Medicaid Managed Care Is Feeling the Squeeze

HMA has released an analysis of the Medicaid managed care market, which shows that consistent with other reports, the market is entering 2027 with shrinking enrollment, rising acuity, elevated utilization, tighter margins, and a much more difficult rate-setting environment.

Jay Gormley, chief investment officer and COO, Advisory, for Zimmet Healthcare Services Group, said in his own analysis that despite these challenges, managed care still dominates Medicaid nationally, with more than three quarters of beneficiaries enrolled in comprehensive MCOs and roughly half of total Medicaid spending flowing through managed care.

“But the market is under real pressure,” he said, noting HMA found that managed care enrollment across 34 reporting states fell to 59.2 million in June 2026, down 3.5 million, or 5.5 percent, from a year earlier. Expansion states saw an even larger 5.9 percent decline, which is especially important because expansion adults are the population most directly affected by the new community engagement requirements and more frequent eligibility redeterminations beginning in 2027.

“The problem for plans is that enrollment decline does not necessarily mean lower costs on a proportional basis,” Gormley said.

“During the post-pandemic Medicaid unwinding, healthier members disproportionately left coverage, leaving behind a smaller but generally higher acuity population.”

MLR Rising

For example, in a separate report, KFF notes that Medicaid MCO medical loss ratios (MLRs) increased from 88 percent in 2023 to 91 percent in 2024, the highest level among the major health insurance markets and the highest Medicaid MCO MLR in a decade.

The 2025 reconciliation law adds another layer of uncertainty, Gormley said. Medicaid work requirements, six-month eligibility redeterminations, provider tax limitations, and state directed payment changes all make it harder for states and actuaries to predict enrollment, acuity and utilization when setting prospective capitation rates.

Those rates generally have to be established before the state knows exactly who will remain enrolled or what that population will cost. “That uncertainty is beginning to affect plan participation,” he said.

Bye, Bye

For instance, Elevance has publicly said it is reviewing its Medicaid portfolio and expects to leave markets where the economics are not sustainable. It has already exited Washington, DC, and will leave Louisiana at the end of 2026. The company expects a negative 1.75 percent Medicaid operating margin for 2026.

Centene is also reportedly planning to leave Arkansas's Medicaid expansion program in 2027. There is also a concentration issue. KFF notes that Centene, Elevance, UnitedHealth, Molina, and Aetna/CVS together account for nearly half of national Medicaid MCO enrollment. HMA's June 2026 data similarly show the four largest plans accounting for 42.6 percent of enrollment in its dataset.

“That means exits by even one large national plan can have meaningful consequences for states, beneficiaries, and provider networks. For providers, including SNFs, plan exits can create short-term administrative headaches around contracting, prior authorizations, network status, and continuity of care,” Gormley said.

Longer term, fewer plans can also shrink competition in already concentrated markets.

SNFs?

He said the SNF angle is a little different from the broader Medicaid market, though. “Medicaid has always been something of an awkward fit for long-stay nursing home care.  You cannot ‘manage’ a day of care. In most states, the plan is largely passing through a state established rate rather than meaningfully negotiating price or managing utilization,” he said. “The premise of savings in this population is that they could largely be cared for in an alternative higher caliber yet more cost-effective setting. Such a setting has by and large not materialized.”

“That makes this broader MCO pressure worth watching, but it also reinforces the question of how much value the managed care intermediary is actually adding in the nursing home setting,” Gormley said.

The bigger takeaway is that 2027 looks like a year of continued contraction and recalibration in Medicaid managed care. Enrollment is falling, the remaining population may be more expensive, rate setting is getting harder, and some plans are already deciding that certain markets no longer make economic sense.

“For SNFs, the immediate concern is less about enrollment losses themselves and more about what happens to plan stability, provider networks, payment administration and state decisions about whether managed care remains the best way to finance long-term institutional care,” he said.

Comments or questions? Contact Patrick Connole at pconnole@parkplacelive.com.