Special needs plans: adapting Medicaid managed care for persons with serious mental illness or HIV/AIDS.

• Author: Swidler, Robert N.
• Position: Symposium on Health Care Policy: What Lessons Have We Learned from the AIDS Pandemic?

1. INTRODUCTION

   New York State is now in the midst of a massive, complex effort to move most of its huge Medicaid population into private managed care plans (MCPs).(1) As explained below, the lure of Medicaid managed care was irresistible to the State's policymakers; it offered the prospect of significant cost savings for the state while improving access to care and quality of care for the poor.(2) General concerns about Medicaid managed care voiced by many melted before the fiscal, programmatic and political logic of this shift, particularly as responsive safeguards were identified.(3)

   Yet from the outset, concerns arose that mainstream, comprehensive MCPs, designed to meet the episodic health care needs of the general population, were ill-suited to the needs of Medicaid clients with chronic, severe illnesses, or disabilities such as mental illness, developmental disabilities, drug or alcohol addiction, HIV infection or AIDS, or long-term illnesses of the elderly.(4) The chief concerns were that mainstream MCPs would: disrupt the existing relationships patients had with specialists or caregivers; over-rely on primary care physicians for the specialized needs of these enrollees; fail to include adequate numbers of specialized providers in their network; unduly restrict access to needed services; not make the latest treatments available; and push enrollees toward accepting less expensive treatment options.(5) Additionally, it was feared that mainstream MCPs would divert public resources, previously earmarked for these subpopulations, and undermine the infrastructure of dedicated providers in these areas.(6)

   Accordingly, three broad policy options emerged with respect to Medicaid services for disabled populations:

   (1) Maintain the status quo by excluding certain chronically ill or disabled populations from Medicaid MCPs, or by "carving-out" specialized services from the MCP benefit package;

   (2) Enroll these groups into comprehensive mainstream MCPs along with other Medicaid clients, perhaps adding special safeguards to address their unique concerns about quality and access; or

   (3) Develop separate, special MCPs for select populations and services.

   From 1991 through 1995, New York employed the first two approaches, excluding certain chronically-ill or disabled groups from MCPs while allowing others to enroll, and carving out some specialized services while including others in the benefit package.(7) But, as the State became more intent on mandating enrollment on a broad basis, and as advocacy and provider groups became more sophisticated, focused, and active, a consensus emerged in support of the third option--at least as applied to persons with severe mental illness and persons with HIV infection or AIDS.(8) Accordingly, in 1996, when the Legislature reauthorized the State's Medicaid Managed Care Law,(9) it authorized two types of "Special Needs Plans" or "SNPs": (1) Mental Health SNPs;(10) and (2) Comprehensive HIV SNPS.(11)

   The SNP concept is simple. A SNP is a MCP that may enroll only those Medicaid clients who have a specific chronic condition, such as severe mental illness or HIV infection.(12) The SNP must meet special qualifications, must be certified by the State, and must abide by rigorous requirements.(13) It can expect to receive a significantly higher capitated rate than a mainstream Medicaid MCP.(14)

   As of this writing, mental health providers, HIV care providers, health management organizations (HMOs), and other interested parties are striving to assemble or join networks that can apply to be SNPs.(15) Meanwhile, the responsible State agencies--the Department of Health (DOH) and the Office of Mental Health (OMH)--are scrambling to fulfill their statutory mandate to: (1) develop specific requirements for SNPs; (2) conduct a contracting process; and (3) calculate acceptable capitation rates.(16) All this is occurring while the State struggles to move forward with its broader, parallel task--enrolling the general Medicaid population into mainstream MCPS.(17)

   New York's effort to enroll disabled persons into a special MCP is not entirely novel. Several other states and the District of Columbia have implemented special prepaid MCPs for disabled Medicaid beneficiaries,(18) and/or have pending or approved demonstration waivers.(19) However, New York's plan is far more ambitious in scope and nature--about 100,000 persons will be eligible to enroll in HIV SNPs, and about 100,000 will be eligible to enroll in mental health SNPs.(20)

