Managed care is poised to become the dominant payment model for Medicaid, projected to save the federal program tens of billions of dollars over the next decade, according to the report, “Potential Savings of Medicaid Capitated Care,” by The Menges Group on behalf of the Association for Community Affiliated Plans.

“States contract with managed care organizations (MCOs) on a capitation basis for a variety of reasons,” the report says. “One is that capitation creates the ability to more accurately budget upcoming Medicaid costs. MCOs also allow for clear points of accountability for facilitating access to needed health care services, effectively measuring and improving quality, benchmarking with other states to see how their populations’ health compares, and attaining available cost savings.”

The report estimates that the MCO model delivered nationwide Medicaid savings of $7.1 billion in 2016, assuming that provider unit prices paid by Medicaid MCOs are equivalent in the aggregate to Medicaid fee-for-service levels. Over the next 10 years, the savings from existing capitation programs are projected to total $94.4 billion.