Richard Conviser, PhD, Miranda Murray, PhD, Christine Lubinski,
Andrea Weddle, MSW, Cindi Grayer, MS
Abstract and Introduction
Many state Medicaid programs have adopted managed care as well as a
variety of other measures to ensure that MCOs caring for high-cost
enrollees can continue to provide quality care and are protected from
financial risk. This article describes several strategies that state
programs have implemented to protect quality HIV/AIDS care. These
strategies include capitated reimbursement, health-based payment
systems, and risk pools. However, cost containment has driven state
Medicaid programs to alter policies that have a direct impact on some or
all groups of Medicaid beneficiaries. State and federal policy makers
must balance the need for fiscal health with the public duty to ensure
that Medicaid beneficiaries receive services that preserve and promote
The cost of providing care to Medicaid recipients with HIV/AIDS
typically exceeds the average cost of providing health care to Medicaid
recipients without HIV/AIDS, even those with disabilities. Many state
Medicaid programs have adopted managed care programs, which have
established a variety of measures to ensure MCOs caring for persons
living with HIV/ AIDS (PLWH) and other high-cost enrollees can continue
to provide care and are protected from financial risk.
In 1999, the Health Resources and Services Administration, through
its HIV/AIDS Bureau's Special Projects of National Significance, funded
a Center for HIV Quality Care. Its mission includes gathering
information on all state Medicaid programs, including their
reimbursement strategies, with a special focus on HIV care; documenting
the changing costs of HIV care in the era of HAART, which began in 1996;
and providing access to information on standards of care for HIV
services. Much of the Center's work can be viewed on its Web site:
The Center for HIV Quality Care has followed the changes and trends
in Medicaid managed care programs that affect significant numbers of
PLWH. These include both cost- containment strategies and expansion
mechanisms used by various states in treating PLWH. Cost-containment
measures that improve access to care have been develop- ed through home
and community-based service (HCBS) waivers, disease management
initiatives, and tar-geted case management programs. In addition,
efforts by some states to expand access to Medicaid coverage in ways
that benefit PLWH in some cases have offered potential financial relief
rather than additional burdens for strained state budgets. Although the
focus of this paper is on the care of HIV-infected patients, the impact
of state Medicaid practices and trends have implications for all
Medicaid beneficiaries with high-cost chronic illnesses.
In the 1990s, many states instituted managed care in their Medicaid
programs. By 1998, more than half of all Medicaid beneficiaries were
enrolled in Medicaid managed care programs.
Full-risk managed care has 2 key features: the use of prepaid capitated
reimbursement rates to participating MCOs and the use of "gatekeeper"
primary care physicians to control beneficiaries' access to services.
In Medicaid managed care programs, capitated reimbursement to MCOs
replaced traditional fee-for-service (FFS) payments. To institute
Medicaid managed care programs, states initially had to obtain waivers
from the Centers for Medicare and Medicaid Services (CMS) because these
programs obligate beneficiaries to use only the providers contracted
with the MCOs in which they are enrolled. This constituted a change from
CMS' "any willing provider" requirement for FFS Medicaid programs.
Congress relaxed the waiver requirement in its 1997 Balanced Budget Act.
Capitation rates for Medicaid managed care programs are typically
determined on the basis of historic FFS health care utilization data,
and the rates paid to MCOs are generally set according to a
beneficiary's eligibility category. To participate in Medicaid, states
must offer coverage to certain categories of people, including children
of low-income families and their single parents through Temporary Aid to
Needy Families (TANF), recipients of Supplemental Security Income (SSI),
low-income seniors, and the blind. Within eligibility categories,
beneficiaries must meet income and asset requirements determined by the
state within federal guidelines. States also have the option of offering
Medicaid coverage to other populations, including the medically needy
and -- if the states apply for special waivers -- the uninsured and/or
uninsurable who would not normally qualify for Medicaid. The capitation
rates assigned to Medicaid eligibility categories are typically adjusted
for enrollees' age, sex, and the region of the state in which they
The second key feature of these managed care plans is the use of
primary care provider gatekeepers. Some states have adopted a blend of
managed care and FFS programs by paying primary care providers a small
monthly fee to treat enrollees whose approved services are reimbursed on
a FFS basis; these programs are known as primary care case management (PCCM).