   This Article looks at the evolution of the policy decision to create SNPs in New York, the features of the 1996 Medicaid Managed Care Act that authorize SNPs, the relevant terms and conditions for a federal waiver, and recent implementation efforts.(21) Additionally, it examines the concept of SNPs as a policy matter and concludes that SNPs are a progressive response to the limitations of mainstream MCPs for the covered populations.(22)

   Specifically, Part II covers the policy debate and shifts that occurred during the late 1980s and the first half of the 1990s.(23) Part III of the Article is concerned with the development of and requirements for mental health SNPs.(24) Part IV deals with the same issues as applicable to HIV SNPs.(25) Part V identifies policy issues raised by SNPs in New York State,(26) and Part VI concludes that the SNP program is an acceptable alternative to either mainstreaming people with HIV and mental illness into managed care programs or leaving them in the fee-for-service system.

2. MEDICAID MANAGED CARE IN NEW YORK

   1. Background

      Medicaid is a joint federal-state program of health insurance for persons with low income and resources.(27) In general, Medicaid clients have the right to seek medical care from any health care professional or facility that participates in the program.(28) The provider then files a claim for payment with the county social services district, and is paid for its services at the fee-for-service rate set by the State.(29) For the most part, the federal government will pay for fifty percent of New York Medicaid program expenditures.(30) New York State generally shares the remaining costs with the county in which the client resides.(31)

      Although Medicaid program spending grew rapidly from the inception of the program, spending spiraled dramatically in the years 1988 to 1992.(32) During that period, New York's total Medicaid spending rose at a staggering rate of seventeen percent per year, reaching about $18.1 billion in 1992.(33) The increase was driven by a combination of factors: federal and state statutory changes expanded eligibility criteria; recession brought more people into the program; AIDS and tuberculosis caused increases in utilization; medical and pharmacological advances added new expensive options to the program; and political and inflationary pressures repeatedly prompted increases in provider payment rates.(34)

      Throughout the 1980s, New York State undertook significant and diverse Medicaid cost containment efforts, including the implementation of a strict rate-setting methodology for inpatient care.(35) Managed care was also viewed as a means to potentially control costs, and the Legislature initiated two programs to test its value. In 1984, it empowered the Commissioner of Health to certify a limited number of "Prepaid Health Services Plans" (PHSPs)--not-for-profit HMOs created to serve Medicaid clients.(36) In 1988, the Legislature authorized demonstrations under which select counties could permit general purpose HMOs to enroll Medicaid clients.(37)

      In late 1990, New York State's economy fell into a severe recession, and the state government began 1991 with a projected budget gap of $6 billion.(38) Medicaid cost escalation was viewed, with justification, as a principal culprit for the gap, and policymakers redoubled their efforts to find ways to bring costs under control without undermining the obligation to ensure basic medical care for the poor.(39)

   2. The Lure of Managed Care

      In developing the 1991 budget, Governor Cuomo's administration turned to managed care as one of several initiatives to try to control Medicaid cost inflation. HMOs and other MCPs--long popular elsewhere--were still a relatively small part of the state health insurance market.(40) The basic features of those plans were becoming more familiar to, and appreciated by, policymakers: plans are paid on a capitated basis and assume responsibility for providing, or arranging for the provision of, a full range of medical services for members; members must choose or be assigned to primary care physicians who are responsible for providing most of the members' care; access to specialty or expensive services is gate-keeped; members are required or induced to select providers from a limited network, selected for quality and cost-effectiveness; providers are paid on bases, including subcapitation, that require them to increase productivity and to be cost-conscious in the care of each patient; and members are encouraged to take advantage of preventive care and health promotion activities.(41) Through these and other techniques, MCPs are able to provide enrollees with basic medical care less expensively than non-managed care, paid on a fee-for-service basis.(42)

      From the perspective of policymakers, the case for moving the state's Medicaid population into private MCPs was compelling.(43) First and foremost, the shift to managed care was expected to help slow down the staggering escalation of Medicaid costs.(44) It appeared that the State could be guaranteed some savings from the outset simply by paying managed care companies less per patient than the State could have expected to pay per patient under the fee-for-service system.

      Programmatically, the enrollment of clients into MCPs promised to improve their access to, and quality of, care in important respects.(45) In particular, MCPs provide each enrollee with a primary care physician--a...