Medicaid Managed Care - U.S. Senate Special Committee on Aging
Medicaid Managed Care - U.S. Senate Special Committee on Aging 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. 756 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
-WHAT IS "MEDICALLY NECESSARY" IN MANAGED CARE SYSTEMS? 757 * State plans for the mental health system developed prior to the shift to managed care, and generally developed with significant public input, should be considered when moving to a restructured system. There is no need to reinvent the wheel if these plans are still appropriate, although at the same time improvements can be made. * Consumers, family members and advocates should continue to have a voice in how the system is designed and run, and their knowledge of how systems can best serve consumers and families should be drawn upon. State planning processes, open public forums and other opportunities for public comments should not be discarded as the state develops requests for proposals (RFPs), reviews bids and negotiates contracts. NMedical necessity is not a new concept. It has been used in
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-WHAT IS<br />
"MEDICALLY<br />
NECESSARY"<br />
IN MANAGED<br />
CARE SYSTEMS?<br />
757<br />
* State plans for the mental health system developed prior to the shift<br />
to managed care, and generally developed with significant public input,<br />
should be c<strong>on</strong>sidered when moving to a restructured system. There is<br />
no need to reinvent the wheel if these plans are still appropriate, although<br />
at the same time improvements can be made.<br />
* C<strong>on</strong>sumers, family members and advocates should c<strong>on</strong>tinue to have a<br />
voice in how the system is designed and run, and their knowledge of<br />
how systems can best serve c<strong>on</strong>sumers and families should be drawn<br />
up<strong>on</strong>. State planning processes, open public forums and other opportunities<br />
for public comments should not be discarded as the state develops<br />
requests for proposals (RFPs), reviews bids and negotiates c<strong>on</strong>tracts.<br />
NMedical necessity is not a new c<strong>on</strong>cept. It has been used in <str<strong>on</strong>g>Medicaid</str<strong>on</strong>g>,<br />
Medicare and private insurance rules for many years, and managed<br />
care plans operating in the private sector typically use procedures to decide<br />
whether a particular ser-vice is appropriate, effective and necessary<br />
for the individual.<br />
<str<strong>on</strong>g>Managed</str<strong>on</strong>g> care plans agree to deliver covered services to covered individuals<br />
whenever those services are needed. They generally cannot<br />
refuse to serve an individual designated as a member of-their plan, as can<br />
most agencies operating under a grant or fee-for-service system. <str<strong>on</strong>g>Managed</str<strong>on</strong>g><br />
care plans therefore devise mechanisms for making decisi<strong>on</strong>s about<br />
what services to provide to whom, under what circumstances. Otherwise,<br />
the plan would have no c<strong>on</strong>trol over utilizati<strong>on</strong> and expenditures<br />
and could not operate effectively.<br />
<str<strong>on</strong>g>Managed</str<strong>on</strong>g> care plans use different mechanisms to c<strong>on</strong>trol the use of<br />
services and hold down their costs. One way is to negotiate discount<br />
rates to pay their providers. However, <str<strong>on</strong>g>Medicaid</str<strong>on</strong>g> rates are generally low<br />
to begin with, so plans must also create greater efficiency through stringent<br />
c<strong>on</strong>trols <strong>on</strong> the use of care. Some put their provider network under<br />
pressure to c<strong>on</strong>trol costs by making capitated payments to the providers,<br />
thereby pawing <strong>on</strong> to them a substantial part of the risk. (Providers<br />
at risk face the possibility that revenues will not be sufficient to cover<br />
expenditures incurred in the delivery of necessary services.) In some<br />
managed care plans, as in fee-for-service, specific limits are placed <strong>on</strong> the<br />
durati<strong>on</strong> of care (such as no more than 20 outpatient sessi<strong>on</strong>s or 30 inpatient<br />
hospital days per year).<br />
Definisg 'Medically Necessary' Services to Protect Plan Members<br />
POLICY ANALYSIS BY THE BAZELON CENTER FOR MENTAL HEALTH LAW<br />
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