Both features of managed care programs are intended to provide
incentives for MCOs to deliver cost-effective care to their enrollees.
However, for PLWH and their advocates (including many primary care and
specialist physician providers), the application of managed care methods
by Medicaid programs in the 1990s gave rise to several concerns. These
included whether managed care would give patients appropriate and timely
access to specialists, whether the capitation rates paid to MCOs would
be sufficient to ensure adequate compensation for HIV/AIDS providers,
and whether MCOs would be more inclined to discourage enrollment of
potentially high-cost clients than to develop care programs tailored to
their special needs.
If high-cost clients were distributed relatively uniformly across
MCOs, categorical capitation rate-setting would be equitable. MCOs'
expenditures on high-cost clients would be balanced by their low
expenditures on other patients within the same capitation rate
categories. In practice, however, MCOs with staffs that include skilled
and experienced HIV care providers -- who, according to several
published studies, deliver higher quality care than inexperienced HIV
care providers -- may attract disproportionate shares of enrollees with
HIV/AIDS and thus be subject to adverse financial risk.
The consequence is that the MCOs providing the best HIV care experience
the greatest overall financial liability for enrolling PLWH.
Studies have confirmed that certain MCOs in several states are indeed at
financial risk because they attract large numbers of PLWH among their
Various strategies that states may adopt to protect MCOs against
adverse risk from high enrollment of PLWH, as well as other measures to
assure high-quality care for PLWH enrolled in Medicaid managed care
programs have been explored.
The first such measures took effect in 1997, when Colorado and Maryland
instituted health-based payments to MCOs in their Medicaid programs.
Over the next several years, other states turned to health-based
payments. In 2001, when CMS held a conference involving states that had
instituted some form of health-based payment, 10 states were
HIV/AIDS Care Costs and Categorical Capitation Rates
The financial viability of both MCOs and the providers who contract
with them depends on whether they receive enough money to cover the
costs of care. It is important to estimate the costs of care with a high
degree of accuracy so that third-party payers are able to develop
payment rates that reflect the true cost of delivering care. Currently,
the federal government -- through Medicaid, Medicare, the Department of
Veterans Affairs, and the Ryan White CARE Act -- is the major payer for
care for PLWH. In fact, Medicaid is the single largest payer for direct
medical care for HIV, covering 55% of the adult population at some point
in their illness and 90% of children with HIV infection.
Given the disproportionate effect of the HIV epidemic on marginalized
populations (eg, racial/ethnic minorities, injection drug users, gay men
of color), it is likely that federal and state governments will continue
to be the largest payers for the care of PLWH. As more of these patients
enroll in managed care plans, novel financing mechanisms, such as
risk-adjusted methodologies, need to be developed so that PLWH and their
providers are not discriminated against by health plans. The goal of
this section is to estimate the cost of HIV/AIDS care and to compare
that cost with reimbursement rates for enrollees in Medicaid programs.
Before the availability of HAART, it had been demonstrated that FFS
care costs for Medicaid beneficiaries with AIDS were 6 times as high as
those for other disabled Medicaid beneficiaries.
As a result of the growing use of HAART, HIV care patterns have changed:
inpatient hospitalizations have declined, and spending for
pharmaceuticals and outpatient care has increased.
However, the overall annual costs of HIV care have changed only
slightly. The HIV Cost and Services Utilization Study, a national
probability sample of PLWH receiving care, recorded a decline of less
than 10% in the average monthly cost of care between 1996 and 1998, from
about $1692 to about $1525.
Among the factors responsible for variations in costs for HIV and
AIDS care are differences in regional practice patterns and costs and
the varying needs of people in different stages of illness. An analysis
of paid, federal, fiscal year 2000 Medicaid claims in New York State for
more than 64,000 PLWH showed monthly Medicaid expenditures averaged
$2351, and monthly reimbursement under the state's impending special
needs plan (SNP) for PLWH will be as high as $2932.
Similarly, reimbursement for AIDS care in Maryland in 2002, based on
recent prior service use patterns, was as high as $2809 per month. In
contrast, monthly costs for 700 HIV/ AIDS patients at an Alabama clinic
in 2001 averaged just $1553.
