Should government protect mission-driven providers in the shift to Medicaid managed care? In part, the answer to this question turns on the statutory purposes of Medicaid as both a vehicle for providing an opportunity for the poor to enter the medical mainstream, and as a program to provide medical care in a setting that includes a wide variety of culturally appropriate social services. The answer also turns in part on an economic and public policy analysis of the performance of these mission-driven providers in comparison with their for-profit counterparts. Part I of this article will describe the complex mission of Medicaid, as a program that on the one hand integrates the poor into the mainstream of health care, and on the other hand provides enhanced, supplementary or remedial care to a population with different and greater needs. Part I concludes that legislative intent is insufficiently clear to determine the fate of mission-driven providers. Rather, their fate must depend on economic and public policy analysis of their effect on Medicaid beneficiaries' health care. Part II will describe the developing Medicaid managed care system, and the complex, largely informal mechanisms by which essential community providers achieve some limited insulation from competitive forces. Part III will argue that regulatorily mandated inclusion of essential community providers in Medicaid managed care networks is appropriate for three reasons. First, mission-driven providers have in the past and are likely in the future to be willing and able to cost-shift, providing necessary care to the poor uninsured. Second, information asymmetries that plague the Medicaid managed-care market can be ameliorated to some extent by affording special status to historic Medicaid providers. Third, the nonprofit essential community providers' reliance on debt financing and donations renders their capital less mobile than that of their for-profits competitors, who normally rely on equity markets. This capital immobility lends stability to the provider network for the vulnerable Medicaid population in the inevitable event of significant funding contraction.
Medicaid, Health care industry