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

566
community based organizations that have experience serving these populations.
Unfortunately these organizations are frequently unable to meet the financial
standards of commercial HMOs-the reserve requirements alone may exceed some
community based organizations' entire annual budget. Nonetheless, some states,
such as Wisconsin, have decided to contract with these agencies for a number of
reasons, including:
* these organizations experience may give them the tools they need to
better manage enrollee care and produce cost savings; and
* these organizations are familiar to members of these populations and
their advocates. This may reduce these groups concerns about entering
managed care.
In these cases the Insurance agency will not regulate the contractor's finances and
the <strong>Medicaid</strong> agency must step into this gap. (Federal regulations require <strong>Medicaid</strong>
agencies to examine the solvency of all managed care contractors.) In some states
this may mean setting financial standards for the first time or modifying the current
standards if they were identical to the Insurance agency's standards. It may also
mean learning new oversight skills if the <strong>Medicaid</strong> agency has not examined
contractor finance in the past. Of course, the level of scrutiny (and financial
reserves) will vary with the amount of risk the <strong>Medicaid</strong> agency intends to pass on
to the contracted plan. For example, if the agency intends to pass on very little risk
to the entity that state may simply wish to consider estimating the maximum
amount the plan will need to contribute to any financial loss and ensure that the
plan has that amount in reserve.
Capitation Payments
Due to the extreme variation in the cost of caring for individual members of special
populations states may wish to consider not paying one fee for all SSI enrollees or
all aged enrollees. Instead states should consider paying several different rates for
members of these groups or paying one rate that varies from plan to plan depending
on the characteristics of those beneficiaries who chose to enroll into each plan. For
example a plan that enrolled more beneficiaries with active AIDS may be paid a
higher payment than other plans.
Some states already vary their payments based on enrollee characteristics. For
example, Minnesota pays plans a number of different rates based on factors such as
the individual's age, sex, Medicare status, and institutional status. While, Colorado
pays each individual plan a single different capitation rate adjusted based on the
The National Academy for State Health Policy * 0 8/97 IV-63