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Frequently Asked Questions

Below are a few frequently asked questions about Medicaid and the role of managed care organizations (MCOs).


Medicaid began as part of the Social Security Act of 1965. The original law gave states the option of receiving federal funding to provide healthcare coverage to certain individuals. Over time, the federal government has required all states to administer Medicaid services to certain people experiencing low incomes, including pregnant women, children (including those in foster care), seniors, and people with disabilities. In some states, the program covers all low-income adults below a certain income level.1

Managed care organizations (MCOs) are organizations that partner with state Medicaid agencies to administer Medicaid benefits. Medicaid managed care enables states to deliver higher quality care, improve health outcomes of Medicaid recipients, and manage healthcare costs.

Our healthcare system requires the innovation, expertise, and capital of the private sector. Managed care organizations are uniquely positioned to combine these resources with public funding, accountability, and oversight. MCOs integrate behavioral and physical health services to address the holistic needs of a person to ensure they are healthy.

States across the country are expanding Medicaid benefits to increase access to critical COVID-19 testing and treatments. MCOs are also helping these states manage and respond to COVID-19 by:

  • Expanding telehealth offerings
  • Conducting proactive outreach and providing information to those most at-risk for the virus
  • Ensuring individuals have the medications they need

MCOs are also addressing social determinants and coordinating care; advocating for additional federal action that can ensure critical coverage; providing philanthropic support; and supporting the provider network.

As more people face unemployment or changing economic circumstances as a result of COVID-19, more individuals will become eligible for Medicaid. As the number of Medicaid applications grows, MCOs can also help states better plan and manage their budgets.

MCOs in nearly every state are accredited and regularly reviewed by the National Committee on Quality Assurance (NCQA). MCOs are held accountable for up to 69 quality measures each year by NCQA. State legislatures and Departments of Health and Human Services are also tasked with the oversight of MCOs and Medicaid programs.

Depending on the market, MCOs are required by the Affordable Care Act (ACA) to spend at least 80 percent or 85 percent of the money provided by the state and federal government on medical care and healthcare quality improvement, rather than on administration, marketing, or profits. Some states require even higher percentages. If these standards—known as Medical Loss Ratios—are not met, MCOs are subject to penalties, which could include being fired by the state.

The standards set by these various groups ensure that MCOs provide high value to patients and invest in measures to improve health outcomes.



A Look At The Numbers is an educational resource about Medicaid managed care, hosted and supported by Medicaid Health Plans of America, in collaboration with other Medicaid managed care organizations and state health plan associations.