A "Cap" on Medicaid: How Block Grants, Per Capita Caps, and Capped Allotments Might Fundamentally Change the Safety Net

Changing the Medicaid program is a top priority for the Republican party. Common themes from GOP proposals include converting Medicaid from a jointly financed entitlement benefit to a form of capped federal financing. While proponents of this reform argue that it would provide greater flexibility and a more predictable budget for state governments, serious consequences would likely result for Medicaid enrollees and state governments. Under all three scenarios promoted by Republicans--block grants, capped allotments, and per capita caps—most states would face increased costs. For all three scenarios, the capped nature of the funding guarantees that the real value of funds would decrease in future years relative to what would be expected from growth under the current program. Although the federal government would undoubtedly realize savings from all three scenarios, the impact might lead states to reduce benefits and services, create waiting lists, impose cost-sharing on a traditionally low-income enrollee population, or impose other obstacles to coverage. Nationally, as many as 20.5 million Americans stand to lose coverage under the proposed Medicaid changes. In California, up to 6 million people could lose coverage if changes to the Medicaid program were coupled with the repeal of coverage for the expansion population.

Uncomfortable realities: the challenge of creating real change in Europe's consolidating hospital sector

BACKGROUND

This article examines uncomfortable realities that the European hospital sector currently faces and the potential impact of wide-spread rationalization policies such as (hospital) payment reform and privatization.

METHODS

Review of relevant international literature.

RESULTS

Based on the evidence we present, rationalization policies such as (hospital) payment reform and privatization will probably fall short in delivering better quality of care and lower growth in health expenses. Reasons can be sought in a mix of evidence on the effectiveness of these rationalization policies. Nevertheless, pressures for different business models will gradually continue to increase and it seems safe to assume that more value-added process business and facilitated network models will eventually emerge.

CONCLUSIONS

The overall argument of this article holds important implications for future research: how can policymakers generate adequate leverage to introduce such changes without destroying necessary hospital capacity and the ability to produce quality healthcare.

Predicting future healthcare costs: how well does risk‐adjustment work?

PURPOSE

Risk-adjustment is designed to predict healthcare costs to align capitated payments with an individual's expected healthcare costs. This can have the consequence of reducing overpayments and incentives to under treat or reject high cost individuals. This paper seeks to review recent studies presenting risk-adjustment models.

DESIGN/METHODOLOGY/APPROACH

This paper presents a brief discussion of two commonly reported statistics used for evaluating the accuracy of risk adjustment models and concludes with recommendations for increasing the predictive accuracy and usefulness of risk-adjustment models in the context of predicting future healthcare costs.

FINDINGS

Over the last decade, many advances in risk-adjustment methodology have been made. There has been a focus on the part of researchers to transition away from including only demographic data in their risk-adjustment models to incorporating patient data that are more predictive of healthcare costs. This transition has resulted in more accurate risk-adjustment models and models that can better identify high cost patients with chronic medical conditions.

ORIGINALITY/VALUE

The paper shows that the transition has resulted in more accurate risk-adjustment models and models that can better identify high cost patients with chronic medical conditions.

Medicare Advantage increases cap payments third straight year

Healtn plans that participate in Medicare Advantage got more good news in April when the Centers for Medicare & Medicaid Services announced a 4.8% increase in capitated payments. It is the third straight year CMS increased rates following the passage of the 2003 Medicare Prescription Drug, Improvement and Modernization Act, fueling a resurgence in Medicare risk contracting.

Beneath the calm surface: the changing face of physician-service use in British Columbia, 1985/86 versus 1996/97

BACKGROUND

Although expenditures on health care are continually increasing and often said to be unsustainable, few studies have examined these trends at the level of services delivered to individual patients. We analyzed trends in the various components that contributed to changes in overall expenditures for physician services in British Columbia from 1985/86 to 1996/97.

