Common use of MCP delegated entities Clause in Contracts

MCP delegated entities. In that MCPs are ultimately responsible for meeting program requirements, the BMHC will not discuss MCP issues with the MCPs’ delegated entities unless the applicable MCP is also participating in the discussion. MCP delegated entities, with the applicable MCP participating, should only communicate with the specific CA assigned to that MCP. 3▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇ w▇▇.▇▇▇▇▇▇▇▇.▇▇▇ November 17, 2006 M▇. ▇▇▇ ▇▇▇▇▇▇ Bureau of Managed Health Care Ohio Department of Job and Family Services 2▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇ Subject: ABD Rate-Setting Methodology & Capitation Rate Certification for the 2007 Contract Period Dear J▇▇: The Ohio Department of Job and Family Services (State) contracted with M▇▇▇▇▇ Government Human Services Consulting (M▇▇▇▇▇) to develop actuarially sound regional capitation rates for the Aged, Blind or Disabled (ABD) managed care population. During calendar year (CY) 2007, the State will roll out statewide ABD mandatory managed care on a regional basis. It is anticipated that managed care will be implemented in all eight regions by May 2007. The specific contract period and effective dates vary by region. A summary of the regional rates for each region is included in Appendix E. This summary will be updated each time the contract period for a new region is determined. This methodology letter outlines the rate-setting process, provides information on the data adjustments and provides a final rate summary. The key components in the rate-setting process are: • Base data development, • Managed care rate development, and • Centers for Medicare and Medicaid Services (CMS) documentation requirements. Each of these components is described further throughout the document and is depicted in the flowchart included as Appendix A. The following ABD individuals are not eligible to enroll in the managed care program. • Children under twenty-one years of age, • Individuals who are dually eligible under both the Medicaid and Medicare programs, • Institutionalized individuals, • Individuals eligible for Medicaid by spending down their income or resources to a level that meets the Medicaid program’s financial eligibility requirements, or • Individuals receiving Medicaid services through a Medicaid Waiver. In addition, for managed care eligible individuals who enter a nursing facility, managed care plans (MCPs) are responsible for nursing facility payment and payment for all covered services until the last day of the second calendar month following the nursing facility admission. Data Sources Since ABD managed care has not yet been implemented in Ohio, FFS data was the only available data source for rate-setting. M▇▇▇▇▇ used FFS claims and eligibility data from State Fiscal Year (SFY) 2003 and from SFY 2004 as the basis for rate development. Once mandatory managed care is implemented and the program becomes stable, M▇▇▇▇▇ will incorporate plan-reported managed care data, including encounter and cost report data. Other sources of information used, as necessary, included State enrollment projections, State financial reports, projected managed care penetration rates and other ad hoc sources. Validation Process M▇▇▇▇▇’▇ validation process included reviewing SFY 2003 and SFY 2004 dollars, utilization and member months. M▇▇▇▇▇ also performed additional reasonability checks to ensure the base data was accurate and complete. FFS Data FFS experience from the base time period of SFY 2003 and SFY 2004 was used as a direct data source for rate-setting. Adjustments were applied to the FFS data to reflect the actuarially equivalent claims experience for the population that will be enrolled in the managed care program. M▇▇▇▇▇ excluded claims and eligibility data for the ineligible populations outlined on the previous page. The State Medicaid Management Information System (MMIS) includes data for FFS paid claims, which may be net or gross of certain factors (e.g., gross adjustments or third party liability (TPL)). As a result of these conditions, it was necessary to make adjustments to the FFS base data as documented in Appendix C and outlined in Appendix A. This section explains how M▇▇▇▇▇ developed the final capitation rates for each of the eight managed care regions, as defined in Appendix B. After the FFS base data was developed and the two years were blended, M▇▇▇▇▇ applied trend, program changes and managed care adjustments to project the program cost into the contract year. Next, the MCP administrative component was applied. Appendix A outlines the managed care rate development process. Appendix D provides more detail behind each of the following adjustments. Blending Multiple Years of Data Prior to blending the two years of FFS data, the base time period experience was trended to a common time period of SFY 2004. M▇▇▇▇▇ applied greater credibility to the most recent year of data to reflect the expectation that the most recent year may be more reflective of future experience and to reflect that fewer adjustments are needed to bring the data to the effective contract period. Managed Care