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Costs are no higher for Medicaid children than for privately insured children in the same HMO

Growing numbers of Medicaid-insured children have been enrolled in managed care plans nationwide. However, many large commercial managed care plans are discontinuing their participation in Medicaid because of low reimbursement rates. A newly published study has found that Medicaid-insured and privately insured children in the same HMO had similar medical expenses. Only Medicaid children who were medically needy, blind, or disabled had substantially higher costs.

These results suggest that it may become necessary for States that want to continue enrolling Medicaid recipients in HMOs to adopt reimbursement levels that are comparable to rates set for commercially insured patients. States also may need to incorporate adequate risk-adjustment mechanisms to determine reimbursement for children with special needs, conclude the Kaiser Permanente of Northern California researchers who led the study. Agency for Healthcare Research and Quality investigators Robin M. Weinick, Ph.D., and Joel W. Cohen, Ph.D., were collaborators in this study.

The researchers compared the health care use and costs of children with Medicaid and children with commercial insurance within the same large California HMO between 1995 and 1997. About 9 percent of Medicaid-insured children were medically needy, and 4 percent were blind or disabled. Income-eligible Medicaid-insured and commercially insured groups of children had similar use of outpatient services such as clinic and hospital outpatient visits. However, Medicaid-insured medically needy children had significantly more clinic visits than their commercially insured counterparts (5.2 vs. 3.6), and blind or disabled Medicaid enrollees had significantly more hospital outpatient visits (0.09 vs. 0.03) and clinic visits (5.6 vs 3.6) compared with commercially insured children.

Overall, income-eligible Medicaid-insured and commercially insured children had costs of about $60 per month. The medically needy were substantially more costly than the commercially insured ($81 vs. $61 per month), mostly due to increased outpatient clinic costs ($12 more per month) and emergency department costs ($3 more per month). Blind and disabled children also were substantially more costly than commercially insured children ($277 vs. $61 per month). These costs followed adjustment for age, sex, and whether the child had joined the HMO within 2 months of birth (a costly time).

See "Comparing the medical expenses of children with Medicaid and commercial insurance in an HMO," by G. Thomas Ray, M.B.A., Tracy Lieu, M.D., M.P.H., Dr. Weinick, and others in the July 2000 American Journal of Managed Care 6(7), pp. 753-760.

Reprints (AHRQ Publication No. 00-R044) are available from the AHRQ Publications Clearinghouse.

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