In New York, inpatient care accounted for 39% of paid claims, and
pharmaceuticals accounted for 25%. In Alabama, however, inpatient care
accounted for just 13% of the costs, and medications (both HIV and
non-HIV), for 79%. The Alabama study also showed substantial variations
in monthly costs by stage of illness, ranging from an average of $1157
for PLWH with CD4 cell counts of 350/µL or greater to $1989 for those
with counts between 50 and 200/µL and $3044 for those with counts less
Similarly, a study by the HIV Research Network using 1999 data from 9
sites in 3 regions of the country showed average monthly inpatient costs
varying from $242 for those with CD4 cell counts greater than 500/µL to
$1234 for those with counts less than 50/µL and outpatient costs of $153
and $208, respectively.
Not surprisingly, care costs also depend on the incidence of
AIDS-related illnesses. A Maryland study found that costs of care
increased with the presence of opportunistic infections and other
AIDS-related conditions, with cytomegalovirus retinitis, toxoplasmosis,
and AIDS-related dementia being the most expensive.
Receipt of ancillary and case management services also affects the
cost of care. A Florida study compared Medicaid spending for AIDS HCBS
waiver program participants with traditional Medicaid program
Case management in the waiver program provides participants with drug
regimen counseling, improving compliance and reducing the need for
Consequently, waiver participants have lower inpatient costs.
HIV care costs tend to be far higher than even the highest
categorical capitation rates paid by Medicaid managed care programs.
Data on most states' capitation rates are shown on the Web site of the
Center for HIV Quality Care. An examination of all such rates is beyond
the scope of this paper. In the discussion below, we focus on the rates
in 2 states that have large populations infected with HIV: Florida and
Texas. Neither state has adopted any special reimbursement mechanisms to
protect MCOs against adverse risk.
In Florida, reimbursement to MCOs is based on enrollees' age,
eligibility category, and geographic region. The highest rates are in
Dade County, which includes Miami. As of mid 2001, for persons aged
between 21 and 54 years, capitation rates were $221.12 per month for
TANF enrollees and $663.15 for disabled enrollees. Behavioral health
services are not included in these rates.
In Texas, managed care has been adopted on a region-by-region basis
and is mandatory for most TANF enrollees but voluntary for those with
disabilities, except in Harris County (Houston), where it is mandatory
for all. For SSI beneficiaries without Medicare coverage, the capitation
rate in Harris County in 2002 was $598.55 per month, excluding
prescription drugs, transportation, and tuberculosis clinic services.
For the latter, MCOs refer clients to public health facilities;
prescriptions are filled by pharmacists participating in the state's
Vendor Drug Program and have no limits. Clearly, capitation rates in
both Florida and Texas are substantially lower than the costs of
providing HIV and AIDS care.
One way to protect MCOs against adverse risk is for states to adopt
health-based payment systems (whose components are risk assessment and
risk adjustment). Their purpose is to match the capitation rates paid to
MCOs with the needs of their enrollees, as measured by historic data on
the enrollees' health care utilization. If these systems are instituted
when a state Medicaid program first adopts full-risk managed care, FFS
data are used to assess the relative risks of MCO enrollees and to
determine the capitation rates that will be paid to the MCOs. However,
especially in states that require managed care enrollment, this source
of data quickly dries up, and managed care encounter data have to be
substituted. Often, MCOs are not good at collecting and/or reporting
such data during the first several years of Medicaid managed care
programs; this requirement can therefore pose ad- ministrative
Under health-based payment systems, the MCOs that enroll persons with
the greatest health care needs receive the highest capitation rates.
Three health-based payment systems have been adopted by public (and some
private) payers in the United States: Diagnostic Cost Groups (DCG),
Adjusted Clinical Groups (ACG, formerly known as Ambulatory Care
Groups), and the Disability Payment System (DPS). These systems differ
from one another in their methodologies, but all have the intent of
grouping together all enrollees with similar levels of health care
utilization for reimbursement purposes.
A variant of the DCG method, known as DCG/HCC (Hierarchical Condition
Category), has been adopted by Medicare in response to a congressional
mandate that it initiate use of a health-based payment methodology.
However, in state Medicaid programs, the predominant methods used are
DPS and ACG. The latter has been in use in Maryland since 1997 and
Minnesota since 2000.
DPS was developed for use with disabled Medicaid enrollees. However,
the interest of state programs in providing health-based payments also
for persons enrolled in Medicaid under TANF, few of whom are disabled,
has led to the development of an alternative method -- Chronic Illness
and Disability Payment System (CDPS).