Assumptions for the FFS Data Source In developing managed care savings assumptions, M▇▇▇▇▇ applied generally accepted actuarial principles that reflect the impact of MCP programs on FFS experience. M▇▇▇▇▇ reviewed Ohio’s historical FFS experience and other state Medicaid managed care experience to develop managed care savings assumptions. These assumptions have been applied to the FFS data to derive managed care cost levels. The assumptions are consistent with an economic and efficiently operated Medicaid managed care plan. The managed care savings assumptions vary by region and Category of Service (COS). Specific adjustments were made in this step to reflect the differences between pharmacy contracting for the State and contracting obtained by the MCPs. M▇▇▇▇▇ reviewed information related to discount rates, dispensing fees, and rebates to make these adjustments. The rates are reflective of MCP contracting for these services. In addition, M▇▇▇▇▇ considered the impact of two pharmacy management restrictions on the MCPs when determining pharmacy managed care assumptions. These restrictions include the prohibition to prior authorize any prescriptions during the first ninety days of managed care implementation and the restriction on prior authorization of any atypical antipsychotics (as defined by the State). Prospective Policy Changes CMS also requires that the rate-setting methodology incorporates the impact of any programmatic changes that have taken place, or are anticipated to take place, between the base period (SFY 2004) and the 2007 contract period. The State staff provided M▇▇▇▇▇ with a detailed list of program changes that may have a material impact on the cost, utilization, or demographic structure of the program prior to, or within, the contract period and whose impact was not included within the base period data. Final programmatic changes approved for SFY 2006 and SFY 2007 are reflected in the rates, as appropriate. Please refer to Appendix D for more information on these programmatic changes. Clinical Measures/Incentives As the ABD managed care program matures, the State will require MCPs to meet minimum performance standards for a defined set of clinical measures. The State expects the first full calendar year of the program will be used as a baseline year to determine performance standards and targets. Since the MCPs will not be at risk for this period, the rates have not been adjusted to account for improvement in performance on the clinical measures. Caseload Historically, the State has experienced significant changes in its Medicaid caseload. These shifts in caseload have affected the demographics of the remaining Medicaid population. M▇▇▇▇▇ evaluated these caseload variations to determine if an adjustment was necessary to account for demographic changes. Based on the data provided by the State, M▇▇▇▇▇ determined no adjustments were necessary. Selection Issue M▇▇▇▇▇ made an adjustment for voluntary selection, which accounts for the fact that costs associated with individuals who participate in managed care are generally lower than the remaining FFS population. Therefore, the voluntary selection adjustment adjusts for the risk of only those members participating in managed care. This adjustment is a reduction to paid claims and utilization. Appendix D provides more detail around the vol untary selection adjustment. Non-State Plan Services According to the CMS Final Medicaid Managed Care Rule that was implemented August 13, 2003, non-state plan services may not be included in the base data for rate setting. The FFS data does not include costs for non-state plan services. Therefore, no adjustment was necessary. Prospective Trend Development Trend is an estimate of the change in the overall cost of providing a specific benefit service over a finite period of time. A trend factor is necessary to estimate the expenses of providing health care services in some future year, based on expenses incurred in prior years. Trend was applied by COS to the blended costs for SFY 2004 to project the data forward to the 2007 contract period. M▇▇▇▇▇ integrated the FFS trend analysis with a broader analysis of other trend resources. These resources included health care economic factors (e.g., Consumer Price Index (CPI) and Data Resource, Inc. (DRI)), trends in neighboring states, the State FFS trend expectations and any Ohio market changes. Moreover, the trend component was comprised of both unit cost and utilization components. M▇▇▇▇▇ discussed all trend recommendations with State staff. We reviewed the potential impact of initiatives targeted to slow or otherwise affect the trends in the program. Final trend amounts were determined from the many trend resources and this additional program information. Appendix D provides more information on trend. Administration/Contingencies Since ABD managed care has not yet been implemented, other ABD Medicaid program administration/contingencies allowances and the State’s expectations were factors that were taken into consideration in determining the final administration/contingencies percentages. Appendix D provides further detail on the allowance. Risk Adjustment The FFS data was not