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Designing Systems of Care that Work for Children with Special Health Care Needs

Access to Affordable Insurance

Recent Findings from CHIRI™ Projects

The Child Health Insurance Research Initiative (CHIRI™) provides a rich source of information on the success of Medicaid and State Children's Health Insurance Program (SCHIP) in serving children, including CSHCN.

One CHIRI™ project examined the experience of children with special health care needs (CSHCN) enrolled in Medicaid managed care in Michigan. Michigan's Title V program for CSHCN, the Children's Special Health Care Services (CSHCS) offers enrollees a choice between two managed care plans in addition to the traditional fee-for-service plan. This research project explored the following questions about this program:

  • What services do CSHCN use and how much do they cost?
  • Who chooses to join the Michigan managed care program?
  • How do use and cost differ between fee-for-service and managed care?
  • What is the relationship between individual health care plans and utilization, under managed care?
  • How do parents and providers rate managed care and fee-for-service models for CSHCN?

The study analyzed claims and membership files of children enrolled in both Medicaid and the CSHCS program between January 1998 and December 2000. The major findings of the study included the following:

  • Qualifying diagnosis is the single most important factor influencing health care utilization and expenditures; there is no independent effect of race, ethnicity, or eligibility category on these measures. Inpatient services, outpatient hospital services, and emergency department services are the three largest components of health care expenditures.
  • Managed care comes in many different flavors, with different implications for patient satisfaction, enrollment, and cost.
  • Infants were more likely than older children to join managed care plans, perhaps because their families had had less time to develop relationships with fee-for-service providers
  • Enrollment differed sharply across counties, presumably reflecting local differences in marketing, provider networks, and other matters.
  • Preliminary cost comparisons show that managed care is associated with lower levels of use, but this effect may be explained by underlying differences in the enrolled populations.

Other CHIRI™ projects have also identified and analyzed the needs of CSHCN in State Children's Health Insurance Programs. CHIRI™ projects in Florida, Kansas, and New York have recently examined data to determine baseline information for new enrollees regarding the types of health care needs reported, prior insurance status, usual source of care, and unmet needs and expenditures. This information is intended to help policymakers better understand the needs of CSHCN, to help tailor SCHIP plans to meet children's actual needs, and to use the baseline as a tool to help monitor performance over time.

Initial analyses have found that:

  • The percentage of SCHIP enrollees who have special health care needs is comparable to national estimates.
  • Most CSHCN enrolled in SCHIP in two of the three study States were uninsured before SCHIP enrollment.
  • Nearly all CSHCN enrolled in SCHIP had a usual source of care and prior contact with the health care system before enrolling.
  • Family satisfaction surveys regarding care prior to enrollment in SCHIP show generally high levels of satisfaction, comparable to those of healthy children.
  • In Florida, expenditures on behalf of CSHCN enrolled in SCHIP have been analyzed and found to be higher than those of healthy children.

The next steps in this study include a one-year longitudinal study, involving telephone surveys and analyses of claims data. In addition, an analysis of the use of preventive services by adolescents with special health care needs is planned.

Equitable Payment Mechanisms

Developing equitable payment mechanisms is an important element of the development of effective insurance strategies for CSHCN. In general, if capitation rates are not adjusted for the risk associated with CSHCN, plans that are particularly responsive to their needs will face large financial losses. This will discourage the provision of appropriate, comprehensive care for this population. Therefore, various health-based payment systems have been proposed to address the need to vary payments by predictable risk, encourage outstanding quality especially for costly conditions, and promote plans that innovate or tailor services for people with disabilities.

Payments can be risk-adjusted based on several criteria, including:

  • Demographic variables (such as age, sex, and eligibility category).
  • Self-reported health and functional status (such as Activities of Daily Living).
  • Health care expenditures in the previous year.
  • Use of prescription drugs.
  • Diagnosis (based on ICD-9 codes reported on past health care encounters).

Of these criteria, diagnosis is the most popular. Ten States are currently collecting diagnostic information and using it to adjust payments. This approach has the advantage of ICD-9 data being readily available, and the system providing an incentive to adequately serve those with high levels of need. However, like most risk adjustment systems, a diagnosis-based system can be gamed, as it provides a clear incentive to over-diagnose, and it presents the risk that plans will be rewarded for better reporting rather than for enrolling sicker patients.

Four systems have been devised to classify diagnoses:

  • Adjusted Clinical Groups.
  • Diagnostic Cost Groups.
  • The Chronic Illness and Disability Payment System (CDPS).
  • Clinical Risk Groups.

The most popular classification system is the Chronic Illness and Disability Payment System (CDPS). In this system, specific diagnoses are associated with future costs. Individual diagnoses are grouped by body system or type of condition, creating four or five major groups, with subcategories based on the severity of the condition. The relative costs for each group is estimated based on the ratio of the average cost for a person with the diagnosis (at the specified level of severity) and the average cost incurred by a person with no diagnosis. The payment to the plan is then based on the case mix of its enrollees. Clearly, the availability of complete and equitable data is critical to this system.

Results of tests of this system show that many diagnoses do persist from year to year, making the system a fairly accurate predictor of future expenditures. In addition, little evidence has been collected that shows that plans or providers are responding to this system by developing systems of care to attract sicker people; however, it is believed that HBPs have not been used for a long enough period of time to expect this outcome.


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