Milliman hosted a series of live webinars throughout August and September 2018 to cover rate setting. The Medicaid Rate Setting 101 Webinar series is an informational tool and initial training session that covers six main areas of Medicaid topics, focusing on rate setting. The six main topics covered are introductory and regulatory oversight, incorporating quality into the rate-setting process, base data and cost model development, base data/prospective rate adjustments, trend rate development, and non-benefit expenses and risk mitigation. Each presentation is presented by Milliman consultants who are involved with Medicaid on a daily basis and work with multiple states. From these presentations, you will learn about the rate-setting process from data requests through Centers for Medicare and Medicaid Services approval.
1. Intro and regulatory oversight (video not available)
Development of Medicaid managed care capitation rates is based upon regulations that have changed and expanded over time. Although the methodologies utilized by actuaries and state Medicaid agencies to establish these rates can vary, the general process follows a few key steps. This presentation covers the regulatory environment in which Medicaid managed care exists and provides discussion of the best practices used in the rate development process. The regulatory oversight discussion includes various changes in legislation and guidance over time. The process overview covers the timeline and considerations of the key stakeholders. The audience can gain fundamental knowledge of the capitation rate-setting process with additional sessions focusing on greater detail of the rate-setting components.
Download the webinar materials2. Incorporating quality into the rate-setting process
This session discusses the ways actuaries incorporate quality in the capitation rate setting process. Topics include state-directed quality activities, managed care organization (MCO)-directed quality activities, and other items such as value-based purchasing (VBP). Related to state-directed quality activities, this session discusses capitation rate withholds and incentive payments along with how these programs can be measured and applied in capitation rate development. MCO-directed quality activities are discussed in the form of managed care savings opportunities in commonly analyzed areas such as acute services, long-term services and supports, and provider contracting. Other quality initiatives, such as VBP, are discussed with consideration for rate setting under the final Medicaid managed care regulations. This discussion includes consideration for transitioning historical pass-through payments to VBP arrangements.
3. Base data and cost model development
This presentation will provide an in-depth look at how the base experience data is developed for setting managed care capitation rates. The presenters will provide an overview of how they stratify both the enrollees and services covered under managed care. They will then dive into the details of validating the base experience, which is critical in the selection of the base data source(s) used to develop the capitation rates. The presentation will also cover guidance from governing bodies regarding the selection of base data. Lastly, the presenters will walk through the process for improving managed care encounter data, which is the primary data source for developing capitation rates for existing managed care programs.
4. Base data/prospective rate adjustments
This presentation is a review of the base data used to set the capitation rates and how that data is adjusted to reflect program changes and other issues. Program changes primarily focus on policy changes that are implemented either through legislation or the Medicaid program. The presentation will also focus on provider contracting and how that is considered in rate setting. Finally, the presenters consider changes in population from the base period to the rating period.
5. Trend rate development
Trend assumptions are often one of the more discussed or disputed items from the Medicaid managed care health plans. This presentation focuses on the development of trend assumptions used in the projection of healthcare costs in the development of Medicaid managed care capitation rates. First, national and industry benchmarks for trend assumptions are reviewed and then a deeper dive is taken into approaches to develop medical and pharmacy trend assumptions using historical data and state specific considerations. Further, considerations are discussed for reviewing historical trend rates as they are often influenced by many factors, including change in morbidity, changes in fee schedules and other policy-related components, and introduction of new technologies or drugs.
6. Non-benefit expenses and risk mitigation (video not available)
Non-benefit
The non-benefit expense portion of the actuarially sound capitation rates can be a fiercely contended assumption in the rate development process. Ian and Jill presented three main topics related to non-benefit expenses (NBEs). Ian first discussed data collection and benchmarking, including a review of National Association of Insurance Commissioners (NAIC) annual statement NBE reporting, and then Jill discussed rate development considerations. NBE projections for the rate year depend on collecting and determining appropriate historical NBE amounts before applying trend and adjusting for program and other anticipated changes between the experience and rate years. NBE rate projections are subject to actuarial soundness similar to claims expense, and the projected medical loss ratio (MLR) for the rate year includes some NBE components. We ended the formal presentation with the health insurance provider fee, which is a current topic due to recent litigation over state funding.
Risk mitigation
This session discusses the spectrum of risk mitigation mechanisms available to states operating managed care programs, which can be used to protect the state and/or contracted health plans from adverse experience. Topics include risk adjustment, risk mitigation tools designed to protect from deviations in expected overall financial performance, as well as risk mitigation tools that can be used to target specific areas, benefits, or populations of a managed care program. For each mechanism outlined in the session, we discuss the pros and cons of choosing that particular mechanism over another. Each risk mitigation tool has specific strengths and weaknesses, and the best mechanism available will depend on the situation and the goals of the state.