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DataWatch

Medicaid Managed Care Payment Methods And Capitation Rates In 2001

Abstract

 
We present results from a survey of Medicaid managed care payment methods and rates in 2001 for AFDC/TANF and poverty-related Medicaid populations, updating a similar survey of 1998 rates. Rates were adjusted for differences in age-sex groupings, maternity payments, and service carve-outs. A twofold variation in Medicaid capitation rates remains, although there was a change in the composition of states at the top and bottom. The data also show that the growth in Medicaid capitation rates between 1998 and 2001 averaged 18 percent, considerably more than the increase in Medicare+Choice rates.

We conducted a survey of Medicaid managed care payment methods and capitation rates in 1998.⁴ Information was collected on how states set rates and how they made adjustments for differences in age and sex, treatment of maternity expenses, and benefits. We made adjustments for these and other factors to allow for comparisons of rates across states. Finally, we computed adjusted rates for each state, which allowed state policymakers and other interested parties to understand how Medicaid programs were paying managed care plans across the states. The results showed a twofold variation in rates, with the highest rates in Connecticut and Massachusetts and the lowest in California.

This paper updates the earlier study to January 2001. We describe how states set rates; what adjustments are made for age, sex, and maternity; risk factors such as HIV/AIDS; whether states make regional adjustments; and which services are carved out from the benefit package. We next describe the procedures we used in making adjustments for all of these factors—the same set of adjustments we used in 1998. We conclude by providing data on the levels of rates being used in the responding states.

Background. States have adopted Medicaid managed care both to contain costs and to improve access to care. There are two broad kinds of managed care: primary care case management (PCCM) programs and capitated HMOs. States have moved toward the latter as their preferred strategy. In general, they believe that HMOs are more effective at controlling costs and also help achieve budget predictability. Many states began with voluntary Medicaid managed care (MMC) plans but have moved toward mandatory arrangements. However, states frequently maintain voluntary MMC for some vulnerable populations and, increasingly, PCCM models in some rural areas.⁵

The increased enrollment in Medicaid managed care in a substantial number of states, together with declines in others, and the evidence on the reduced number of plans in many states indicate that Medicaid managed care is surviving but struggling. Many states now have fewer commercial plans and increasingly rely on Medicaid-only plans. In this environment states still need to pay these plans adequately because Medicaid is such an important source of the revenues for their providers. Thus, rate adequacy is important both because many states are still attempting to retain commercial plans in Medicaid managed care and because of safety-net providers’ dependence on Medicaid revenues.

Survey Design

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We mailed surveys to Medicaid directors in all fifty states and the District of Columbia and asked states with capitated HMO programs to respond. The survey was designed to elicit information that was comparable to the 1998 survey and not available from secondary sources. The questions applied to only capitated HMO programs for Aid to Families with Dependent Children/Temporary Assistance for Needy Families (AFDC/TANF) and poverty-related eligibility groups: low-income unemployed parents, poverty-related children, and poverty-related pregnant women. We did not include State Children’s Health Insurance Program (SCHIP) enrollees, the elderly and disabled, and the medically needy. The population covered represents the majority of Medicaid managed care caseloads, as relatively few states require participation in fully capitated Medicaid managed care for elderly and disabled population.

The survey asked questions about rate-setting methods, adjustments for disproportionate-share hospital (DSH) payments and graduate medical education (GME) payments, add-on payments and adjustments for maternity care and deliveries, and services carved out from capitation. We also asked how states adjusted for safety-net providers, high-risk cases, and administrative savings and about rate-updating processes and methods. States also were asked to provide capitation rates or average accepted bids that were effective in January 2001 and per member per month equivalent values for carved-out services.

Of the possible thirty-nine states (including the District of Columbia) with capitated MMC, thirty-six responded with information on payment methods and rates. Nebraska, Oregon, and Tennessee declined to respond. (In 1998 forty-one states responded, but only thirty-six provided data on rates.) The participating states accounted for approximately 87 percent of the nation’s Medicaid managed care beneficiaries enrolled in capitated programs in 2001.

