Research Reports | Market Assessment
July 2014

The Growth of MCOs in Medicare and Medicaid and Their Effect on U.S. Drug Utilization

The increase in U.S. Medicare and Medicaid beneficiaries has been accompanied by growth in managed care’s presence in those two sectors of health benefits. In 2014, 30% of all Medicare beneficiaries are enrolled in managed care plans, while 60% of those covered by Medicaid are in similar arrangements. Tighter medical and drug management in the public sector means MCOs are putting higher out-of-pocket cost burdens on individuals, limiting drug formularies, and more frequently using drug utilization controls.

In addition to changing the financial responsibilities of individuals in Medicaid and Medicare, the managed care plans have required higher standards from providers. The programs are signing accountable care and shared savings reimbursement agreements with hospital systems and physician groups, thus requiring them to be more attuned to drug and medical cost decisions. At the same time, MCOs are excluding from their networks the providers that are less efficient or operating below quality standards.

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