Academic journal article Health Care Financing Review

Health-Based Payment for HIV/AIDS in Medicaid Managed Care Programs

Academic journal article Health Care Financing Review

Health-Based Payment for HIV/AIDS in Medicaid Managed Care Programs

Article excerpt

In recent years, State Medicaid programs have begun adopting health-based payment systems to help ensure quality care for people living with human immunodeficiency virus (HIV) and acquired immunodeficiency syndrome (AIDS), and to ensure equity for the managed care organizations (MCOs) in which these people are enrolled. In this article, the authors discuss reasons why such payment systems are needed and describe AIDS-specific capitation rates that have been adopted in several State Medicaid waiver programs. The authors also examine comprehensive risk-adjustment systems both within Medicaid and outside the program. Several research questions needing further work are discussed.


The rapid growth of managed care in State Medicaid programs has caused unease in the care community that serves people living with HIV and the advanced form of HIV infection, AIDS. One reason for the concern is that most capitation rates paid to MCOs for the care of people living with HIV or AIDS (PLWH) have been substantially lower than the cost of care (Conviser, Kerrigan, and Thompson, 1997). This financial shortfall gives MCOs a disincentive for maintaining or improving the quality of care provided to PLWH and, under some conditions, can threaten MCOs' viability and that of providers in their care networks. In this article, we explore ways of adjusting capitation rates on the basis of enrollee health status and describe health-based payment methods that some State and local Medicaid managed care programs have begun adopting to ensure both quality care for PLWH and equitable payment for MCOs in which these people are enrolled.

Until the enactment of the Balanced Budget Act (BBA) in 1997, States had to submit applications and go through an approval process administered by HCFA to institute Medicaid managed care section 1115 or 1915(b) waivers. By November 1993, only two statewide waivers had been awarded under section 1115 of the Social Security Act. But 4 years later, section 1115 Medicaid managed care programs had been instituted in 13 States (Alabama, Arizona, Delaware, Hawaii, Maryland, Massachusetts, Minnesota, Ohio, Oklahoma, Oregon, Rhode Island, Tennessee, and Vermont), most for mandatory programs (Gearon, 1997). In addition, section 1115 waiver approval had been given to five more States (Arkansas, Florida, Illinois, Kentucky, and New York). Moreover, by early 1998, section, 1915(b) waivers had been approved for 88 mostly voluntary Medicaid managed care programs operating in 38 States; these are more limited than section 1115 waivers in either the scope of the services or the geographical areas they cover.

The BBA includes a provision that may speed the growth of Medicaid managed care: The legislation contains a State plan option that removes the necessity for a HCFA waiver review process for certain aspects of managed care. The BBA's limited exemption from new managed care requirements for waiver processes under section 1115 or section 1915(b) gives States some flexibility in designing their managed care programs. There will still be a need for States to comply with fairly complex regulations and requirements of section 1932(c) (passed as part of the BBA), concerning such matters as quality assessment and performance improvement.

This rapid growth of managed care in Medicaid programs has quality of care and financial implications not only for PLWH and other disabled or chronically ill populations but also for providers, MCOs, and States. Some of these issues were explored at a May 1997 conference on HIV Capitation Risk Adjustment cosponsored by the Health Resources and Services Administration (HRSA), HCFA, the Kaiser Family Foundation, and others (Conviser et al., 1997a). Figures 1-4 incorporate and expand upon concerns that were expressed by conference participants about problems facing States, MCOs, providers, and consumers. The concerns listed in these figures include issues relating to access, cost, equity, and quality; many of the concerns can be addressed by (or have relevance for) the design of payment methods that base the capitation rates paid to MCOs upon the health status of their enrollees. …

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