Administrative Pricing, Negotiation, And Competitive Bidding

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States use three approaches to establish rates. About half (nineteen) of the thirty-six responding states used some form of administrative pricing. Essentially, the states set rates that plans can accept or not accept in deciding upon participation. This is similar to the approach Medicaid uses in paying physicians and other providers. Of course, managed care plans must also meet a variety of other standards in order to participate. These states typically use data from their fee-for-service (FFS) experience to establish rates, making adjustments to reflect the expected health status of HMO enrollees, cost containment goals, and other objectives.

Seven states negotiate with plans individually, while ten use some form of competitive bidding. In most cases, these systems are never purely rate setting, negotiation, or bidding. Even the administered rate-setting states often involve some negotiation with plans. States that negotiate or use competitive bidding also use FFS data as a basis of establishing an acceptable rate range. States that use competitive bidding often find that negotiations are necessary to arrive at acceptable rates.

Several states have moved away from competitive bidding, seemingly for two reasons: (1) The administrative burden associated with competitive bidding is thought to be too great; and (2) rates developed through competitive bidding have been too frequently disputed and subjected to political pressures and are often subsequently adjusted, sometimes substantially. Of the states that said they had competitive bidding in 1998, Arizona, District of Columbia, Hawaii, Indiana, Michigan, Missouri, New Mexico, Oklahoma, and Washington all continue to set rates based on bidding. However, Illinois, New York, Pennsylvania, Rhode Island, and Texas moved to either an administrative rate-setting system or to negotiations. Of the states that responded to our previous survey, New Hampshire is the only state reporting that it has moved to competitive bidding.

Capitation Rate Adjustments

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There were extraordinary variations in the capitation rate data that states originally submitted to us, reflecting the differences in the ways states established rates. A direct comparison of these data across states would not be meaningful. Here we describe the kinds of adjustments that states make to address a variety of differences in expected health care costs.

Age, sex, and region. Virtually all states adjust for age and sex; more than 70 percent make regional adjustments.⁶ Hawaii, Kentucky, New Hampshire, and Pennsylvania have the simplest demographic adjustments. Hawaii has one rate per region (island), Kentucky has two statewide rates (one for AFDC/TANF recipients and the second for poverty-related groups), and New Hampshire has two statewide rates (one for people under age nineteen and the second for people age nineteen and older). At the other extreme, Iowa has 108 rate cells: sixteen age/sex groupings and six regions; Kansas has fifteen age/sex cells across six regions.

Health status. Six of the thirty-six states reported risk-adjusted Medicaid payment systems based on health status, up from two in our 1998 survey. Colorado relies on a disability payment system (DPS), which identifies and groups diagnoses that are chronic in nature and are associated with higher future costs.⁷ Maryland has implemented a risk-adjustment system based on the Adjusted Clinical Groups (ACG) diagnostic classification systems developed by the Johns Hopkins University to risk-adjust demographic rate cells.⁸ Delaware and Utah report using the Chronic Illness and Disability Payment System to adjust rates. Washington and Minnesota also indicated that they were initiating risk adjustment for some of their beneficiaries. A seventh state, Michigan, reported beginning risk adjustment for the disabled.

HIV/AIDS. Some states also adjust rates for patients with HIV/AIDS, but most do not. Some people with HIV/AIDS are eligible for Medicaid as disabled persons, and the survey was not intended to cover them. But many continue to work and thus do not qualify for Supplemental Security Income (SSI) and remain on Medicaid as AFDC/TANF eligibles. A few states, such as New York, report moving these patients out of managed care and paying for their services using FFS. Many states that did not report establishing separate rates indicated that they had carved out HIV/AIDS drugs or all pharmacy costs. Among the specific arrangements for HIV/AIDS patients, Arizona makes a $525 supplemental payment for members receiving HIV/AIDS drugs each month. Maryland establishes separate rates for HIV/AIDS enrollees. Michigan provides additional funds for plans serving such patients. New Jersey makes separate capitation rates for them and pays separately for the cost of protease inhibitors. Wisconsin pays the actual cost of care for HIV/AIDS patients, including pharmacy costs.

