Medicaid Managed Care - U.S. Senate Special Committee on Aging

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1996, Oregon's average 6-month capitation rate for disabled individuals in
the cell that includes these children was $3,023.w
High-Cost Cases With such a broad range of costs within the category of disabled enrollees,
Strengthen Pressure to a health plan being paid on the basis of average costs may make profits or
Seek Healthier Enrollees expenence losses unrelated to its ability to provide high-quality health
care services efficiently. Instead, these profits or losses may be a function
of how many high-cost cases it does or does not enroll. A health plan with
a disproportionate number of high-cost cases that result in unanticipated
losses is said to be experiencing 'adverse selection," while a plan with few
high-cost cases is said to be experiencing 'favorable selection."
The greater the difference between the high- and low-cost recipients in
each cell, the greater the pressure on plans to avoid enrolling high-cost
recipients or to underserve the high-cost beneficiaries who do enroll.
Favorable selection may happen unintentionally in that, as research
suggests, some people-often those with few health care needs-may be
more prone to select prepaid care when given the option. But, plans can
also avoid enrolling high-cost members by using a variety of methods that
may be difficult for states to detect
Manipulating the panel of providers. Health plans can avoid high-cost
recipients by dropping providers that attract high-cost patients. For
example, a former health plan official told us that the health plan she
worked for identified a specific provider who was responsible in large part
for the plan's attracting a significant number of enrollees with Abs-a
condition that frequently requires extensive and expensive treatment
especially in its later stages. This plan dropped the provider from its panel
in favor of an AmIS treatment clinic and saw its Ams caseload decrease. The
decision to drp the provider may have been for other reasons, in that by
adding the clinic and dropping the individual provider, the health plan may
have improved its capacity to treat people with Ams and the quality of care
they would receive. The outcome demonstrates, however, recipients'
attachment to specific providers and health plans' ability to (1) identify
specific providers as magnets for high-cost recipients and (2) reduce the
cost to treat these recipients by dropping or replacing certain providers.
Limiting access to information about specialty providers. Health plans can
also make it difficult for prospective enrollees to find out which specialty
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