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

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risk adjustment methodology even for largely healthy populations.
So that when we talk about risk-adjusting the payments, we are
really-and Bill, you can correct me if I'm wrong-we are really on
the frontier. The down side risk of that is that if you do not riskadjust
correctly, obviously, you are either overcompensating or
undercompensating the plan. If you are overcompensating the plan,
you are going to be basically skimming off other services that need
to be provided in other plans to other populations. If you are
undercompensating, you run a severe solvency risk. Solvency
sounds like a "techie issue. But everything turns on solvency, because
if the plan is running into solvency problems, it means they
have cash-flow problems, it means that they are then going to have
strong incentives to cut back on services because they can't pay the
providers. So that at every step of the way, the solvency of the plan
is a critical quality assurance to services being provided.
Now, I just participated in a video conference in Pennsylvania
where they are trying to set up their <strong>Medicaid</strong> managed care program,
and they had a lot of questions about how to go about it. One
of their questions, interestingly, was should they, could they, set up
a separate HMO where they exclusively enrolled all of their AIDS
patients and HIV-positive patients. From the clinical perspective
that has a certain amount of appeal because it assures that you are
going to get a very expert network that knows how to treat these
patients, that is going to be basically up-to-speed on all the research,
that is going to have a lot of clinical experience-and we
found with tuberculosis and with AIDS treatment, like with cardiac
bypass surgery, the number of times that a clinician is involved in
treatment for a specific condition makes a radical difference in
terms of the outcome for a patient.
So the clinical advantages are substantial. The financial problems
in terms of how they risk-adjust that payment to that HMO
are huge because they are now talking about an HMO comprised
exclusively of very high-cost enrollees whose prescription drug expenses
alone would be $15,000 a year. What they are also doing,
of course, is they are freeing up all the rest of the <strong>Medicaid</strong> HMOs
from any of those responsibilities, so not only are they going to
have to pay this HMO a very large capitation, but they are then
going to have to ratchet down substantially the other HMOs that
are delivering primarily well care, and then their market changes
a lot.
So these are the kinds of issues that are coming up on the face
of the contract, in the course of the States trying to implement
plans. In terms of access to subspecialists, I have to say that there
is very little language in the contracts themselves. It does not
mean the plans are not providing it, but it means that in terms of
getting accountability, measuring it, enforcing that if you have the
need to do it, there is just very little there.
In most States, enrollment of disabled people in <strong>Medicaid</strong> managed
care is voluntary; in many States, it is excluded. So again,
they are leaving those people in the fee-for-service sector for a reason,
and the reason is that the evolution just hasn't gone that far
yet.
I want to elaborate a little bit on what the contract showed in
terms of medical necessity. I guess I should add a caveat at this