Maternity care. Twenty-eight states make separate adjustments for maternity care.⁹ The other states presumably account for the expected cost of maternity care in the rates for women in childbearing years. Twenty-one make direct payments to health plans for maternity expenses in addition to paying regular capitation rates. These payments are typically used to reimburse plans for prenatal, delivery, and postpartum costs. New Mexico pays separate rates for pregnant women meeting the poverty-related eligibility standards and for AFDC/TANF pregnant women. Eleven states pay separate rates for poverty-related pregnant women only, and eight states pay higher rates for infants and children under age one, which are expected to compensate plans for birth-related expenses.

Carve-outs. States also address the impact of high-cost cases by carving out certain services in their capitated arrangements. This allows states to pay for these services separately, on either a capitated or FFS basis. Carve-outs also limit the exposure of the plans from the cost associated with an unusually large number of high-cost enrollees and allow states to avoid interagency or intergovernmental disputes. States carve out many kinds of services, such as mental health and substance abuse services, dental care, pharmacy, and organ transplants. The use of carve-outs increased between 1998 and 2001. For example, of the states responding to the 2001 survey, 72 percent reported carving out mental health services, 61 percent substance abuse, 67 percent dental care, and 44 percent pharmacy.¹⁰ Corresponding percentages in 1998 were 58 percent for mental health services, 50 percent for substance abuse, 59 percent for dental care, and 29 percent for pharmacy care.

Most of the states that carve out mental health carve it out completely, while others carve out all services beyond a certain number of visits or inpatient days. For example, New York covers mental health and substance abuse services up to thirty days combined for inpatient services, twenty visits for outpatient care, and sixty visits for substance abuse. Any service use in excess of these limits is paid by the plan, which is in turn reimbursed by the state under the state’s stop-loss program. As for mental health, most states that carve out substance abuse services do so completely, while some carve out all services beyond certain limits.

Twenty-four states carve out dental services. Most carve out all services, but some include selected services within their rates. For example, Colorado and West Virginia require plans to cover emergency dental services only; the rest are carved out. Massachusetts requires plans to cover emergency dental care and oral surgery performed by a physician.

Sixteen states carve out pharmacy services. Nine carve out all pharmacy services; others such as California and Missouri carve out most HIV/AIDS drugs. Michigan carves out drugs related to behavioral health.

DSH payments. Most states exclude DSH payments from Medicaid capitation rates, in part because hospitals have claimed that HMOs do not pass through DSH payments in the form of higher rates. The 1997 Balanced Budget Act (BBA) included provisions that require states to make Medicaid DSH payments directly to hospitals rather than to its managed care entities, except for payment arrangements in effect on 1 July 1997. Six states (Hawaii, Illinois, Minnesota, New York, Washington, and Wisconsin) reported including DSH payments in capitation rates.

GME payments. Most states exclude GME payments from their capitation rates; only eight states reported including them (Indiana, Kentucky, Massachusetts, Minnesota, New Jersey, Ohio, Washington, and Wisconsin).

Reinsurance. Managed care plans in all states can in theory purchase reinsurance in the private market using funds available through their capitation payments. But some states offer to provide reinsurance directly. Typically, the actuarial value of the reinsurance is carved out of the capitation payments. In Arizona, once a plan meets an annual deductible, the state reimburses the plan at 75 percent of the costs above the deductible. The state will pay 85 percent of the cost in the case of transplants and hemophilia after the deductible. New York offers reinsurance in which the plan pays all costs for care up to $50,000 for a person’s inpatient care per year. The plans then pay 20 percent (and the state 80 percent) between $50,000 and $350,000 and nothing beyond that.

Rate Standardization Methodology

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To compare capitation rates across states, we made adjustments to account for the variations in each area mentioned above. These adjustments do not include changes to rates due to an initiation of new contracts, presence of or variation in stop-loss or reinsurance arrangements, unreported differences in carved-out services across states, and selection bias under voluntary capitated programs. Once the adjustments were made to the state-submitted capitation rates, the following set of standardized rates were calculated for each state: (1) infants up to 1 year old; (2) males and females ages 1–13; (3) females ages 14–34; (4) males ages 14–44; (5) females ages 35–44; and (6) males and females ages 45–64.

