Managed Medicaid cost savings: the Arizona experience

This paper reports on estimated cost savings for acute care beneficiaries in the Arizona Health Care Cost Containment System (AHCCCS) over its first nine years of operation, fiscal years 1983-1991. AHCCCS has similar eligibility and service coverage as a traditional Medicaid program has but capitates health plans to provide medical services to beneficiaries. The results indicate that the program yielded $100 million in savings over estimates of what a traditional Medicaid program would have cost in Arizona. In addition, AHCCCS experienced a smaller rate of increase in program expenditures over time, so that cost savings have increased as the program has matured.