Academic journal article Health Care Financing Review

Findings from the Medicaid Competition Demonstrations: A Guide for States

Academic journal article Health Care Financing Review

Findings from the Medicaid Competition Demonstrations: A Guide for States

Article excerpt

Findings from the Medicaid Competition Demonstrations: A guide for States


In 1982, the Health Care Financing Administration (HCFA) approved demonstration projects in six States to experiment with alternative methods of organizing and financing the delivery of care of Medicaid recipients. The demonstrations were developed in response to concerns that the medicaid program was not fully meeting its goal of access to mainstream medicine, continuity of care, and cost containment. On the one hand, there was evidence of "doctor shopping" and of high self-referral rates contributing to excessive utilization, a problem that may have been exacerbated by the most common mode of cost control, i.e., fee constraints. On the other hand, patients lacked access to primary care physicians in some locations because of low Medicaid payments rates. As a result, they often received inadequate or inappropriate (e.g., emergency room) care.

The demonstrations were intended to test a number of concepts that State and Federal officials hoped would contain costs while promoting greater continuity of care and improving or maintaining access to care. The goal was to change the incentives facing both prividers and consumers under Medicaid so that program goals could be met more effectively. The demonstrations incorporated a variety of innovations of the traditional Medicaid program structure:

*Capitation as a mechanism of provider payment.

* Case management by a primary care physician "gatekeeper."

* Limitations on provider choice as a means of promoting efficiency and, it was hoped, competition among providers for patients.

The purpose of this article is to share the lessons learned in the demonstrations with other States that are considering making similar changes in their Medicaid programs. We first provide an overview and comparison of the demonstration sites, then we offer findings from the demonstration experience in three areas: program design and administration, health plan and provider relations, and beneficiary acceptance.

Overview of demonstration sites

Highlights of the demonstrations are provided below and summarized in Table 1. References to the series of detailed care studies available for each demonstration are cited at the end of the article. Particularly for the completed demonstrations, an indicator of State satisfaction with the projects is their current status. Three of the demonstrations have been converted to ongoing State programs (Santa Barbara, California; Missouri; and New Jersey), one has been extended (Minnesota), and two have ended (Monterey, California; and New Jersey). (1)

California demonstration programs

There were two programs in California; the Monterey County Health Initiative and the Santa Barbara County Health Initiative. In both, the county established a new authority that accepted capitation payments from the State and, in turn, contracted with physicians, clinics, hospitals, and other providers. Despit this organizational similarity, the programs differed in two critical areas. The first relates to the method of provider payment; Monterey paid a fee for service plus a case-management fee for primary care physicians, while Santa Barbara capitated primary care physicians for their services and paid for referral services on a fee-for-service basis. Second, physician attitudes differed: Alhough there was resistance to managed care in both counties, a few well-respected physicians served on an advisory board in Santa Barbara and helped smooth the way for utilization review and other cost-containment efforts. Physician opposition to the capitation of case managers, for example, was overcome in Santa Barbara but not in Monterey.

The Monterey program was terminated in March 1985 becuase of cost overrins and administrative difficulties; the Santa Barbara program, however, has become an ongoing State initiative. …

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