the interest of fairness to MCOs, behavioral health services were traditionally carved out of risk bearing arrangements. Now, it looks like the opposite is becoming a trend and states are including these services in MCOs. 

States are Carving-In

As of 2019, eleven states have carve-in arrangements or integrated MCOs. That number increased more than four times from 2018, when only two states had implemented a carve-in approach. 

Mississippi and South Carolina were the first to completely integrate behavioral health services into MCOs in 2018; Washington followed suit but only in certain regions. In 2019, nine more states took steps toward integration. States are producing different methods for integrating behavioral health services in MCOs. Unique populations require unique solutions, meaning a one-size-fits-all approach doesn’t usually work.

States who took steps to carve-in behavioral health services in 2019:

Two states took steps to integrate some, but not all MCOs:

One state, Ohio,  achieved full carve-in status with their MCO contracts. 

Michigan is piloting an integrated approach. 

Arkansas plans to integrate services, but only for the most complex beneficiaries. 

Many States Still Carve-Out, But Not for All Behavioral Health

Despite the increasing popularity of carve-in arrangements, many states are still using a carve-out model. However, the inclusion or exclusion status can vary by service type. According to a survey of 39 states contracting with MCOs, there is a difference in carve-out status for different services. 

Specialty Mental Health outpatient services are more likely to be carved out than carved in.

In contrast, Outpatient Substance Use Disorder services were the most likely to be carved in. Of the 39 states with risk based MCOs, 27 carve these services in all the time and five vary.

With Inpatient Substance Use Disorder services, the data is similar. Of the 39 states surveyed, 26 always carve these in to MCO benefits. It varies in seven states, while six states always exclude these services from MCO contracts. 

As states continue to battle the nation-wide opioid addiction epidemic, governments are looking for new ways to get beneficiaries the right services, at the moment they need them. It’s often easier for vulnerable individuals to turn to the same access point for all their benefits. Centralizing services is easier for beneficiaries, especially those who may be in the midst of a substance abuse crisis. Carved in Substance Use Disorder services, therefore, facilitates treatment of addiction disorders.

Inpatient Mental Health services are more often carved out than Substance Use Disorder services, but more often carved in than specialty mental health services. 24 states carve in these benefits, while seven states carve them out. It varies in eight states. 

What Is The “In Lieu Of” Rule?

The “In Lieu Of” rule took effect in 2016 and likely has an impact on how states think about behavioral health services. Under this rule, MCOs have more flexibility to offer different kinds of services “in lieu of” other contracted services.

For example, an MCO may be more inclined to cover innovative services such as tele-counseling for Substance Use Disorder. By offering a flexible option, more patients will have access to the service. However, since this is not a covered service under Medicaid, MCOs would be precluded from offering this service were it not for the “in lieu of” rule. Thanks to the regulation, MCOs can provide alternative services without compromising their reimbursement. 

States, in turn, receive credit from the federal government for these “in lieu of” services, specifically as it relates to Substance Use Disorder and psychiatric illnesses. States can also get reimbursed from the federal government for capitation payments made to MCOs while patients are in an inpatient treatment facility, as long as the beneficiary is in the facility for 15 days or less in a month. 

The “in lieu of” rule is also an integral part of the H.R. 6 or the SUPPORT Act. The SUPPORT act increases the number of days a beneficiary can be in an impatient stay from 15 to 30. 

These rules should increase coverage of Substance Use Disorder and Behavioral Health services for Medicaid beneficiaries across the country. States will also likely be more inclined to carve these services in to an MCO, to facilitate flexibility and offload administrative burden. 

How Do Additional Services Impact Behavioral Health Benefits? 

MCOs have flexibility to offer services beyond what may be covered by the state health plan. Unlike “in lieu of” services which must be a replacement of services covered by the state, additional services go beyond what the state offers. 

MCOs use these additional services to tailor benefits to their population. Offering more services benefits Medicaid recipients by increasing what is covered by insurance, without additional cost to the state. The most common additional services are dental related. MCOs may cover more dental procedures than a state Medicaid plan. 

Some examples of the most common additional services are:

As is obvious from this list, MCOs have wide latitude when deciding which additional services to offer their population. In general, the offering of additional services benefits patients and may lead states to include, or carve-in, more behavioral health services. 

As MCOs take on more responsibilities, states will likely increase their reliance on these organizations to manage vulnerable populations. States are encouraging MCOs to address not only physical health, but Social Determinants of Health (SDOH), as well. 

Poor health isn’t only affected by poor physical condition. Lack of housing or adequate food, for example, can exacerbate chronic conditions. To address these issues, states are investing in social determinants of health. 

The role of MCOs is changing. As managed care companies become more involved in social issues as well as medical ones, their roles in states will likely expand. As states rely on MCOs for more social interventions, they will likely increase their scope. Such an increase means carving in more services. 

According to the Kaiser Family Foundation, 37 states allow MCOs to offer additional services as of 2018. While there is no updated data to determine whether that number is increasing, the trend towards carving in behavioral health services is clear. 

These social determinants are closely tied to mental health. As more states require MCOs to handle complex populations, they will likely find it prudent to also give these organizations more flexibility in the services they provide. In states where behavioral health services are carved in, and additional services are allowed, MCOs have the opportunity to tailor services to their populations. 

How Do Additional Services Impact Behavioral Health Benefits? 

As is obvious from this list, MCOs have wide latitude when deciding which additional services to offer their population. In general, the offering of additional services benefits patients and may lead states to include, or carve-in, more behavioral health services. 

As MCOs take on more responsibilities, states will likely increase their reliance on these organizations to manage vulnerable populations. States are encouraging MCOs to address not only physical health, but Social Determinants of Health (SDOH), as well. 

Poor health isn’t only affected by poor physical condition. Lack of housing or adequate food, for example, can exacerbate chronic conditions. To address these issues, states are investing in social determinants of health. 

The role of MCOs is changing. As managed care companies become more involved in social issues as well as medical ones, their roles in states will likely expand. As states rely on MCOs for more social interventions, they will likely increase their scope. Such an increase means carving in more services. 

According to the Kaiser Family Foundation, 37 states allow MCOs to offer additional services as of 2018. While there is no updated data to determine whether that number is increasing, the trend towards carving in behavioral health services is clear. 

These social determinants are closely tied to mental health. As more states require MCOs to handle complex populations, they will likely find it prudent to also give these organizations more flexibility in the services they provide. In states where behavioral health services are carved in, and additional services are allowed, MCOs have the opportunity to tailor services to their populations. 

What Does This Mean for Providers?

Carving in health services seems like the way of the future. However, as is often the case in healthcare, changes in policy can have downstream effects. Providers may struggle to keep up with new regulations, benefit changes and billing updates. While changing benefits may help providers, reaping those benefits might not be so easy. Whether your practice is carving in or out, Logik’s Online software can be your one source of truth when it comes to billing. Ready to get started with a solution to help you thrive? Learn more about how to find the perfect fit for your billing needs.

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