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

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planning process and had a relatively smooth implementation process and
consumer transition, but even then, unexpected administrative issues arose.
New partnerships need to be formed at the state level as well as the county, regional,
and local levels, depending on how providers are organized. Needed training
should be coordinated among states' mental health and <strong>Medicaid</strong> programs, MCOs
and local providers.
States warned that cost-shifting is real during periods of transition, particularly
between institution- to home-treatment. It was suggested that contractors pay
transition costs to minimize cost-shifting.
Rate-Setting and Risk Sharing
There does not seem to be one best way to set rates that guarantees states are paying
properly for services. Many states agreed that it is difficult to acquire and synthesize
all the data needed to set rates and determine risk sharing arrangements.
Colorado uses historical fee-for-service claims data, geography, age, eligibility
category, and health status to set rates. The State planned to establish a stop-loss
pool, which would withhold part of the BHOs' capitation rate to offset high cost
consumers, but the BHOs felt confident they could take on the risk themselves.
Oregon uses an actuary firm to set rates. However, the actuary firm must make
many assumptions in determining rates, so the State does not know whether they
are paying too much or not enough. BHOs in Oregon must participate in the State's
stop-loss insurance or to self-insure. Finally, Massachusetts has established risk
corridors and is considering adopting a case-mix payment approach.
Soon after converting medical and mental health systems to managed care,
Massachusetts' <strong>Medicaid</strong> agency realized many beneficiaries were also receiving
services through the Department of Mental Health. The two agencies have
developed a relationship in which the Department of Mental Health transfers
money to the <strong>Medicaid</strong> agency to cover mental health services supplied by MCOs.
<strong>Medicaid</strong> covers acute services; the Department of Mental Health covers continuing
care, quality, clinical oversight and policy.
States e;.pressed interest in limiting MCO profits, but noted that such initiatives
were very easy to "game", and that plans may need higher administrative payments
to meet quality standards.
Data Systems
Information needed for quality assurance, program planning, and setting future
capitation rates is obtained in part by tracking high-cost consumers, identifying areas
of underservice, and identifying gaps in continuity of care and preventative care.
States also stressed the importance of tracking the authorization of services and
The National Academy for State Health Policy* 08/97 Iv-ss