The basic idea behind the rate standardization is as follows. We first disaggregate state-submitted rate information by each year of age, sex, and region for each state. These data are used to aggregate state-submitted rate information into our six groups. We then create blended rates for states with separate capitation rates for AFDC/TANF and poverty-related women or children, standardize treatment of maternity care costs across states—particularly lump-sum payments for delivery expenses—and reduce rates by estimated DSH or GME dollar amounts, or both, for states that included DSH or GME payments, or both, in their capitation rates. We then use 1990 U.S. census data on the population below 200 percent of the federal poverty level as weights to aggregate across age, sex, and region to calculate statewide rates for each of our six groups.¹¹ Finally, to adjust for differences in carve-outs (and benefit packages, if applicable), we added the per member per month–equivalent amounts of the carved-out services to the standardized rates, so that the carve-out-adjusted rates represented capitation rates for comparable benefit packages. Because of data constraints, estimates were limited to six service categories: mental health, substance abuse, dental care, vision care, prescription drugs, and organ transplants. The remaining services that states sometimes carve out are generally minor in terms of expenditures and should not have sizable effects on our final capitation rates.¹²

Payment Rates

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Following these various adjustments, the results show that the highest payment rates in 2001 were for newborns and the lowest for children ages 1–13. Recall that we attempted to exclude the cost of childbirth from the newborn rates. Although the adjustment was inevitably imperfect, the result was an average capitation rate of $251 for newborns. The average rate for children ages 1–14 was $93. For females in the prime childbearing years (ages 14–34), the average rate, after adjustment for the various ways in which states treat maternity expenses, was $219. The greatest variation among states was among newborns (tenfold) and the least, among females ages 14–34 (threefold).

We compute the statewide averages in two ways. The first uses population weights based on the actual distribution by age and sex of each state’s Medicaid population (AFDC/TANF and poverty-related groups), as shown on the 2000–2001 Current Population Survey (CPS). The second uses national weights, thus eliminating any differences in the statewide average that would be caused by the different composition of the state’s Medicaid populations. Exhibit 1 shows that there is slightly more than a twofold variation in aggregate statewide Medicaid capitation rates. (This is somewhat less than the variation in Medicaid acute care spending for adults and children, which varies by a factor of almost three.)¹³ Using national weights, the states with the highest rates are the District of Columbia, Kentucky, Minnesota, New Mexico, North Carolina, and North Dakota. States with the lowest rates are Florida, Kansas, Michigan, Oklahoma, and Texas.

Exhibit 1 also provides data on the within-state variation in rates for those states that establish rates for substate areas. We found that twenty-two states had substate rates, ranging from six states (Colorado, Delaware, Illinois, Maryland, Nevada, and Pennsylvania) that had two regions to two (California and Washington) that had twelve and two (Ohio and Wisconsin) that had fourteen. In some cases, the variation was relatively large (for example, 36 percent in Connecticut, 30 percent in Maryland, and 28 percent in Texas). At the other extreme, there was only a 1 percent variation between the two regions in Colorado and less than 1 percent in Illinois and Nevada.

It is important to be able to compare Medicaid rates not only among states but also with some other benchmarks. For example, it would be useful to know whether these rates are low relative to rates available to commercial managed care plans. If one of the objectives of Medicaid managed care is to increase the number of plans willing to participate, then the level of Medicaid rates relative to the private market is important. Unfortunately, such data are not available in any useful way. There is no way of knowing whether benefit packages and covered populations are comparable. Neither are Medicaid FFS data available to compare with capitation rates. The most recent data on Medicaid FFS acute care spending are for 1998 and do not allow us to examine FFS spending for the same populations (AFDC/TANF and poverty-related groups) for which we have capitation-rate data.

We can make useful comparisons by using Medicare data, under the assumption that although Medicare expenditures are clearly higher than for a Medicaid or private nonelderly population, they should be generally reflective of the relative variations in FFS spending among states. If the variation in Medicare rates is highly correlated with the variation in private-sector rates, it will be indicative of the relative adequacy of Medicaid rates compared with commercial rates. Prior to the BBA, Medicare rates were based on county-level FFS expenditures. Since the BBA, there has been a 2 percent limit (in most years) on growth in rates in high-cost counties and a floor in low-cost counties. Thus, this is not as clear a comparison as one would like, but it is probably the best available. To make these comparisons, we used the county-level Medicare adjusted average per capita costs, or AAPCC. We used weights only for those counties for which states provided us Medicaid rates (that is, only those counties with fully capitated Medicaid managed care).