CDPS has supplanted DPS in Colorado (in 2002; DPS was adopted there in
1997), Oregon (in 2001, after DPS was adopted in 1998), and New Jersey
(in 2001, after DPS was adopted in 2000). DPS is still in operation in
Michigan (where it was first adopted in 2000) for children with special
needs only. CDPS has also been adopted in Delaware (2000), Utah (2001),
and Tennessee (2001), as well as in Washington State for nondisabled
populations (2001). Different health-based payment methodologies yield
more accurate payments (ie, closer to the costs of care) for different
categories of Medicaid eligibility and under different scenarios, but
several simulations suggest that CDPS most closely matches payments with
costs over the broadest range of conditions.
Early adopters of global health-based payment systems -- Colorado,
Maryland, New Jersey, Michigan, and Minnesota -- used state-specific
rates. More recent implementers -- Oregon, Pennsylvania, Oklahoma,
Tennessee, and Utah -- have used national weights; Colorado and New
Jersey are considering switching to them. CDPS weights may be
recalibrated based on newer data, and some think that the weights should
be based entirely on managed care utilization patterns rather than on
historic FFS data, because managed care may bring about changes in the
use of services.
The adoption of health-based payment methodologies can greatly affect
the revenue that flows to MCOs participating in a state Medicaid
program, and the prospect of this can instill fear in MCOs. To ease the
initial impact of the transition to such methodologies, several states
have established "risk corridors" to limit the deviation of health-based
payments from historic capitation amounts. In the first years of risk
adjustment in Oregon and Michigan, these corridors were set at 10%; in
Minnesota, they were set at 5%. Another way states can limit MCOs' risk
is to provide stop loss insurance against catastrophic per-enrollee
losses. Maryland initially offered such insurance for per capita
expenditures in excess of $61,000 per annum, but it has since
discontinued the program.
With or without health-based payments, state Medicaid managed care
programs may further protect MCOs against adverse risk by carving out
coverage for certain drugs from capitation rates. Several tests (such as
for viral loads) and drug treatments (such as protease inhibitors) were
introduced for HIV care in the mid 1990s, making it difficult for states
to estimate the financial burden these innovations would impose on MCOs.
Hence, many states elected to reimburse MCOs for these tests and
medications on a FFS basis, over and above capitation payments. Once
states have a better sense of the use and costs of these treatments,
they can include them in capitation rates (as Maryland has done).
The use of risk pools is a strategy that many states routinely employ
to cover the delivery and postnatal costs for new mothers and their
newborns. Tennessee and Pennsylvania both established risk pools to
reimburse MCOs experiencing adverse selection as a result of
disproportionate shares of enrollees with high-cost conditions. The
development of risk pools is administratively less cumbersome for both
states and MCOs than global health-based payment systems, because the
former require MCOs to report encounter data only for enrollees with
high-cost conditions rather than for all enrollees.
To protect MCOs against adverse selection, the risk pools must have
funds sufficient to make up for the cost difference between high-cost
enrollees and typical enrollees in the same Medicaid eligibility
category (eg, TANF or disabled). Pennsylvania did not release
information about the amount of funds in its risk pool, but the funds in
Tennessee's risk pool did not begin to cover the differential between
the cost of HIV care and categorical reimbursement paid to MCOs.
Tennessee abandoned its risk pool when it adopted a global health-based
payment system in 2000, and Pennsylvania will reportedly adopt a
health-based payment system in 2003.
In addition to financial mechanisms to ensure the flow of appropriate
funding to MCOs caring for PLWH, there are several other ways in which
Medicaid programs can improve access to care for this population. These
include optional medically needy programs, waivers to expand Medicaid
coverage to persons with early-stage HIV disease, HCBS waivers, disease
management programs, and ticket-to-work programs that allow those who
work to maintain Medicaid eligibility.
Medically Needy Programs
PLWH in some states can receive Medicaid coverage through an optional
medically needy category. This allows persons who are in eligible
Medicaid coverage categories, such as those with disabilities, but who
exceed income ceilings to qualify for coverage by counting their medical
expenses against their income to "spend down" to a qualifying income
level. Thirty-six states have medically needy programs, and 35 of them
are open to persons with disabilities.
