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Do adjusted clinical groups eliminate incentives for HMOs to avoid substance abusers? Evidence from the Maryland
Susan L Ettner1, Steven Johnson
1UCLA Department of Medicine, Division of General Internal Medicine & Health Services Research, 911 Broxton Plaza, Room 106, Box 951736, Los Angeles, CA 90095-1736, USA. settner@mednet.ucla.edu
Insights
Managed care organizations (MCOs) may still avoid enrolling patients with substance use disorders despite risk adjustment. This study found that while risk adjustment reduced, it did not eliminate, financial incentives for MCOs to avoid these costly beneficiaries.
Area of Science:
- Health Services Research
- Public Health Policy
- Healthcare Economics
Background:
- Managed care organizations (MCOs) face scrutiny regarding risk adjustment adequacy.
- Incentives for MCOs to avoid enrolling high-cost patients, particularly those with substance use disorders, remain a concern.
- The Maryland Medicaid HealthChoice program's risk adjustment methodology is examined.
Purpose of the Study:
- To investigate expenditure differences between beneficiaries with and without substance use disorders.
- To assess whether risk adjustment effectively eliminates MCO incentives to avoid substance-abusing enrollees.
- To evaluate the Maryland Medicaid HealthChoice program's adjusted clinical groups (ACG) methodology.
Main Methods:
- Utilized Maryland Medicaid data from fiscal years 1995-1997.
- Assigned beneficiaries to capitation rate groups based on FY1995 diagnoses.
- Compared expenditures for beneficiaries with and without substance use disorders (defined by FY1995 and FY1997 diagnoses).
Main Results:
- Expenditure differences in FY1997 between beneficiaries with and without prior substance use disorders were minimal.
- MCOs faced potential for greater average losses and reduced average profits with substance-abusing beneficiaries in FY1997.
- The ACG methodology attenuated, but did not fully remove, financial disincentives for MCOs to enroll substance users.
Conclusions:
- Risk adjustment in the HealthChoice program partially mitigates, but does not eliminate, MCOs' financial incentives to avoid substance abusers.
- Further refinement of risk adjustment models may be necessary to ensure equitable care access for vulnerable populations.
- Substance use disorders continue to present financial challenges for MCOs under current risk adjustment systems.
Abstract:
The adequacy of risk adjustment to eliminate incentives for managed care organizations (MCOs) to avoid enrolling costly patients had been questioned. This study explored systematic differences in expenditures between beneficiaries with and without substance disorders assigned to the same capitation rate group under the Maryland Medicaid HealthChoice program. The investigators used fiscal year (FY) 1995 to 1997 Medicaid data to assign beneficiaries to rate cells based on FY 1995 diagnoses and compared the distribution of expenditures for beneficiaries with and without substance disorders, defined using FY 1997 and FY 1995 diagnoses. Results showed that differences in FY 1997 expenditures between beneficiaries with and without FY 1995 substance disorders were negligible. However, MCOs could expect greater average losses and lower average profits on beneficiaries with FY 1997 substance disorders. Thus, the adjusted clinical groups methodology used to adjust capitation payments in the HealthChoice program attenuated, but did not eliminate, financial incentives for MCOs to avoid substance abusers.
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