Intended consequences: modernizing Medi-Cal rate setting to improve health and manage costs
- Collection:
- Health Policy and Services Research
- Contributor(s):
- California HealthCare Foundation, issuing body. Manatt, Phelps & Phillips, issuing body.
- Publication:
- [Oakland, Calif.] : California Health Care Foundation, March 2018
- Language(s):
- English
- Format:
- Text
- Subject(s):
- Managed Care Programs -- economics Medicaid -- economics Rate Setting and Review Cost Savings Risk Adjustment Social Determinants of Health State Government Humans California United States
- Genre(s):
- Technical Report
- Abstract:
- The Medi-Cal program plays a critical role in California, providing health coverage for a third of all residents, including those with complex health care needs and significant economic and social challenges. Like other states facing federal and other budgetary pressures on their Medicaid spending, California is eager to identify and support innovative models of care that have the potential to both improve member health outcomes and reduce cost trends over the long term. With 81% of Medi-Cal beneficiaries enrolled in managed care, Medi-Cal managed care organizations (MCOs) are central to achieving these objectives. Several plans are already investing in innovative models that go above and beyond the required benefits; examples include enhancing case management, providing housing supports to give older disabled members an alternative to living in a nursing home, and integrating physical and behavioral health. However, these plans have been hampered in their efforts to bring such initiatives to scale and maintain them over time by disincentives built into the Medi-Cal MCO rate structures. What is needed is an approach that aligns health plan incentives with the state's goal to reduce the long-term cost trend. An unintended consequence of the current rate-setting methodology is that plans are negatively impacted when they invest in initiatives that result in lower costs. This can occur when an MCO seeks to improve care by investing in services or other initiatives that are not traditional Medicaid benefits, such as improved care coordination or housing supports; such efforts can result in a decline in inpatient hospital use, emergency department use, or other high-cost utilization. In such cases, the cost basis for the plan's future rates declines and the plan receives a lower rate than it would have received without the intervention. The state recognized this dilemma in its 1115 waiver renewal and proposed a program where plans could receive some of the savings generated through improvements in care. (This initiative was ultimately not part of the approved waiver, although a waiver is not necessary to implement such a program.) To seek possible solutions to the unintended consequences of rate-setting methods, the California Health Care Foundation, with support from Manatt and Optumas, convened a work group to explore options for addressing this issue and encouraging joint state and plan investments in innovative health-related initiatives. The work group comprised leaders of several Medi-Cal MCOs, and the Medi-Cal director served as an advisor to the group. This report presents the output of that work group process. Specifically, it: (1) Provides an overview of the current rate-setting process, highlighting challenges and unintended consequences; (2) Describes the work group process and principles that guided the evaluation of new options; (3) Offers a recommended approach for updating the current rate-setting methodology to advance Medi-Cal's goals of improving member health outcomes and promoting efficient resource use. One of the parameters of the work group was to work within current Medi-Cal funding constraints--designing approaches that would not require any net investments by the state. Additional state investments, however, to improve Medi-Cal access and quality would augment the impact of these recommendations and yield health improvements for members.
- Copyright:
- Reproduced with permission of the copyright holder. Further use of the material is subject to CC BY-NC-ND license. (More information)
- Extent:
- 1 online resource (1 PDF file (30 pages))
- Illustrations:
- Illustrations
- NLM Unique ID:
- 101744387 (See catalog record)
- Permanent Link:
- http://resource.nlm.nih.gov/101744387