Income limits for these programs vary across the country; a survey of 40
state Medicaid programs found income limits ranging from 15% to 87% of
the federal poverty level (FPL).
In 2000, Medicaid began awarding waivers to states for the purpose of
expanding coverage to PLWH in early stages of HIV. Thus far, such
waivers have been approved in Maine, Massachusetts, and the District of
Columbia. As with all Medicaid waivers, these are required to
demonstrate revenue neutrality over a 5-year period. The first waiver
was awarded to Maine in February 2000, but its implementation was
delayed from October 2000 to July 2002. Program benefits include HAART
and other drugs, office visits, laboratory services, case management,
inpatient care, and mental health and substance abuse services.
Eligibility criteria include a diagnosis of HIV infection and an income
of less than 250% of the FPL. Enrollment under the waiver was initially
capped at 130 persons.
Massachusetts received approval in 2001 for a modification to its
existing waiver in order to expand most Medicaid benefits to PLWH with
incomes of less than 200% of the FPL. For employed persons, the state
pays health insurance premiums to the individual, insurer, or employer;
it also provides wraparound benefits for services not covered under an
employee's health plan.
The Massachusetts program began accepting applications in April 2001 and
during its first year enrolled 700 PLWH. A program was also approved for
implementation in the District of Columbia in September 2002. The
District's program has an income cap of 100% of the FPL and an
enrollment cap of 200 to 400 persons. Some of the savings in the
District's program are to be achieved through the use of the Federal
Supply Schedule to purchase antiretroviral drugs at rates substantially
below AIDS Drug Assistance Program and Medicaid program rates.
Home and Community-Based Services Waivers
Section 1915 (c) of the HCBS waiver programs provide another avenue
for states to expand Medicaid eligibility to targeted populations
requiring intensive use of health services. These waivers permit
Medicaid coverage for services not normally paid for if providing them
prevents hospitalization or long-term care and allows patients to remain
in the community. Services available under HCBS waiver programs may
include case management, homemaker/home health aides, personal care
services, adult day health, rehabilitation, and respite care.
Because the provision of these services theoretically saves hospital
and/or nursing home costs, HCBS waivers also offer states the option of
expanding eligibility to people with incomes of up to 300% of the SSI
payment level, approximately $1639 per month in 2002. Fifteen states
have HCBS programs for PLWH, and these play a critical role in providing
access to services for PLWH in these states.
Disease Management Programs
These initiatives offer state Medicaid programs a potential
cost-containment strategy that may also improve the quality of care. A
number of states are experimenting with such programs for a variety of
disease conditions. In 1999, Florida implemented in its PCCMprogram the
first disease management program specifically designed for Medicaid
beneficiaries with AIDS. The aim is to control unnecessary service
utilization (and associated costs) and improve the quality of care.
Services include patient and provider education, case management and
care coordination, provider and beneficiary profiling, claims analysis,
and chart audits. Nurse care managers check in with providers and
beneficiaries to ensure that patients are receiving the standard of HIV
care, including appropriate drug regimens.
The disease management organization (DMO) is expected to realize a
certain percentage of savings over historical FFS costs for this
population. After this level of savings is achieved, there is a
profit-sharing arrangement between the DMO and the state Medicaid
program. Florida has also implemented Medicaid disease management
programs for asthma, diabetes, and hemophilia.
Two other states have approached disease management in different
ways. With support from the Robert Wood Johnson Foundation, Tennessee
has created a network of Centers of Excellence that share HIV knowledge
and expertise among Medicaid providers at 8 facilities in various parts
of the state, including several rural areas. New York has developed a
SNP for HIV and AIDS whose MCO participants are to receive enhanced
reimbursement rates for HIV/AIDS care, ranging from $255 to $2932.
In turn, MCOs participating in the SNP provide an enhanced level of care
for PLWH. Benefits include clinical coordination and medical case
management in consultation with the enrollee's primary care physician,
utilization management, quality assurance and continuous quality
improvement, nonintensive psychosocial case management, treatment
adherence services, and HIV prevention and risk-reduction education.
The Ticket to Work and Work Incentives Improvement Act (TWWIIA),
passed in 1999, allows states to expand Medicaid eligibility to 2
Persons who would qualify for the SSI program if their earned
income was not counted (known as the basic coverage group).
