Evaluation of the Medicaid Competition Demonstrations

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Evaluation of the Medicaid Competition Demonstrations

Introduction

This article contains a detailed overview and summary of the activities and findings of the Nationwide Evaluation of Medicaid Competition Demonstrations(1). Six States (California, Florida, Minnesota, Missouri, New Jersey, and New York) applied for and received waivers of regulations from the Health Care Financing Administration (HCFA) in 1982 and 1983 for demonstration projects to implement and test alternative strategies for the delivery and financing of health and medical services to Medicaid beneficiaries.(2) The goal of the evaluation was to provide a comprehensive understanding and assessment of the following: * Implementation and operation issues.(3) * Utilization and costs of care. * Administrative costs. * Rate setting. * Biased selection and Medicare-Medicaid dual eligibles. * Quality of care and access and satisfaction.

The evaluation was intended to inform both researchers and policymakers at State and Federal levels about the impact of capitation and case management on the delivery of Medicaid services(4). (4)The evaluation activities and design, the analytical approach, and the findings are described in detail elsewhere in the published literature and in an eight-volume set, Nationwide Evaluation of Medicaid Competition Demonstrations Final Report, and its appendixes that are available from the National Technical Information Service (NTIS), 5285 Royal Road, Springfield, Va. 22161.

The Medicaid Competition Demonstrations were initiated against a backdrop of a rapidly changing health policy environment (Freund and Neuschler, 1986). After a decade of sharp health care cost escalation and soaring Medicare and Medicaid outlays, decisionmakers in the public and private sectors were experimenting with new cost-management techniques. The competition demonstration projects examined under this evaluation were part of a wave of public sector reforms that occurred during this period as Government officials tried to control costs without slashing benefits to the poor and disabled.

The waiver of beneficiary freedom of choice of provider permitted under the demonstrations was critical because freedom of choice had been a hallmark of Medicaid since its enactment in 1965. Freedom of choice under the original legislation was intended to provide open access to the mainstream medical system. Although intended to avoid a "two-tier" system of care, the freedom-of-choice provision was also a deterrent to public authorities who tried to steer recipients toward more cost-conscious doctors, hospitals, and other providers of care, and away from providers judged to be less conservative in the use of resources. The freedom-of-choice waivers allowed States to try to reduce the amount of "doctor shopping" believed to characterize the patterns of service use by some Medicaid recipients.

The demonstrations examined during the evaluation were designed to address fundamental problems in the Medicaid program. One objective, for example, was to establish realistic payment schedules that would both encourage providers to treat Medicaid patients and, at the same time, distribute the risks and rewards of future cost trends between Government and providers. By pilot testing concepts (such as the primary care network) in which groups of primary care doctors entered into risk-sharing financial arrangements with payers, the demonstrations hoped to ascertain whether the potential promise of these new incentives could be achieved in practice. The demonstration programs in most sites were designed to enhance the access of Medicaid beneficiaries to mainstream providers who had not customarily participated in the Medicaid programs. These providers included existing prepaid health plans and primary care networks, as well as private physicians (Freund, 1987).

Although the original concept was to test alternatives to the traditional Medicaid system based on the principles of competition, the actual designs of the demonstrations did not approach a full competitive model. …