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

The research for this paper
Was supported by the Center for
Mental Health Services of the
Substance Abuse and Mental
Health Services Administration,
U.S. Departnsent of Health and
Human Services.
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nonprofit providers or groups of providers that have joined together as
a more comprehensive managed care entity.
This shift to managed care alters incentives in the system. Typically,
managed care firms agree to provide an array of services (specified in the
contract) to a defined group of individuals (also described in the contract)
for a flat fee or payment negotiated in advance. Most often, the
plan receives a capitation payment for each individual enrolled. The incentives
under these arrangements are for managed care entities to control
their costs. If they provide fewer services, they will make more
profit or save more money. This directly, and deliberately, creates the
opposite incentive to that in a fee-for-service system, where providers'
income increases if more services are furnished. Yet, while controlling
costs is an important objective for the public agency, it must be balanced
with legal protections for covered individuals so that consumers
have appropriate choices and are not denied services in order to save expenses
or increase profit.
The shift to managed care often alters the providers' role in subtle
ways as well. In a fee-for-service system, the provider's clinical judgment
was largely insulated from cost-saving concerns, and when the <strong>Medicaid</strong>
agency denied reimbursement, the denial was a clear-cut event which
triggered a formal notice and the opportunity for appeal. Under these
circumstances, the individual could often rely on the provider to support
the appeal. Under managed care, the provider's role is more ambiguous,
and the consumer may not have as clear a picture of the service
options that can be considered or any understanding that a service has,
in fact, been denied him by the treating provider. For the consumer,
there is no clear 'denial event' and, as a result, less opportunity for an
appeal.
- The shift from rules and regulations to contracts also represents a
dramatic change, and requires the recrafting of essential principles for
the service system into contract language. In this process, crucial aspects
of the current system could be lost if not specifically included; yet the
process also provides an opportunity to improve upon and strengthen
the current system. Fundamental for developing sound contracts for
public mental health services are the following principles:
* Even where the mental health system has been privatized, the ultimate
responsibility for its operation still lies with the public agency.
This includes ensuring compliance with federal ano state law.
Defining 'Mcdically Necessary Services cto Protect PIan Members
POLICY ANALYSIS BY THE BAZELON CENTER FOR MENTAL HEALTH LAW