Persons between the ages of 16 and 64 who (in the absence of
TWWIIA) would lose Medicaid coverage because their condition improves
to the point that they no longer meet disability criteria (known as
the medical improvement group).
If persons choose to participate in the TWWIIA program, states must
cover the basic coverage group and may choose to cover the medical
improvement group. As of late 2002, 22 states had TWWIIA programs, which expanded Medicaid to
individuals with annual incomes ranging from $8860 in several states up
to $75,000 in Connecticut. New York plans to implement a TWWIIA program
in spring 2003.
TWWIIA also has a modestly funded demonstration program that allows
states to apply for funds to expand Medicaid coverage to targeted
populations for whom coverage under Medicaid would delay or prevent the
onset of disability. As part of the demonstration program, Mississippi
and the District of Columbia have received grants to expand Medicaid
eligibility to PLWH before they become disabled with AIDS. Mississippi
proposed to cover 500 PLWH aged between 16 and 64 years, limiting
participants' unearned income to 135% of the FPL and earned income to
150% of the FPL.
The District of Columbia's proposed Medicaid expansion is capped at 500
Medicaid Changes in Response to Tightening State Budgets
As states continue to grapple with strategies to provide health care
to persons with complex disease conditions, they are also working to
contain spiraling costs associated with the Medicaid program, which is
frequently the second-largest item in state budgets. In a survey
sponsored by the Kaiser Commission on Medicaid and the Uninsured,
virtually all states reported having acted to reduce the growth in their
Medicaid program costs.
According to the survey, more than half the states are changing or have
changed prescription drug policies by requiring prior authorization,
developing preferred drug lists, and mandating use of generic drugs. In
addition, a number of states are beginning to implement limits on the
number of prescriptions per month that a Medicaid beneficiary may fill.
States are also limiting or eliminating some optional services,
especially adult dental care, and are implementing or increasing
copayments for a variety of services from pharmacy to doctor visits.
The survey found that 29 states plan to cut or freeze provider
payments in this fiscal year, notwithstanding the fact that low
reimbursement rates already make it difficult to find adequate numbers
of medical providers willing to participate in the program. It may be
some time before the impact of these cost-containment measures is clear,
but it is likely that persons with high-cost illnesses will be most
adversely affected. In addition, copayments are onerous for those
beneficiaries who require a variety of health care services on a regular
basis, causing an accumulation of out-of-pocket costs that will burden
low-income households and may trigger health care rationing as
beneficiaries must choose between prescriptions and physician visits.
Tennessee's Medicaid program provides an example of the sorts of
changes taking place in response to budgetary constraints. TennCare was
a pioneer in 1994 in expanding Medicaid eligibility to uninsured and
uninsurable state residents. However, it is currently back-pedaling from
its earlier attempts to move toward universal health care coverage.
TennCare has begun to restrict eligibility and benefits under a revised
Section 1115 waiver approved by CMS in May 2002; all recipients are
required to reapply for certification. Notification letters were sent in
July 2002 to 235,000 enrollees, and 130,000 of them (most of whom failed
to respond to the letter) were disenrolled at the end of October.
Another 200,000 enrollees (of the 325,000 sent notices in August and
September) could be disenrolled by January 2003. Benefits coverage
changes were implemented in January 2003, with coverage for the
uninsurable (including many PLWH) being reduced from previous levels.
Prescription copayments between $1 and $3 were instituted, physician
visit copays increased from $5 to $10, and the prescription copay cap
was raised to $25 for enrollees with incomes above the FPL. During an
18-month transition period, MCOs are to be freed from medical cost
At the other end of the spectrum is Maryland, which instituted its
Medicaid managed care program, HealthChoice, in 1997. In addition to
adopting health-based payments across the board, Maryland developed
special AIDS reimbursement rates based on historic Medicaid utilization
data. Those rates were $2161 for residents of Baltimore and $1812 for
persons living in the rest of the state. Care for HIV patients was
reimbursed on the basis of the more general ACG health-based mechanism
used for other Medicaid enrollees. That mechanism established 9 tiers or
rate categories for families with children, with monthly reimbursement
rates of $45 to $721, and 9 tiers for persons with disabilities, with
rates of $95 to $1102.2 Those rates did not include payment for HAART,
for which the state paid on a FFS basis.
Since that time, Maryland's reimbursement strategy for HIV and AIDS
care has undergone several changes. The most recent HealthChoice
capitation rates from 2001 to 2003.
