State and territorial Medicaid agencies design and administer their Medicaid programs within federal rules and can implement a range of delivery systems, which differ widely across states. The type of delivery system determines how the Medicaid program is structured, who is responsible for program operations, and how payments flow through the system.
While these delivery systems vary in their features and functions, the primary difference between Medicaid delivery systems is whether the state or territory is directly responsible for administering the Medicaid program or whether the state or territory delegates responsibility for some or all of its functions to private commercial health insurance companies, known as managed care organizations or MCOs.
State and territorial legislators play an important role in overseeing Medicaid delivery systems. These include:
- Determining which beneficiaries and what services are covered in each delivery system.
- Funding Medicaid agencies to oversee or administer delivery systems.
- Setting standards for delivery systems.
- Overseeing quality and value of delivery systems.
There are four types of Medicaid delivery systems (defined further in table below):
- State-operated fee-for-service (FFS).
- Primary care case management (PCCM).
- Comprehensive risk-based managed care (MCO model).
- Limited-benefit plans.
The following table defines and describes delivery systems by structure, payment, providers, beneficiaries, and national enrollment.
| Delivery Systems |
Structure |
Payment |
Providers |
Beneficiaries |
National Enrollment |
| State-Operated Fee-For-Service (FFS) |
State administers the program and manages all day-to-day operations, including beneficiary enrollment, provider payment, and internal agency analysis and policy updates. |
Providers submit claims for payment to the state. The state processes those claims and pays providers according to rates and methodologies established by the state. |
State enrolls providers. The state must enroll and pay any willing provider that meets the state’s criteria and submits necessary documentation. |
The state (or local government entities in some states) determines beneficiary eligibility and enrolls beneficiaries in the Medicaid program. The state checks and renews eligibility. |
As of July 1, 2022, approximately 22% of Medicaid beneficiaries were enrolled in FFS nationwide. |
| Primary Care Case Management (PCCM) |
Similar to FFS with an additional case management component. PCCM is a delivery system where enrollees have a single designated primary care provider who is responsible for their care management and coordination. |
Similar to FFS, the state pays the designated primary care provider a monthly fee to cover a core set of case management services. All other services are reimbursed according to payment rates and methodologies established by the state. |
Similar to FFS. |
Similar to FFS. |
As of July 1, 2022, approximately 13% of Medicaid beneficiaries were enrolled in PCCM nationwide. |
| Comprehensive Risk-Based Managed Care (MCO model) |
MCO model is a delivery system where the state contracts with managed care organizations to perform some or all the day-to-day operations of the Medicaid program. In exchange, the state pays the MCO a per member per month fee for each beneficiary, called a “capitated payment.” |
States set the MCO capitation rate using actuarially-sound principles and can risk-adjust rates to account for enrollee health status, incentives for plan performance, and to ensure payments are reasonable and appropriate. Each MCO is at-risk for cost of services, meaning that the MCO is responsible for costs that exceed the capitated payment but may keep savings if costs fall below the capitated payment. Each MCO directly contracts with and pays providers according to the payment rates and methodologies established in the provider’s contract. |
Providers still enroll in the Medicaid program with the state but must also separately contract with each MCO and be accepted into the MCO provider network (sometimes called “credentialing”). Providers submit claims for payment to the MCO. The MCO processes claims and pays providers according to the payment rates and methodologies set forth in the provider’s contract with the MCO. MCOs are not typically required to accept any willing provider and can limit the providers in the network within the state’s standards for network adequacy. |
Similar to FFS, except that some functions related to beneficiary eligibility determinations and renewals may be delegated to or performed by the MCO. Beneficiaries may have a choice of MCO or may be automatically assigned to an MCO within their geographic region. |
As of July 1, 2022, approximately 63% of Medicaid beneficiaries were enrolled in MCOs nationwide. |
| Limited-Benefit Plans |
Similar to the MCO model, limited-benefit plans manage a specific subset of benefits, typically:
- Behavioral health.
- Non-emergency medical transportation.
- Dental.
- Managed long-term services and supports.
|
Similar to the MCO Model. These are generally paid on a capitated basis and may also be adjusted for risk. MCOs may be at-risk for the cost of care, depending on whether inpatient services are included or not. |
Similar to the MCO model. |
Limited benefit plans are similar to the MCO model. |
In 2021, approximately 45% of Medicaid beneficiaries used some type of limited-benefit plan, mainly for transportation (16%) and dental services (16.9%). |
| *Average calculated using KFF data. |
While most states cover the majority of Medicaid beneficiaries in one type of delivery system, states often operate a blend of two or more delivery systems. Each delivery system within a state Medicaid program may vary widely in the populations served, benefits covered, geographic scope, and organization.