Pennsylvania fights release of capitation rates; legislature calls for independent actuarial study
Pennsylvania Capitation Rates
September 30, 1997
Despite mounting criticism from plans, providers, and consumers, and the threat of legal action, Pennsylvania Medicaid officials have steadfastly refused to release the rates paid under the state’s Medicaid managed care program, HealthChoices. State officials have even refused to disclose rates and their underlying assumptions to the legislature.
Now, with managed care plans reportedly losing money, the state House of Representatives has called for an independent actuarial study of rates to be submitted to it by Dec. 1. The Legislative Budget and Finance Committee expects to appoint an independent actuary this month to "evaluate the adequacy of rates for managed care organizations under HealthChoices."
Peg Dierkers, policy development director for the Department of Public Welfare, said the department is cooperating with the Legislative Budget and Finance Committee study, but it is concerned about the impact the study could have on the expansion of HealthChoices if rates are disclosed. She and other officials argue that release of seven rates paid under the program would "negatively affect our ability to do an open and competitive procurement process as the program is taken statewide." HealthChoices was launched in Philadelphia and four surrounding counties on February 1. The state next plans to expand it to the Pittsburgh area in the western part of the state.
Ms. Dierkers said the agency "wants to purchase managed care products for our clients for the best possible value. If we release the rates and the actuarial assumptions, we don’t believe we can do that.
"The critical underpinning of our success is that we ran a very clean procurement process technically and in terms of cost," she said. "We don’t want to jeopardize that as we move forward."
Ms. Dierkers questions why any organization outside the department needs to see the rates and the actuarial assumptions used to develop them, believing groups can represent the interests of their constituents without that specific information.
Representatives of providers and consumers clearly disagree. An executive of the Hospital and Healthsystem Association of Pennsylvania (HAP) said it is "important to providers, plans, and consumers to see that HealthChoices is financially viable."
"Consumers want to be sure there will be continuity of care, and providers want to be sure they will be paid for the care they provide," said Paula A. Bussard, HAP senior vice president for policy and regulatory services. If rates are inadequate, there is a compounding effect over time that could jeopardize consumers, she noted.
"Medicaid managed care involves the government, plans, providers, and consumers, and when you fail to deal with all four elements together, there can be unintended negative consequences."
Ms. Bussard said HAP supported the House resolution calling for the Legislative Budget and Finance Committee study, and hopes that the committee report is sufficient to avoid possible legal action seeking to force release of the rates.
The state Department of Public Welfare has released projected average capitation rates for the four plans in the program. The averages range from $118 to $146 per member per month in the first year. However, Ms. Bussard said these average rates can’t be used to determine the soundness of rates over the seven patient categories in physical health. She said questions about whether rates are adequate for special needs groups, for example, can’t be answered without seeing the specific rates. The rate categories include rates for AFDC recipients; the categorically and medically needy in the state general assistance program; SSI with and without Medicare; and clients in the state’s Healthy Beginnings program. (Mental health services are covered under a separate contract.)
Ann Torregrossa, director of the Pennsylvania Health Law Project, a legal advocacy organization representing low-income health care consumers, said that six months ago she filed a Freedom of Information request with the U.S. Health Care Financing Administration (HCFA) to obtain the rates, but so far has heard nothing. Ms. Torregrossa said HCFA informed her that Pennsylvania is the only state in Region 3 not releasing its rates. Asked about the possibility of filing legal action, she said it would be up to her clients to determine the need for a lawsuit.
"This is a publicly funded program and there should be nothing to hide," she declared. "Taxpayers, legislators, and the public should know what the rates are. And for consumers to have confidence in Medicaid managed care, it is important that they know the rates."
Ms. Torregrossa said the Legislative Budget and Finance Committee study is particularly important given the reported financial problems the four managed care plans are experiencing. While the department and plans have refused to release financial information, state Insurance Department filings indicate that at least three of the four plans lost money in the first two quarters of Health Choices. (The figures for the fourth plan are included with its parent company in the Insurance Department reports and cannot be broken out.) Ms. Dierkers confirmed that all four plans in HealthChoices are losing money, but said initial losses were expected as part of the start-up. One of the plans, Health Partners, said it will cut back on optional benefits such as adult eye glasses, tighten controls on prescription drugs, and stop enrolling patients in HIV/AIDS patients in one county.
Before HealthChoices was launched, the state worked extensively with actuaries to develop rates that would cover plans’ costs and yet not allow for excess profits.
"We have to tightly monitor the day-to-day and month-to-month performance of the plans and make an assessment," Ms. Dierkers said. "After the plans reported first quarter losses we did thorough financial reviews on each plan, testing for immediate problems in the rate structure. We have not seen any yet."
Two issues that are receiving immediate attention are payments for HIV/AIDS patients and for childbirth. She said the state already has mechanisms in the contracts to make adjustments in these areas, if needed.
Ms. Dierkers said the department is looking at indicators such as claims payment turnaround to gauge financial performance. She said such indicators are better at raising red flags than the overall performance review. The department is making changes based on "constructive suggestions" from the plans.
—John Hope
Contact Ms. Bussard at 717-564-9200; Ms. Dierkers at 717-772-8318; Ms. Torregrossa at 215-625-9111.
Pennsylvania fights release of capitation rates; legislature calls for independent actuarial study
- Award-winning Medical Content
- Latest Advances & Development in Medicine
- Unbiased Content
