Vanderbilt Law Review


John A. Flippen

First Page



For a majority of Medicaid recipients, managed health care is fast becoming a reality. As state governments seek to control Medicaid costs in a world of limited resources, unlimited reimbursement for any treatment a doctor deems necessary is no longer feasible. One major tool for cost containment has been the privatization of the delivery of Medicaid coverage into managed care organizations. The shift to a managed plan means that services will be rationed. This rationing occurs because capitated rates, for example, require that private managed care organizations ("MCOs") bear the risk of providing services to the Medicaid population and attempt to profit from a flat-rate fee system.

The managed care trend is causing a paradigm shift for Medicaid. Medicaid originated in an era when the government was not as concerned about controlling health care costs. Today, Medicaid's mandates sometimes conflict with efforts to control health care costs. This conflict manifests itself in the Early and Periodic Screening, Diagnostic, and Treatment ("EPSDT) mandate of the Medicaid Act.,, The "T' in the EPSDT provides broad coverage. Treatment is available to Medicaid-eligible children under twenty-one years of age, and the EPSDT requires states to provide any service that Medicaid offers and a physician has deemed "medically necessary."' Such treatment is required even if the state does not provide it to the adult Medicaid population.

This Note attempts to demonstrate how the EPSDT, as a broad mandate created before managed care, has the potential to diminish the effectiveness of managed care's cost saving efforts, particularly in the area of managed mental health care. Part II of this Note provides the background of Medicaid, describing the fiscal problems it has presented and the solution offered by Tennessee's attempt to control costs through managed care. Part III discusses Medicaid's EPSDT requirement and the challenges it may present to Medicaid managed care cost containment efforts. The Note then suggests two steps to reconcile the goals of the EPSDT with the goals of Medicaid managed mental health care. First, it encourages states seeking to meet the EPSDT's requirements to do so by adopting an incentive program for the screening portion of the EPSDT. Second, Part IV suggests that mental health care presents some unique challenges in a capitated system faced with full enforcement of the EPSDT. Therefore, in order to realize an active and willing enforcement of the EPSDT in the managed mental health care environment, Congress must allow states to define which services are "medically necessary" for purposes of a managed mental health care program. In addition, Congress clearly must allow that definition to apply to the EPSDT. Only then can a state ensure fulfillment of the EPSDT while meeting its goal of controlling costs in a managed care environment.

Part V reviews Tennessee's "TennCare Partners" program for managed Medicaid mental health care in light of the two suggested steps. Tennessee has introduced its Medicaid mental health care coverage within a relatively unique system of "carving out" a separate mental health care delivery system. This carve-out system allows this Note to focus on the EPSDT within managed mental health care, where unique concerns about effective and necessary diagnosis and treatment clash with efforts to save costs through managed care. The Note first addresses how the TennCare Partners program, like many other managed care programs, is fumbling its responsibility to execute the EPSDT, in part because the state did not properly contract for the EPSDT, and in part because MCOs are often not fully aware of the EPSDT's breadth. Second, the Note analyzes how TennCare Partners defines "medically necessary." It then explains how Tennessee's definition of medical necessity would operate if Congress allowed it to apply to the treatment portion of the EPSDT.