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J Health Polit Policy Law. 1997 Oct;22(5):1191-214.

Medicaid managed care and the family planning free-choice exemption: beyond the freedom to choose.

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George Washington University Center for Health Policy Research, USA.


Family planning services represent one of the most common managed care services, particularly in the case of Medicaid. In 1986, Congress enacted legislation exempting family planning services from mandatory managed care requirements. The effect of this legislation was to permit beneficiaries enrolled in mandatory managed care plans to continue to obtain family planning benefits from the providers of their choice, regardless of the providers' network status. The purpose of the law was to assure that managed care would not impede individuals' access to benefits. Subsequent experiences surrounding implementation of this provision indicated that the Health Care Financing Administration failed either to define the scope of the exemption or to provide guidance to states regarding the various issues that would have to be resolved in exempting certain primary care services from mandatory managed care. States, in turn, developed working definitions of exempt family planning services that omitted treatment for sexually transmitted diseases and also delegated to their managed care contractors the responsibility to design implementation and payment arrangements. This systematic failure to articulate the scope and functional elements of the exemption consequently led to nonpayment of providers, and ultimately, to denial of care in some cases. Moreover, plans and community providers alike relied on the exemption to justify their failure to come to grips with the requirements and challenges of managed care. We conclude that exempting primary care services from managed care requirements may raise as many questions as it answers, and instead recommend that states, plans, and community providers focus on developing managed care systems that are responsive to patient needs.


This article examines the impact on State Medicaid agencies of a 1986 amendment enacted by the US Congress that allowed managed care enrollees to obtain family planning (FP) services from any provider, even those not part of a managed care network. The analysis begins by providing an overview of Medicaid managed care and the FP freedom-of-choice exemption and noting that the amendment 1) failed to define "FP services and supplies," leaving its precise scope vague and 2) provided no implementation guidance. The study methodology is then described as an examination of the situation in 15 states and an intensive look at the experience of Illinois, Pennsylvania, Michigan, Florida, and Minnesota. Results are presented in terms of the types of managed care arrangements in effect in states and how states varied in their treatment of FP services. States used available definitions of FP services (that omitted treatment for sexually transmitted diseases) and delegated the implementation of this amendment to health plans. The plans treated FP providers as non-contract providers and failed to resolve complex problems involving payment, referral procedures, and patient confidentiality. Among the case studies, only the publicly-assisted FP programs in Philadelphia and Pittsburgh had become successful managed care network members. It is concluded that the 1986 amendment detached a basic primary health care service from managed care and may have hindered efforts to develop effective FP services for Medicaid beneficiaries. The solution may be to include community FP service providers in managed care networks.

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