Savings from a Medicaid carve-out for mental health and substance abuse services in Massachusetts

The authors label this behavior "managing to the contract" and discuss some reasons why a managed care organization might behave in this way and the implications this behavior has for contract design.

Abstract

In light of the contract's weak cost-saving incentives, it may be surprising that so much was saved. One explanation is that it was easy to achieve such savings in a state with high expenditures. However, in examining the particular amounts saved, it is clear that the organization came close to contract targets even when incentives to achieve them were weak. The authors label this behavior "managing to the contract" and discuss some reasons why a managed care organization might behave in this way and the implications this behavior has for contract design.