HealthLeaders-InterStudy, the leading provider of managed care market intelligence, reports that a new rate- setting methodology should help California Medicaid managed plans that have struggled, and in some cases lost money, in the past few years. According to the latest California Health Plan Analysis, the proposed 2007-2008 state budget allots $214 million in rate increases for managed care plans in the Medi-Cal program, the nation's largest Medicaid program by enrollment.
"Medi-Cal plans have been feeling the pain since 2005, when the costs of providing care began to outpace the capitation rates they were receiving from the state," said Chris Lewis, market analyst for HealthLeaders-InterStudy and author of the report. "If the Legislature and governor move to enact the budget as proposed, Medicaid plans can look forward to a more accurate payment based on their individual experience. But only time will tell, as the plans do not yet know how much of an increase some of them will get."
Medi-Cal plans, many of which operate as nonprofit public entities in the counties they serve, have been subject to a rate-setting system that began with base data from only four of the state's Medi-Cal plans. The state's MCOs have not had a general cost-of-living increase in five years, with some exceptions such as the fiscal year 2006-2007 budget, which included a $78 million rate increase for six plans in financial distress.
The state has devised a new rate-setting formula based on each plan's cost of providing care and included extra money for administration and an appropriate rate of return.
One of the Medi-Cal plans that has lost money in recent years is the fast- growing Molina Healthcare, which has seen its net income per member, per month fall from $4.09 in 2003 to a negative $4.23 in 2006. Molina officials blame flattened capitation rates that haven't kept up with the cost of its negotiated contracts with providers.
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