categorized by age/sex cohort because the base regional rates will undergo risk adjustment. Risk adjustment takes into account the demographics and diagnoses of the population. The risk adjusted rates (RAR) will be implemented into the ABD managed care program using a generally accepted risk adjustment method to adjust base capitation rates to reflect the different health status of the members enrolled in each MCP’s program. ODJFS and its actuarial consultant will develop each MCP’s risk score to reflect the health status of members enrolled in the contractor’s program within a region. During the initial months of managed care implementation in each region, it is anticipated that ODJFS and its actuaries will calculate regional MCP case mix scores monthly until the enrollment in the region becomes relatively stable. Because enrollment for these months will not be known until after the start of the month, the initial payment will be made assuming the base capitation rates for all MCPs. An adjustment will be made in the subsequent month to reflect the appropriate risk adjustment reimbursement for the prior month. Once regional enrollment has stabilized, it is anticipated that the MCP case mix scores will be updated semi-annually. In the event that the ABD implementation is delayed or a change in methodology is required, the risk assessment schedule may be revised. Base capitation rates were developed for the eight managed care regions, and a rate summary is provided in Appendix E. Upon receiving final contract period information for each region, M▇▇▇▇▇ will update Appendix E accordingly. M▇▇▇▇▇ certifies the attached rates were developed in accordance with generally accepted actuarial practices and principles by actuaries meeting the qualification standards of the American Academy of Actuaries for the populations and services covered under the managed care contract. Rates developed by M▇▇▇▇▇ are actuarial projections of future contingent events. Actual MCP costs will differ from these projections. M▇▇▇▇▇ has developed these rates on behalf of the State to demonstrate compliance with the CMS requirements under 42 CFR 438.6(c) and to demonstrate that rates are in accordance with applicable law and regulations. MCPs are advised that the use of these rates may not be appropriate for their particular circumstance and M▇▇▇▇▇ disclaims any responsibility for the use of these rates by MCPs for any purpose. M▇▇▇▇▇ recommends any MCP considering contracting with the State should analyze its own projected medical expense, administrative expense, and any other premium needs for comparison to these rates before deciding whether to contract with the State. Use of these rates for purposes beyond that stated may not be appropriate. Sincerely, W▇▇▇▇ ▇▇▇▇▇▇, FSA, MAAA A▇▇▇▇▇ ▇▇▇▇▇▇▇, ASA, MAAA Copy: C▇▇▇▇ ▇▇▇▇▇▇, M▇▇▇▇▇ ▇▇▇▇▇▇, T▇▇▇▇ ▇▇▇▇▇▇▇▇ — ODJFS D▇▇▇▇▇ ▇▇▇▇▇, K▇▇▇▇ ▇▇▇▇▇▇ — M▇▇▇▇▇ Please refer to the map below, which defines the counties within each of the eight managed care regions.

MCP delegated entities. In that MCPs are ultimately responsible for meeting program requirements, the BMHC will not discuss MCP issues Appendix D with the MCPs’ delegated entities unless the applicable MCP is also participating in the discussion. MCP delegated entities, with the applicable MCP participating, should only communicate with the specific CA assigned to that MCP. 3▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇ w▇▇▇.▇▇▇▇▇▇▇▇.▇▇▇ November 17October 20, 2006 M▇▇. ▇▇▇ ▇▇▇▇▇▇ State of Ohio Bureau of Managed Health Care Ohio Department of Job and Family Services 2▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇ Subject: ABD Rate-Setting Methodology & Capitation Rate Certification for the 2007 Contract Period Dear J▇▇▇: The Ohio Department of Job and Family Services (State) contracted with M▇▇▇▇▇▇ Government Human Services Consulting (M▇▇▇▇▇▇) to develop actuarially sound regional capitation rates for Calendar Year (CY) 2007 for the Healthy Families and Healthy Start (CFC) managed care populations. ▇▇▇▇▇▇ developed CY 2007 capitation rates for the Aged, Blind or Disabled (ABD) following seven managed care populationregions: Central, ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, and West Central. During calendar year (CY) 2007At this time, ▇▇▇▇▇▇ has not developed rates for the State will roll out statewide ABD mandatory eighth region, Northeast Central, because managed care implementation has been put on hold for this region. Once the implementation date is determined for Northeast Central, a regional basis. It is anticipated that managed care supplemental certification with the Northeast Central rates will be implemented in all eight regions by May 2007provided. The basic rate-setting methodology is similar to the county-specific contract period and effective dates vary by region. A summary of the regional rates for each region is included rate methodology used in Appendix E. This summary will be updated each time the contract period for a new region is determinedprevious years. This methodology letter outlines the rate-setting process, provides information on the data adjustments adjustments, and provides includes a final rate