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How the Rates Were Developed

Key Regulation Requirements: .

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How the Rates Were Developed

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    1. How the Rates Were Developed Actuarial Soundness Requirements of the BBA: Section 42 CFR 438.6(c) CMS RO Ratesetting Checklist(s): The BBA Requirements Detail

    2. Key Regulation Requirements:

    3. “Actuarially sound” capitation rates means capitation rates that - have been developed in accordance with generally accepted actuarial principles and practices; are appropriate for the populations to be covered and the services to be furnished under the contract; and

    4. have been certified, as meeting the requirements of the regulation, by actuaries who meet the qualification standards established by the American Academy of Actuaries and follow the practice standards established by the Actuarial Standards Board.

    5. Requirements for actuarially sound rates. In setting actuarially sound capitation rates, the State must apply the following elements, or explain why they are not applicable:

    6. ·        Base utilization and cost data that are derived from the Medicaid population, or if not, are adjusted to make them comparable to the Medicaid population. ·        Adjustments made to smooth data and adjustments to account for factors such as medical trend inflation, incomplete data, MCO, PIHP, or PAHP administration, and utilization;

    7. Rate cells specific to the enrolled population, by-- (A) Eligibility category; (B) Age; (C) Gender; and (D) Locality/region; or (E) Risk adjustments based on diagnosis or health status (if used).

    8. Other payment mechanisms and utilization and cost assumptions that are appropriate for individuals with chronic illness, disability, ongoing health care needs, or catastrophic claims, using risk adjustment, risk sharing, or other appropriate cost-neutral methods.

    9. Documentation. The State must provide the following documentation: ·    The actuarial certification of the capitation rates. ·    An assurance that all payment rates are— (A) Based only upon services covered under the State plan (or costs directly related to providing these services, for example, MCO, PIHP, or PAHP administration).

    10. Provided under the contract to Medicaid-eligible individuals. ·    The State’s projection of expenditures under its previous year’s contract compared to those projected under the proposed contract. An explanation of any incentive arrangements, or stop-loss, reinsurance, or any other risk-sharing methodologies under the contract.

    11. State Develops New Cap Rates Using FY 1998 MMIS FFS Data – The Last Complete Set of State Plan [& Approved 1915(c) Services] Utilization and Cost Data Derived from the Medicaid Population Covered Under the Specialty MH/DD/SA PIHP Contract

    12. Why MI Could Not Continue Using Old Rates or Base New Ones On PHP/CMHSP Encounter Data: CMS Issues with MI’s prior Specialty MH/DD/SA Capitation rates CMS Issues with MI’s Encounter Data

    13. Overview of How Rates were calculated from the FY 98 FFS Base: Start with: a.       Fee-for-service Base Expenditures b.       Fee-for-service Base Enrollment

    14. Add BBA allowable adjustments for incomplete data , trends, administration, utilization, etc.:       IBNR Adjustment (+)       Capital Outlay (+)       Admission Physicals (+)       PT 21 Fee Screen Adjustment (+)       ECT Adjustment (+)       Direct Care Wage Pass Through (+)       Full-year Adjustment for New Services (+)

    15.    PT 69 (AIS/MR) Cost Settlment Adjustment (Mostly +) SSI Deduction for Residents of Former AIS/MRs (-) PHIP to PIHP Transfers (cost neutral) Central Diagnostic Referral (CDR) Adjustment (+) DD Placement Adjustment (Mostly +) 1915(a) Service Adjustment (+)

    16. Managed Care Adjustment (-) Annual Trend Rate (+) PIHP Administration Load (+) [4% for HSW (c) services; 8% for all non-(c)]

    17. Divide base expenditures plus adjustments totals by “eligible” months for statewide [PEPM] cap rates; Divide Individual PIHP PEPMs by Statewide PEPM for geographic factor. And finally,  Split the rates for MH TANF and DAB and SA TANF and DAB between State Plan and (b)(3) using FY 02 Encounter and Sub Element Cost Data.

    18. Questions [Time Permitting] Bill Harrison, WJBHC@AOL.COM Please copy Irene on any follow-up questions or requests for clarification.

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