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

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particularly on a full risk basis. Thus, the state may have to stimulate the
development of specialty contractors through technical assistance and special
payment systems. Many states do not have well-developed commercial managed
care markets, particularly in rural areas. They too may need to build systems from
the ground up.
Legal Authority
Federal and state laws also influence contractor selection.
Title IV-H of HR 2015 (PL 105-33) changed several federal regulations to
make it easier for states to contract with managed care entities that are
not federally-qualified HMOs. For example, this law removes the
federal requirement for a <strong>Medicaid</strong> contracted plan to have at least 25%
commercial enrollment and enables states to lock-in enrollees of
managed care entities that are not federally-qualified HMOs.
* Medicare Capitation. If a state wishes to include Medicare services on a
capitated basis and does not want to go through the waiver approval
process, it may need to consider entities with existing legal authority to
receive capitated Medicare payments, such as Medicare HMOs, Social
HIMOs and PACE sites.
* State Insurance Laws. Risk arrangements are subject to state insurance
laws, which favor large, financially sound commercial entities. Several
states, including Arizona, Connecticut, Oregon and Wisconsin, have
obtained exceptions to state insurance laws for at least some of their
<strong>Medicaid</strong> managed care initiatives.
How Will the Program Address Medicare Services?
Medicare can not be ignored as an inconsequential issue among special populations.
As previously noted, 90-98% of older <strong>Medicaid</strong> beneficiaries also have Medicare
coverage, as do 30-50% of adults with disabilities under age 65. As first payor for
primary and acute care, Medicare coverage carries great cost and coordination of care
implications for dually eligible people in <strong>Medicaid</strong> managed care.
Until recently, states with <strong>Medicaid</strong> managed care programs took one of two courses
toward dually eligible persons. Either they 1) excluded them from the programs or
2) made an adjustment in their <strong>Medicaid</strong> capitation rates to reflect Medicare
eligibility and took no further actions regarding Medicare. More recently, states
have pursued a far more active role in ensuring that <strong>Medicaid</strong> and Medicare work
well together for the maximum benefit of dually eligible persons. Approaches fall
into two broad categories: those that attempt to coordinate the distinct Medicare and
The National Academy for State Health Policy * © 8/97 IV-15