The results are shown in Exhibit 2. Column 1 provides the state-weighted MMC rates shown in Exhibit 1. Column 2 provides the same data in the form of index numbers calculated by taking the ratio of the statewide MMC rate to the fiftieth percentile. Thus, Arizona has a ratio of 0.87, indicating that its Medicaid rates are 13 percent below the national median rate. The Medicare rates shown in column 3 reflect differences in the demographic composition of the counties’ Medicare populations as well as in spending for the FFS population. The Medicare rates in all cases are, not surprisingly, higher than the Medicaid capitation rates. Column 4 provides a set of index numbers again comparing each state’s average Medicare rates with the fiftieth percentile of Medicare rates.

The results show a very low correlation between Medicaid and Medicare rates. The underlying assumption is that the Medicare rates generally vary with costs in the market. States whose Medicaid rates are in line with the market would be expected to have relative indices close to 1.00 (column 5). States that have values above 1.10 could be thought of as having high Medicaid rates and those below 0.90 as having low Medicaid rates. For example, Connecticut, D.C., Maryland, Massachusetts, Ohio, and Rhode Island all have Medicaid and Medicare rates that are above the national median—thus, high rates but high-cost markets. On the other hand, Colorado, Kansas, South Carolina, Utah, and Wisconsin all have low rates but also low-cost markets. Iowa, Minnesota, New Hampshire, North Carolina, and Virginia each have Medicaid rates above the median but Medicare rates below the median; clearly, Medicaid rates would appear relatively high in these states. States that have Medicaid below the median but Medicare rates that are above may face issues of rate adequacy; these are Arizona, California, Florida, Illinois, Michigan, New Jersey, New York, Nevada, Pennsylvania, and Texas.

Exhibit 3 provides data for both 1998 and 2001, using the same CPS data to weight rates across the six population groups and across regions.¹⁴ We used the same weights so that changes in covered populations would not distort the comparisons. We provide similar data on changes in the Medicare rates for each state using only the counties that have Medicaid managed care. Again, we use the census weights to aggregate the Medicare rates across counties.

Medicare rate increases averaged about 10 percent over the period, roughly half the rate of increase of Medicaid rates. This low rate of growth is related to the controls in the BBA on FFS spending and somewhat to the change in the payment structure for Medicare+Choice (M+C) plans. Twenty-one of the states for which we have data in both years had Medicaid rate increases that exceeded those in Medicare rates. Another point of comparison is the increase in Medicare spending per enrollee for M+C enrollees, which provides an estimate of growth in Medicare managed care spending (not limited to counties with Medicaid managed care). Data computed by the Center for Studying Health System Change (HSC) show that M+C spending increased by 15.1 percent between 1998 and 2001.¹⁵

While Medicaid rates grew faster than Medicare rates, they did not grow as fast as commercial premiums. Data from annual employer surveys, while not adjusted for changes in population characteristics or benefits, show a 26 percent increase in rates over the same period.¹⁶ Analysis of the HSC data, limiting the estimates to firms with more than 200 workers, revealed an increase of 23.7 percent.¹⁷

Conclusion

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Considerable variation remains in how states set rates. Nineteen of the thirty-six responding states continued to simply establish rates that are available to any plan meeting state standards and willing to participate. Seven other states negotiated rates, and ten states used competitive bidding (down from fourteen in 1998).

There was noticeable movement toward sophisticated risk-adjustment payment systems using health status measures in our states between 1998 and 2001. Colorado and Maryland continued with the systems they had in 1998, while Delaware, Minnesota, Utah, and Washington initiated new systems. As we discussed, plans can adjust for risk in many other ways.

The results on capitation rates show a twofold variation among states, for several reasons. First, capitation rates generally reflected existing FFS spending. Since this varies considerably, it has translated into variation in Medicaid rates. Some states have attempted to control FFS spending to minimize costs, while others have been more generous. Some states are also limited by the upper payment limit, which constrains capitation rates to be no greater than a state’s FFS payments for comparable populations. If states have low FFS payments, then it is difficult for them to increase capitation rates regardless of their objectives.