summary. The key components in the CY 2007 rate-setting process are: • Base data development, • Managed care rate development, and • Centers for Medicare and Medicaid Services (CMS) documentation requirements. Each of these components is described further throughout the document and is depicted in the flowchart included as Appendix A. The following ABD individuals are not eligible to enroll in the managed care programOctober 20, 2006 ▇▇. • Children under twenty-one years of age, • Individuals who are dually eligible under both the Medicaid and Medicare programs, • Institutionalized individuals, • Individuals eligible for Medicaid by spending down their income or resources to a level that meets the Medicaid program’s financial eligibility requirements, or • Individuals receiving Medicaid services through a Medicaid Waiver. In addition, for managed care eligible individuals who enter a nursing facility, managed care plans (MCPs) are responsible for nursing facility payment and payment for all covered services until the last day of the second calendar month following the nursing facility admission. Data Sources Since ABD managed care has not yet been implemented in Ohio, FFS data was the only available data source for rate-setting. M▇▇▇ ▇▇▇▇▇▇ used FFS claims Ohio Department of Job and eligibility Family Services The major steps in the development of the base data from State Fiscal Year (SFY) 2003 and from SFY 2004 as the basis for rate developmentare similar to previous years. Once mandatory managed care is implemented and the program becomes stable, M▇▇▇▇▇▇ will incorporate and the State have discussed the available data sources for rate development and the applicability of these data sources for each region. The data sources used for CY 2007 rate setting were: • Ohio historical FFS data, • MCP encounter data, and • MCP financial cost report data. Validation Process As part of the rate-setting process, ▇▇▇▇▇▇ validated each of the data sources that were used to develop rates. The validations included a review of the data to be used in the rate setting process. During the validation process, ▇▇▇▇▇▇ adjusted the data for any data miscodes (e.g., males in the delivery rate cohort) that were found. Data Sources As Ohio’s Medicaid program matures, the rate-setting methodology for those counties within each region with stable managed care programs can focus more on plan-reported managed care data, including encounter data and cost report datareports. For counties within each region without established managed care programs, ▇▇▇▇▇▇ continued to use the FFS data as a direct data source. The data sources used in each region depended on the most credible data sources available within the region. In regions where there are stable managed care programs, managed care data for those counties was combined with the FFS data for those counties without established managed care programs. The process to prepare these three data sources for rate-setting is detailed below. Appendix B includes a chart detailing how each region’s counties have been bucketed into mandatory, Preferred Option, voluntary, or new based on the delivery system in place during the base period. This determined which data sources were used in determining regional CY 2007 rates. Also included in Appendix B is a map that shows the counties included within each region. Other sources of information that were used, as necessary, included State state enrollment projectionsreports, State state financial reports, projected managed care penetration rates rates, information from prior MCP surveys, encounter data issues log, and other ad hoc sources. Validation Process MOctober 20, 2006 ▇▇. ▇▇▇ ▇▇▇▇▇’▇ validation process included reviewing SFY 2003 Ohio Department of Job and SFY 2004 dollars, utilization and member months. M▇▇▇▇▇ also performed additional reasonability checks to ensure the base data was accurate and complete. FFS Data Family Services FFS experience from the base time period of SFY 2003 State Fiscal Year (SFY) 2004 (July 1, 2003-June 30, 2004) and SFY 2004 2005 (July 1, 2004-June 30, 2005) was used as a direct data source for rate-the counties described below: • Those that had a voluntary managed care program during the base time period, and • Those that did not have a managed care program during the base time period. In addition to the SFY 2004 and SFY 2005 data, SFY 2003 data supplemented the FFS base data development as a reasonability measure. For the above counties, the FFS data was considered the most credible data source and, in some cases, was the only data available for rate setting. Adjustments As in previous years, adjustments were applied to the FFS data to reflect the actuarially equivalent claims experience for the population that will be enrolled in the managed care program. M▇▇▇▇▇ excluded claims and eligibility data for the ineligible populations outlined on the previous page. The State Medicaid Management Information System (MMIS) includes data for populations and/or services excluded from managed care and the actual FFS paid claims, which claims may be net or gross of certain factors (e.g., gross adjustments or third party liability (TPL)). As a