This information is for reference purposes only. It was current when produced and may now be outdated. Archive material is no longer maintained, and some links may not work. Persons with disabilities having difficulty accessing this information should contact us at: https://info.ahrq.gov. Let us know the nature of the problem, the Web address of what you want, and your contact information.
Please go to www.ahrq.gov for current information.
Providing High-Quality Services to Children with Special Health Care Needs (CSHCN) Under Managed Care
Reimbursing Managed Care Organizations (MCOs)
Developing Equitable Arrangements, Risk Adjustment & Risk Sharing
Carol Tobias, M.S., Project Director, Medicaid Working Group, Boston, MA.
Richard Kronick, Ph.D., Associate Professor, Department of Family and
Preventive Medicine, University of California at San Diego, and Co-Investigator,
Medicaid Working Group, La Jolla, CA.
If managed care plans are to be expected to provide high-quality care to children with special
health care needs, it is reasonable that they receive payments that reflect the additional costs
associated with serving these high-risk and high-cost children. More equitable payment
arrangements between States and managed care plans hold promise to significantly reduce the
effects of traditional incentives to avoid enrolling high-cost populations and to under serve such
populations once they are enrolled.
In this session, Carol Tobias and Rick Kronick of the
Medicaid Working Group discussed the development of risk-adjusted capitation rates for special
populations enrolled in managed care.
Carol Tobias explained that four main things are needed
in order to set rates:
- A definition of the target population.
- A definition of the benefits.
- A database of service use and expenditures with which to set rates.
- An understanding of the potential for adverse selection.
To illustrate the range of definitions and their effects on rate-setting, Tobias used
the District of Columbia, Michigan, Massachusetts and South Carolina as case studies. In the
area of benefits, Tobias noted that if the benefits are extensive, there is more potential for adverse
selection, and in turn, a greater need for risk adjustment.
Rick Kronick focused his presentation on the technical aspects of risk adjustment. He explored
the challenges surrounding the development of sensitive risk adjustment factors, and the
advantages and disadvantages of alternative methodologies based on factors, including:
- Demographic variables.
- Functional health status.
- Prior expenditures.
- Program enrollment.
Dr. Kronick presented two examples of risk adjustment methodologies developed by
the Medicaid Working Group, one used in developing Michigan's capitated system for CSHCN
as well as the Disability Payment System. Overall, in order to make capitation work, he feels it
is necessary to set appropriate rates for CSHCN, write a demanding contract, and monitor plan
Kronick R, Dreyfus T, Lee L, Zhou Z. Diagnostic Risk Adjustment for Medicaid: The Disability Payment System. Health Care Financing Review Spring 1996;17(3):7-33.
Previous Section Contents Next Section