One difference from the 1997 rates is that starting in 2001, they
include HAART, which costs between $800 and $1000 per month per
Exclusive of HAART, the costs of care for people with AIDS receiving the
therapies are similar to the 1997 reimbursement rates. Changes in the
reimbursement rates for persons with HIV infection (non-AIDS) suggest
the rates that HealthChoice initially paid for HIV patients were well
below the costs of care. Recognition of this fact has led to the second
major change in Maryland's reimbursement for HIV/AIDS care, namely, the
establishment of separate reimbursement categories for HIV care for both
disabled enrollees and families with children.
Recent HIV capitation rates, particularly for disabled enrollees, are
higher than the highest rates available when Maryland first instituted
HealthChoice. The decrease in HIV capitation rates scheduled to take
place at the beginning of 2003 may reflect changing medical strategies
regarding the appropriate point in HIV illness at which to begin
administering HAART. When these therapies first became available in
1996, the strategy of choice was to use them early in the course of HIV
infection, and almost always when CD4 cell counts dropped below 500/µL.
As a result of the failure of these drugs to eradicate HIV, the limited
times for which they are effective, and their sometimes serious (and
even life-threatening) side effects, physicians are being advised to
delay administration of these therapies in most cases until CD4 cell
counts have dropped to below 350/µL. Maryland has also explored the
possibility of adopting capitation rates for HIV and AIDS that vary with
However, the MCOs participating in the state's Medicaid program found
the prospect of getting accurate encounter data from providers,
including diagnosis codes for comorbidities, to be daunting. Hence, the
state adopted reimbursement rates that do not depend on this
Implications of the HIV Experience for the Care of Other Chronic
In recent years, the federal government has allowed states to
increase the number of persons with health coverage through Medicaid and
the State Children's Health Insurance Program. However, a new federal
waiver program, the Health Insurance Flexibility and Accountability (HIFA)
demonstration initiative, allows states more flexibility to reduce
eligibility levels and benefits for optional Medicaid populations if
they expand health care to previously uninsured people.
While a response to the large numbers of persons without insurance in
the United States is important, there are concerns about the
consequences of the HIFA approach for those who depend on comprehensive
Medicaid services to preserve their health. The so-called optional
Medicaid eligibility categories include 22% of all beneficiaries who are
disabled and qualify based on medically needy status, as well as 56% of
all elderly persons enrolled in Medicaid.
That the HIFA waiver process allows states to impose unlimited
cost-sharing and to stop providing key services to these optional
populations raises questions about both the scope and quality of care.
More generally, cost-containment strategies that ration care through
service limits or eliminations, reimbursement rate reductions, or
eligibility limitations are likely to have the greatest impact on the
beneficiaries who are most in need of health care services because of
disability, chronic illness, or advanced age.
The response of many state Medicaid programs to the special needs
posed by PLWH shows that other options that can contain costs without
compromising the quality of care are available. These include HCBS
waiver programs, HIV expansion waivers that provide coverage earlier in
the course of illness, and disease management programs. The past several
years have brought remarkable changes in treatment patterns for PLWH,
including the widespread adoption of HAART, marked decreases in
inpatient hospitalizations, and declines in opportunistic infections and
mortality. The use of new practice guidelines and treatment patterns can
improve quality without increasing costs. Thus, Medicaid programs should
provide incentives for providers and MCOs to adopt such new practice
guidelines and treatment patterns quickly.
As noted above, this rapid evolution of standards of care and
treatment has been accompanied by changes in state Medicaid program
policies as states work to contain costs while also meeting their
obligations to offer comprehensive health care to beneficiaries. Driven
by cost containment, these changes in state Medicaid policy have
accelerated, and a number of the strategies have a direct impact on some
or all groups of Medicaid beneficiaries. Especially in times of
tightening state budgets, beneficiaries with a wide range of chronic
illnesses and disabilities may face changes in Medicaid benefits that
simply do not meet their fundamental needs. State and federal policy
makers have an opportunity to balance the need for fiscal health with
the public duty to ensure that Medicaid beneficiaries receive services
that preserve and promote health. Novel financing mechanisms, such as
using Medicaid funds to purchase private insurance and negotiating drug
price reductions from pharmaceutical companies, can help contain costs
while maintaining access to care.