result of these conditionsresult, it was is necessary to make adjustments to the FFS base data as documented in Appendix C and outlined in Appendix A. MCP encounter experience from the base time period of SFY 2004 and SFY 2005 was used as a direct data source for the counties described below: • Those that had a mandatory managed care program during the base time period, and • Those that had a Preferred Option managed care program during the base time period. For the above counties, the encounter data was considered a credible data source and was used along with the financial cost report data as a direct data source. Although encounter data is generally reflective of the populations and services that are the responsibility of the MCPs, adjustments were applied to the encounter data, as appropriate. Those adjustments, and other considerations, include the following items: • Claims completion factors, October 20, 2006 ▇▇. ▇▇▇ ▇▇▇▇▇▇ Ohio Department of Job and Family Services • Program changes in the historical base time period (SFY 2004-SFY 2005), and • Other actuarially appropriate adjustments, as needed, and according to the State’s direction to reflect such things as incomplete encounter reporting or other known data issues. The adjustments to the encounter data are further documented in Appendix C and outlined in Appendix A. During the rate setting process, shadow pricing was used to assign unit costs to the encounter data. This process was necessary since, during the base period, paid amounts were not a required field for reporting encounters. Additional information on shadow pricing is presented on page six of this letter. MCP-submitted financial cost reports from the base time period CY 2004 and CY 2005 were used as a direct data source for the counties described below: • Those that had a mandatory managed care program during the base time period, and • Those that had a Preferred Option managed care program during the base time period. For all of the above counties, except Mahoning and Trumbull who entered into managed care on October 1, 2005, the cost reports were considered a credible data source. In addition, for counties with voluntary managed care programs during the base time period, the cost reports were taken into consideration when setting rates, although not used as a direct data source. As with the encounter data, the cost report data typically reflects the populations and services that are the responsibility of the MCPs. However, adjustments were applied to the cost report data, as appropriate. Those adjustments, and other considerations, include the following items: • Program changes in the historical base time period (CY 2004-CY 2005), • Incurred claims estimates based on review of claims lag triangles, and • Other actuarially appropriate adjustments, as needed, to reflect such things as incomplete reporting or other known data issues. ▇▇▇▇▇▇ considered the CY 2004 and CY 2005 cost reports both in the development of completion factors for the base time period (CY 2004-CY 2005) and in the development of the final rate. October 20, 2006 ▇▇. ▇▇▇ ▇▇▇▇▇▇ Ohio Department of Job and Family Services The adjustments for the cost report data are further documented in Appendix C and outlined in Appendix A. This section explains how M▇▇▇▇▇▇ developed the final capitation rates for each of paid to contracted MCPs after the eight managed care regions, as defined in Appendix B. After the FFS base data was developed and the two multiple years of data were blendedblended for each data source. First, M▇▇▇▇▇▇ applied trend, program programmatic changes and managed care other adjustments to each data source to project the program cost into the contract year. Next, the MCP various data sources were blended into a single managed care rate and an administrative component was applied. Finally, relational modeling was used to smooth the results within each region. Appendix A outlines the managed care rate development process. Appendix D provides more detail behind each of the following adjustments. Blending Multiple Years of Data As the programs have matured, we have collected multiple years of FFS and managed care data. In order to utilize all available current information, ▇▇▇▇▇▇ combined the yearly data within each data source using a weighted average methodology similar to that used in previous years. Prior to blending the two these years of FFS data, the base time period experience was trended to a common time period of SFY 2004CY 2005. M▇▇▇▇▇▇ applied greater credibility to on the most recent year of data to reflect the expectation that the most recent year may be more reflective of future experience and to reflect that fewer adjustments are needed to bring the data to the effective contract period. Managed Care Assumptions for the FFS Data Source In developing managed care savings assumptions, M▇▇▇▇▇▇ applied generally accepted actuarial principles that reflect the impact of MCP programs on FFS experience. M▇▇▇▇▇▇ reviewed Ohio’s historical FFS experience experience, CY 2004 and CY 2005 cost report data, SFY 2004 and SFY 2005 encounter data, and other state Medicaid managed care experience to develop managed care savings