University of Maryland Center on Aging

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University of Maryland Center on
Aging Medicare/Medicaid Integration Program July
8, 2004
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Capitation Rate Development Process

• AHCCCS pays Program Contractors a monthly amount
  for each member for the purpose of contracting
  with providers to deliver ALTCS services. This
  amount is a capitation rate.
• AHCCCS contracts with independent actuaries to
  develop capitation rates that are actuarially
  sound.
• On an annual basis, the actuaries review various
  data that support rate increases or decreases.
• Based on that review, capitation rates are then
  adjusted for each county.

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Items Considered in Capitation RateDevelopment

• Historical Utilization of Services
• Program Contractor Financial Experience
• National and Local Inflation Trends (including
  AHCCCS FFS rate increases)
• Program Changes
• Percentage of members in different placement
  settings (nursing facilities, HCBS)

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Capitation Rate Components
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Capitation Rate Calculation Example
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Program Contractor to ProviderReimbursement

• Program Contractors establish networks that are
  adequate to meet the service needs of its
  members.
• Contracted rates are negotiated with the
  providers.
• Capitation rate increases from AHCCCS to Program
  Contractors are factored into reimbursement when
  Program Contractors renegotiate their provider
  contracts.