February 17, 2015 —

Texas Association of Health Plans Study Identifies $3.8 Billion of Savings in Six Years

Austin, TX – The Texas Association of Health Plans (TAHP) today revealed that the Medicaid managed care approach, adopted to provide care for some of the state’s most vulnerable populations, has resulted in cost reductions to the Texas Medicaid program of nearly $4 billion over six years, compared to what it would have cost with the “fee for service” (FFS) model it replaced. Projections indicate the approach is expected to save an additional $3.3 billion over the next three years using the managed care model compared to projections under a FFS model.

“In response to the health needs of a growing population and unsustainable Medicaid cost growth, the Texas Legislature has spent years moving Texas towards a private market solution that uses innovation and competition to reduce cost and improve access to quality care,” said Jamie Dudensing, CEO of TAHP and former practicing nurse. “The Legislature had a strong sense that Medicaid managed care was having a positive impact on the quality and affordability of care, but these eye­opening numbers provide a resounding endorsement of the approach.”

Under managed care, the state pays a fixed per­person, per­month amount (known as capitation) to a managed care organization (MCO). The MCO assumes the full financial risk of costs, limiting the state’s financial exposure. In return for the capitated payment, the MCO provides comprehensive health care benefits, manages all medical services and administrative functions and assumes responsibility for all payments associated with the medical care of the enrollee. This approach also provides a higher degree of cost predictability for state budget writers.

The TAHP ­funded studies, conducted by respected health care research firms Milliman and Sellers Dorsey, also showed that, in addition to reducing Medicaid costs for the programs studied by nearly 8% (Milliman), MCOs have also increased access to services and improved quality of care (Sellers Dorsey).

“As our state population keeps growing, the challenge of providing care will only increase, so it is reassuring to know that a program of this scope is reducing costs and improving quality of care,” concluded Dudensing. “We’re proud that our MCOs are part of this fiscally conservative solution for Texas.

The studies can be downloaded for closer study:

Milliman: “Texas Medicaid Managed Care Cost Impact Study” >

Sellers Dorsey: “Medicaid Managed Care in Texas: A Review of Access to Services, Quality of Care, and Cost Effectiveness”

Managed Care vs. Fee for Services Costs >

The Texas Association of Health Plans

The Texas Association of Health Plans (TAHP) is the statewide trade association representing private health insurers, health maintenance organizations, and other related health care entities operating in Texas. Our members provide health and supplemental benefits to Texans through employer-sponsored coverage, the individual insurance market, and public programs such as Medicare and Medicaid. TAHP advocates for public and private health care solutions that improve the affordability, access and accountability of health care for many Texans. As the voice for health plans in Texas, TAHP strives to increase public awareness about our members’ services, health care delivery benefits and contributions to communities across Texas.