assumptions. These assumptions have been applied to the FFS data to derive managed care cost levels. The assumptions are consistent with an economic and efficiently operated Medicaid managed care plan. The managed care savings assumptions vary by region region, rate cohort and Category category of Service service (COS). Specific adjustments were made in this step to reflect the differences between pharmacy contracting for the State and contracting obtained by the MCPs. M▇▇▇▇▇▇ reviewed information related to discount rates, dispensing fees, rebates, encounter data and rebates MCP cost report data to make these adjustments. The rates are reflective of MCP contracting for these services. In additionOctober 20, M2006 ▇▇. ▇▇▇ ▇▇▇▇▇▇ considered Ohio Department of Job and Family Services Shadow Pricing During our base period, MCPs were not required to report the impact amount paid for a particular service in their encounter submissions. Therefore, ▇▇▇▇▇▇ developed assumed unit costs that were applied to encounter utilization data. For the inpatient category of two pharmacy management restrictions service, unit costs were calculated by region based on the MCPs when determining pharmacy average daily cost for each hospital peer group. Unit costs for other ▇▇▇▇ were calculated based on Ohio Medicaid FFS reimbursement levels. The unit costs were then adjusted by rate cohort to reflect the age/sex unit cost differential apparent in the statewide FFS data. In addition, a unit cost managed care assumptions. These restrictions include assumption was applied in the prohibition to prior authorize any prescriptions during shadow pricing step for the first ninety days of managed care implementation and the restriction on prior authorization of any atypical antipsychotics (as defined by the State)pharmacy COS. Prospective Policy Changes CMS also requires that the rate-setting methodology incorporates the impact of any programmatic changes that have taken place, or are anticipated to take place, between the base period (SFY 2004CY 2005) and the 2007 contract periodperiod (CY 2007). The State staff provided M▇▇▇▇▇▇ with a detailed list of program changes that may have a material impact on the cost, utilization, or demographic structure of the program prior to, or within, the contract period and whose impact was not included within the base period data. In addition, other potential program changes are being discussed in the current legislative session. Final programmatic changes approved for SFY 2006 and SFY 2007 are reflected in the CY 2007 rates, as appropriate. Please refer to Appendix D for more information on these programmatic changes. Clinical Measures/Incentives As Per Appendix M of the ABD managed care program maturesProvider Agreement, the State will require expects the MCPs to meet minimum reach certain performance standards levels for a defined set of selected clinical measures. The State expects ▇▇▇▇▇▇ reviewed the first full calendar year impact of the program will be used as a baseline year to determine performance these standards and targets. Since the MCPs will not be at risk for this period, the rates have not been adjusted to account for improvement in performance incentives on the clinical managed care rates and developed a set of adjustments based upon the State’s expected improvement rates. These utilization targets were built into the capitation rates. The individual measures. /incentives are outlined in Appendix D. Caseload Historically, the State has experienced significant changes in its Medicaid caseload. These shifts in caseload have affected the demographics of the remaining Medicaid population. M▇▇▇▇▇▇ October 20, 2006 ▇▇. ▇▇▇ ▇▇▇▇▇▇ Ohio Department of Job and Family Services evaluated these recent and expected caseload variations to determine if an adjustment was necessary to account for demographic changes. Based on the data provided by the State, M▇▇▇▇▇▇ determined no adjustments were necessarynecessary for either the non-delivery or delivery rate cells. Selection Issue M▇▇▇▇▇ Issues There are two selection adjustments that were made an in the development of the rates. The first is adverse selection, which accounts for the “missing” managed care data and is applied to historical FFS data. This adjustment for is explained in more detail in Appendix C. The second selection adjustment is voluntary selection, which accounts for the fact that costs associated with individuals who elect to participate in managed care are generally lower than the remaining FFS population. Therefore, the voluntary selection adjustment adjusts for the risk of only those members participating in selecting managed care. This adjustment is a reduction Both selection adjustments are reductions to paid claims and utilizationutilization for non-delivery data. Appendix D provides more detail around the vol untary voluntary selection adjustment. Non-State Plan Services According to the CMS Final Medicaid Managed Care Rule that was implemented August 13, 2003, non-state plan services may not be included in the base data for rate rate-setting. The FFS CY 2004 and 2005 cost reports contain information from the MCPs that was used to adjust the