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

539
spending will exceed the capitation. If more than 40% of the participants are served
in non-institutional settings, the State has capped the savings that may be retained. 9
Observers question whether this methodology creates incentives to underserve
beneficiaries in order to increase profits. Several factors protect members from
incentives to offer fewer services than people need, as well as monitoring/oversight
activities that are designed to detect barriers to obtaining appropriate services.
ALTCS contractors are at risk for costs which exceed their capitation payments. If
contractors do not provide members an adequate level of services, the risk of
admission to a nursing facility or a hospital increases.10 Denial of care can lead to
increased institutional expenses.
Second, case managers follow a cost effectiveness formula in developing HCBS
services. Service authorizations are limited to 80% of the cost of care in a nursing
facility. However, exceptions can be made to exceed the 80% cap. The provisions set
guidelines against which spending patterns can be compared.
Third, functional assessments and level of care determinations are made by
AHCCCS11 staff not by the ALTCS contractor. Based on the assessment data and
reports filed by ALTCS contractors, AHCCCS staff can identify under and over
spending. Field staff review case records and service plans to determine whether
the plan and service costs are warranted based on the member's assessment.
The Minnesota Senior Health Options program also created incentives to use
residential and in-home services. The capitation system contains rate cells based on
the level of impairment and the residence of the beneficiary. Separate cells are used
for nursing home residents, beneficiaries who have moved from a nursing home to
the community after a six month stay or longer, beneficiaries living in the
community who meet the criteria for placement in a nursing home and other
9 The 40% is a HCFA imposed cap. Arizona has requested approval from HCFA to raise this
cap to 50%.
10 This incentive may not be as strong for dual eligibles enrolled in an ALTCS plan (unless
the ALTCS plan was also the beneficiary's Medicare HMO). In this case, since nursing facility charges are
primarily covered by <strong>Medicaid</strong> and hospitalizations primarily by Medicare, the ALTCS plan (which provides
<strong>Medicaid</strong> services) would typically have greater liability for nursing facility charges than for hospitalizations
and, in theory, be more concerned with avoiding nursing facility stays than hospital stays.
11 Arizona has several separate <strong>Medicaid</strong> managed care programs. The Arizona Health <strong>Care</strong>
Cost Containment System (AHCCCS) provides medical care to those beneficiaries who are not eligible for
long term care. ALTCS provides both medical and long term care to those who are eligible for long term
care. These two programs are administered separately.
The National Academy for State Health Policy 0 8/97 Iv-36
44-098 97 -18