Risk-based Managed Care – MCOs are health plans that contract with states to provide comprehensive Medicaid benefits to enrolled Medicaid beneficiaries for a pre-set per-member-per-month (PMPM) premium, or capitation payment.3 This arrangement is known as risk-based managed care because MCOs are at financial risk for the Medicaid services specified in their contracts. States develop and oversee their own Medicaid managed care programs, subject to federal requirements. MCOs must meet federal and state-specific requirements that address matters such as: protocols for enrollment, disenrollment, and member support; ensuring an adequate provider network and access to care; grievances and appeals, and collection and reporting of data. Although MCOs are at financial risk for comprehensive Medicaid benefits, many states “carve out” certain services from their MCO contracts, such as prescription drugs or behavioral health services. These carved-out benefits may be provided and financed under a separate contract with a prepaid health plan (see definition below) or on a FFS basis. Alternatively, some MCOs may subcontract with prepaid health plans to provide such benefits.
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