Status of CY 04 MCO Rates

1
Status of CY 04 MCO Rates

• Medicaid Advisory Committee
• September 25, 2003

2
Goals of Rate Setting Process

• Develop rates that accurately reflect the
  relative risk of the population
• Provide adequate funding for MCOs to deliver
  contracted services
• Get the best value for the State Medicaid Program
• Use a data driven approach to resolve issues
• Collaborative process involving MCOs

3
Key Background Statistics

• HealthChoice enrollment 470,000
• Six plans ranging in size from 7,000 to 127,000
  (7th plan began 9/1/2003)
• Four plans now statewide
• Capitation payments in CY 03 will exceed 1.4
  billion (total funds)

4
CY 04 Rate Setting Steps

• Steps similar to prior years
• Create base year data
• Create trends from base year to rate year
• Apply and update risk adjustment

5
Base Year Use of CY 2001 MCO Cost Experience

• Most significant change for CY 04 rate setting
• Fixed percentages implemented for profit (1.5)
  and risk margin (.5) which equal 2 versus 3.7
  in CY 03 as a percentage of medical expenses
• Actual dental costs trended up to over 40
  utilization in the base
• Geo/Dem case mix adjustment implemented with
  updates to the factors every six months
• RAC relative values adjusted to make budget
  neutral

6
Trending Base Year to Rate Year

• Mercer followed similar methodology used in
  previous year
• Trend rates vary by service type and eligibility
  group
• Mercers overall average weighted trend is 7.1
  per year

7
Other Insurance Plans Trends

• Health insurance premiums in the US will increase
  15 this year
• Average US HMO premiums will increase 16 this
  year, and could rise by as much as 24 in 2004
• The Kaiser Family Foundation estimates that, on
  average, states expect Medicaid spending to
  increase 9 in FY 2003.

8
Anticipated Rate Increase

• Overall the expected rate increase from CY 03 to
  CY 04 is 6.3. Due to budgetary constraints, the
  rates were reduced by 1 for FY 2004
• Amount is consistent with Federal and state
  Medicaid increases and is significantly lower
  than commercial rate renewals
• Includes continuation of the statewide bonus
• Individual plan increase will vary based on their
  unique mix

9
Anticipated Budget Impact

• Total rate impact on budget is an increase for CY
  04 of 41 million (general funds)
• Requested FY 04 deficiency for second half of
  year is 21 million (general funds)

10
Plan Participation

• One on one meetings have been conducted with most
  plans. All meetings will be completed by the end
  of the month. Plans who we met with expressed
  their intent to continue to participate in the
  program.

11
Regulations

• Regulations have been submitted for an effective
  date of January 1, 2004.