Other factors are also important. For example, if a state has relatively strict eligibility criteria or if enrollment is difficult, it could lead to adverse selection (less healthy beneficiaries). As a result, use and spending will be higher, which will affect the FFS base on which the capitation rates are established. States with a mix of PCCM programs and HMOs also may find that there is favorable selection into the HMOs and adjust rates downward to compensate. In some states, Medicaid managed care is predominantly in urban areas. Such states tend to have higher rates than do states in which enrollment is distributed throughout the state.

Factors related to plans’ participation. The adequacy of Medicaid managed care rates is a major issue to states, plans, and beneficiaries. We hope that these data provide information that will allow observers to be better informed on the issue. But the results by themselves do not answer the question of rate adequacy as it relates to plan participation. The reasons for the entry and exit of plans are complex. There seems little doubt that the level of rates, as well as the way states adjust for risk, will affect managed care plans’ willingness to serve the Medicaid clientele. Clearly, a number of other factors matter as well.

The first factor is the history of managed care in the state. In a state that has many plans and a highly competitive commercial market, more plans will likely be willing to participate in Medicaid at a given level of rates, all else being equal. On the other hand, if managed care is relatively new and there is relatively little competition, rates would have to be higher to attract a sufficient number of plans.

Second, the adequacy of rates depends on the plans’ ability and willingness to adapt to the product being purchased by the state. The cost of health care is not simply exogenous. Managed care plans have some flexibility in adapting the product to serve the Medicaid population, specifically in the number of providers in a network, utilization controls, and provider payment rates. The willingness to adapt the product may be limited by concerns about how the plan will be viewed in the broader commercial and Medicare markets or that it will be identified as a "Medicaid plan." A plan obtaining the reputation for providing limited access in the Medicaid market may be tarnished in its ability to compete elsewhere.

Third, rate adequacy will be affected by the amount of excess provider capacity in a state. Plans that can take advantage of an oversupply of doctors and hospitals and negotiate lower provider payment rates will be more likely to accept lower capitation rates from the state. In states where these conditions do not exist, plans will not be able to negotiate low provider payment rates, and capitation rates will have to be higher to allow plans to cover those costs.

A fourth factor is the degree of Medicaid managed care regulation. The more regulation, the higher the cost of doing business as a managed care plan. Rates will have to be higher in "high-regulation" states to attract a sufficient number of plans.

Fifth, other state policies can affect how plans will view the rates. For example, states that make a high level of DSH payments to hospitals will probably be able to pay lower capitation rates. Hospitals will be able to accept lower rates from managed care plans because they are receiving Medicaid revenues from other sources. All of these reasons suggest that the reported level of rates should not be used to suggest that one state’s rates are adequate and another’s are not.

Caveats. In constructing these rates, we had to make a number of estimates and adjustments (such as maternity costs, GME, DSH, and several carve-outs), but we did not adjust for the use of stop-loss arrangements. To the extent that there were errors in these adjustments and key differences in the factors that are not accounted for, the rates we report will be affected. However, we do not expect these problems to be large. An additional caveat is that these rates apply to AFDC/TANF and poverty-related groups only and do not reflect the relative payment that states make to other population groups.

Despite these caveats, the results show, as they did in 1998, more than a twofold variation among states in rates for fairly comparable populations. Even if our various adjustments were perfect, that reality would not be much changed. The key issue is whether the rates that states are paying yield satisfactory levels of plan participation, beneficiary access, and quality of care. If states with low rates have plenty of plans participating and no issues of access or quality, their rates can be presumed to be adequate. But most likely states are getting what they paid for, in terms of the number and kinds of plans participating, in access for beneficiaries, and in quality of care. States with low rates are probably not buying the same product as states with higher rates are buying. The implications of these product differences for access, quality of care, and health are beyond the scope of this study.

Editor's Notes

 
John Holahan is director of the Health Policy Research Center at the Urban Institute in Washington, D.C. Shinobu Suzuki is a research associate there.