METHODS

We obtained data on all fee-for-service payments to physicians in each study year using the British Columbia Linked Health Data set and analyzed these at the level of individual patients. We disaggregated overall billing levels by year into the following components: number of physicians seen by each patient, number of visits per physician, number of services rendered on each visit and average price of those services. We removed the effect of inflation on fees by adjusting to those in 1988. We used direct age-standardization to isolate and measure the effect of demographic changes. We used the Consumer Price Index to determine the effects of inflation.

RESULTS

Total payments to fee-for-service physicians in British Columbia rose 86.3% over the study period. The increase was entirely accounted for by the combined effects of population growth (28.9%), aging (2.1%) and general inflation (41.4%). Service use per capita rose 10.5%; this increase was offset by a decline of 9.4% in inflation-adjusted fees. The average cost of age-adjusted per-capita services rendered by general or family practitioners (GP/FPs) increased very little (3.3%) over the 11-year period, compared with a nearly one-third (31.8%) increase for medical specialists. Although there was a dramatic increase in the number of GP/FPs seen on average by each patient (32.9%), this increase was offset by the combination of decreases in the number of visits per physician (-14.9%), the number of services provided per visit (-8.0%) and the "real cost" of each service provided (-3.5%). Visits to medical specialists increased by about 20% over the study period in all age groups. However, for each person 65 years of age or over receiving any services, the average fee-adjusted expenditures increased 24.8%, almost 4 times the rate of increase for people younger than 65. The use of surgical services grew 26.5% for seniors while declining -2.0% for people under age 65.

INTERPRETATION

These findings suggest a form of "homeostasis" in aggregate-level service use and cost. The supposed inflationary effects of population aging and increasing "abuse of the system" by patients were not found.

Medicaid managed care payment methods and capitation rates in 2001

We present results from a survey of Medicaid managed care payment methods and rates in 2001 for AFDC/TANF and poverty-related Medicaid populations, updating a similar survey of 1998 rates. Rates were adjusted for differences in age-sex groupings, maternity payments, and service carve-outs. A twofold variation in Medicaid capitation rates remains, although there was a change in the composition of states at the top and bottom. The data also show that the growth in Medicaid capitation rates between 1998 and 2001 averaged 18 percent, considerably more than the increase in Medicare+Choice rates.

Kinder and gentler: physicians and managed care, 1997-2001

Despite the managed care backlash, an overwhelming majority of U.S. physicians continue to contract with managed care health plans. In fact, according to a new Center for Studying Health System Change (HSC) study, between 1997 and 2001 physicians reported a modest increase in the proportion of practice revenue from managed care contracts and the average number of contracts. At the same time, the nature of physicians' relationships with health plans changed, with a significant decrease in plans' use of capitation, or fixed monthly payments for each patient regardless of the amount of care provided. Meanwhile, physician practices moved away from using direct financial incentives to influence doctors' clinical decision making, but did experience an increase in the overall influence of treatment guidelines and other practices commonly associated with managed care.

Lawsuits against Medicaid programs may boost capitation rates

A legal victory in Colorado over inadequate Medicaid capitation rates and a similar lawsuit field in Oregon may lead to improved managed care reimbursement rates for health plans and providers.

Capitation not dead in California, but only the strong survive

Capitation in California appears on the upswing two years after several large physician practice management companies and smaller medical groups went out of business.

Reevaluation of capitation contracting in New York and California

We obtained detailed quantitative and interview data from Aetna U.S. Healthcare and six physician organizations to examine changes between 1998 and 2000 in the scope of capitation contracting and delegation of responsibility for claims payment and medical management in New York and California. The physician organizations in New York included Benchmark (Continuum), Montefiore IPA, and Lenox Hill Healthcare Network. In California they included Brown and Toland Medical Group, Monarch Healthcare, and Santa Clara County IPA. In both California, where global and shared risk capitation have been common, and New York, where they have not, we find movement to reduce the scope of prepayment and a rethinking of the delegated contractual relationship by physician organizations and health plans. This represents a departure from the 1990s, when many industry participants and analysts expected capitated and delegated relationships to spread across the nation.