base data does not include costs for non-state plan servicesservices reported in the cost reports and the encounter data. Therefore, no adjustment was necessaryPlease refer to Appendix D for more information concerning this adjustment. Prospective Trend Development Trend is an estimate of the change in the overall cost of providing a specific benefit service over a finite period of time. A trend factor is necessary to estimate the expenses of providing health care services in some future year, based on expenses incurred in prior years. Trend was applied by COS to the blended base data costs for SFY 2004 CY 2005 to project the data forward to the CY 2007 contract period. MCost report data was reviewed for overall per member per month (PMPM) trend levels while the FFS data continued to be a primary source in projecting trend. Because of its role in the rate-setting process, the encounter data was available to study utilization trend drivers. ▇▇▇▇▇▇ integrated the FFS specific data sources’ trend analysis with a broader analysis of other trend resources. These resources included health care economic factors (e.g., as Consumer Price Index October 20, 2006 ▇▇. ▇▇▇ ▇▇▇▇▇▇ Ohio Department of Job and Family Services (CPI) and Data Resource, Resource Inc. (DRI)), trends in neighboring states, the State FFS trend expectations and any Ohio market changes. Moreover, the trend component was comprised of both unit cost and utilization components. MAs in the past, ▇▇▇▇▇▇ discussed all trend recommendations with State staffthe State. We reviewed the potential impact of initiatives targeted to slow or otherwise affect the trends in the program. Final trend amounts were determined from the many trend resources and this additional program information. Appendix D provides more information on trend. Administration/Contingencies Since ABD managed care has not yet been implemented, other ABD Medicaid program administration/contingencies allowances and the State’s expectations were factors that were taken into consideration in determining the final administration/contingencies percentages. Appendix D provides further detail on the allowance. Risk Adjustment The FFS data was not categorized by age/sex cohort because the base regional rates will undergo risk adjustment. Risk adjustment takes into account the demographics and diagnoses of the population. The risk adjusted rates (RAR) will be implemented into the ABD managed care program using a generally accepted risk adjustment method to adjust base capitation rates to reflect the different health status of the members enrolled in each MCP’s program. ODJFS and its actuarial consultant will develop each MCP’s risk score to reflect the health status of members enrolled in the contractor’s program within a region. During the initial months of managed care implementation in each region, it is anticipated that ODJFS and its actuaries will calculate regional MCP case mix scores monthly until the enrollment in the region becomes relatively stable. Because enrollment for these months will not be known until after the start of the month, the initial payment will be made assuming the base capitation rates for all MCPs. An adjustment will be made in the subsequent month to reflect the appropriate risk adjustment reimbursement for the prior month. Once regional enrollment has stabilized, it is anticipated that the MCP case mix scores will be updated semi-annually. In the event that the ABD implementation is delayed or a change in methodology is required, the risk assessment schedule may be revised. Base capitation rates were developed for the eight managed care regions, and a rate summary is provided in Appendix E. Upon receiving final contract period information for each region, M▇▇▇▇▇ will update Appendix E accordingly. M▇▇▇▇▇ certifies the attached rates were developed in accordance with generally accepted actuarial practices and principles by actuaries meeting the qualification standards of the American Academy of Actuaries for the populations and services covered under the managed care contract. Rates developed by M▇▇▇▇▇ are actuarial projections of future contingent events. Actual MCP costs will differ from these projections. M▇▇▇▇▇ has developed these rates on behalf of the State to demonstrate compliance with the CMS requirements under 42 CFR 438.6(c) and to demonstrate that rates are in accordance with applicable law and regulations. MCPs are advised that the use of these rates may not be appropriate for their particular circumstance and M▇▇▇▇▇ disclaims any responsibility for the use of these rates by MCPs for any purpose. M▇▇▇▇▇ recommends any MCP considering contracting with the State should analyze its own projected medical expense, administrative expense, and any other premium needs for comparison to these rates before deciding whether to contract with the State. Use of these rates for purposes beyond that stated may not be appropriate. Sincerely, W▇▇▇▇ ▇▇▇▇▇▇, FSA, MAAA A▇▇▇▇▇ ▇▇▇▇▇▇▇, ASA, MAAA Copy: C▇▇▇▇ ▇▇▇▇▇▇, M▇▇▇▇▇ ▇▇▇▇▇▇, T▇▇▇▇ ▇▇▇▇▇▇▇▇ — ODJFS D▇▇▇▇▇ ▇▇▇▇▇, K▇▇▇▇ ▇▇▇▇▇▇ — M▇▇▇▇▇ Please refer to the map below, which defines the counties within each of the eight managed care regions.