This paper was produced with funding from the Robert Wood Johnson Foundation and the Center for Health Care Strategies. All of the conclusions are those of the authors and do not necessarily reflect the views of the funders or the Urban Institute. The authors appreciate the helpful comments of the reviewers.

NOTES

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1. Centers for Medicare and Medicaid Services, "Medicaid Managed Care Enrollment Report, Summary Statistics as of June 30, 1997," and "Medicaid Managed Care Enrollment Report, Summary Statistics as of June 30, 2001," www.cms.gov/medicaid/mcaidsad.asp (15 October 2002).
2. J. Holahan, J.M. Wiener, and A.W. Lutzky, "Health Policy for Low-Income People: States’ Responses to New Challenges," 22 May 2002, www.healthaffairs.org/WebExclusives/Holahan_Web_Excl_052202.htm (15 October 2002); and S. Felt-Lisk, R. Dodge, and M. McHugh, "Trends in Health Plans Serving Medicaid—2000 Data Update" (Washington: Kaiser Commission on Medicaid and the Uninsured, November 2001).
3. T.A. Coughlin, S.K. Long, and J. Holahan, "Commercial Health Plan Participation in Medicaid Managed Care: An Examination of Six Markets," Inquiry (Spring 2001): 22–34.
4. J. Holahan, S. Rangarajan, and M. Schirmer, "Medicaid Managed Care Payment Rates in 1998," Health Affairs (May/June 1999): 217–227.
5. Space precludes us from presenting data on Medicaid managed care penetration in the states. These data are available on request from John Holahan, jholahan{at}ui.urban.org.
6. J. Holahan and S. Suzuki, "Medicaid Managed Care Payment Methods and Capitation Rates in 2001: Results of a New National Survey" (Working Paper, Urban Institute, 2002).
7. R. Kronick et al., "Diagnostic Risk adjustment For Medicaid: The Disability Payment System," Health Care Financing Review (Spring 1996): 7–33.
8. Johns Hopkins Bloomberg School of Public Health, Health Services Research and Development Center, "The Johns Hopkins University ACG Case Mix Adjustment System—Documentation for PC-DOS and UNIX Version 4.1," 1998, www.acg.jhsph.edu (15 October 2002).
9. Holahan and Suzuki, "Medicaid Managed Care Payment Methods."
10. Ibid.
11. We used a three-year average of Current Population Survey (1997–1999) data for all adjustments that were made prior to aggregating across age, sex, and region—for example, to calculate separate weights for AFDC/TANF and poverty-related women. Since aggregation required county-level data, we used 1990 U.S. census data to create age/sex-specific population weights by county. The Actuarial Research Corporation (ARC) provided estimates of carve-out dollar amounts by the six age/sex categories and calculated population weights for these groups using 1999 and 2000 (March 2000 and 2001) CPS data. These weights take into account the delinking of Medicaid and AFDC/TANF. We used the population weights calculated by the ARC to aggregate across the six age/sex categories to obtain statewide capitation rates.
12. A more complete description of these adjustments is available in Holahan and Suzuki, "Medicaid Managed Care Payment Methods."
13. Urban Institute estimates from HCFA-2082 data for 1998.
14. Rates for 1998 and 2001 are calculated using the same weights: We used 1990 U.S. census data to aggregate across counties and then used 1999 and 2000 (March 2000 and 2001) CPS data to aggregate across the six age/sex categories.
15. J.M. Grossman, B.C. Strunk, and R.E. Hurley, Reversal of Fortune: Medicare+Choice Collides with Market Forces, Issue Brief no. 52 (Washington: Center for Studying Health System Change, May 2002).
16. Data from "Exhibit 3.3: Increases in Employer Health Insurance Premiums Compared to Increases in Overall Inflation and Workers’ Earnings, 1989–2001," in C. Williams et al., Trends and Indicators in the Changing Health Care Marketplace, 2002, Chartbook (Washington: Henry J. Kaiser Family Foundation, May 2002).
17. Data from "Figure 1: Trends in M+C Spending, Commercial Premiums and Commercial Health Care Costs, 1994–2001," in Grossman et al., Reversal of Fortune.

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