It clearly will be a challenge to design a new LTC system in which greater care and service delivery options are made available to an increasing elderly and disabled population. This is particularly so given the stated intent to slow the rate of increase in LTC expenditures. In addition to this challenge, the Department should begin to address the following public policy questions:

What incentives will MCOs have to participate in the proposed redesigned system?

Managed care staff have noted that expanding managed care to include elderly and disabled Medicaid recipients will require the Department to answer a number of serious questions. MCOs typically are able to manage their budgets by taking on risks associated with enrollees with varying health care needs. That is, of those enrolled in a managed care program, some are known to be high users of services, while many others will have more limited, and less costly, projected needs. In essence, this is the business of insurance, the ability to spread risk over a large enrollment base. For example, Health Maintenance Organizations (HMOs) which offer Medicare managed care coverage are thriving in many areas of the country because of these very reasons. The captitation rate paid to these HMOs is sufficiently high to warrant risk-taking on behalf of the HMO, and perhaps more importantly, the HMO has the ability to attract a sufficient number of relatively low cost "healthy" enrollees to offset the cost of other enrollees.

MCOs serving the Medicaid elderly and disabled population, however, will likely have very few "low cost/low users" of services. Almost by definition, this population tends to have long term chronic conditions. Therefore, it is unlikely that the new redesigned system will be viewed by many potential MCOs as a wise business venture, unless the capitation rates are adequate. This is particularly so if the new system does not also include acute care, MD visits, therapies, drugs, and other health care services which will afford MCOs greater opportunities to effectively manage care and costs.

Therefore, DHFS should answer the following:

• Why will large MCOs be interested in participating in the redesigned system?
• What entities does the State envision as serving as MCOs and what incentives is the State prepared to offer for their participation?
• How will DHFS ensure that MCO business decisions are in the best interests of the Medicaid program and its recipients?
• Will the new system allocate sufficient dollars for care versus administration and oversight?
• How will DHFS provide and fund incentives to MCOs to cover preventive care/services?

Who will say "No?"

Managing care for elderly and disabled persons will require some very difficult and, perhaps, unpopular decisions as organizations attempt to implement care and service plans within a limited funded system. The Department's LTC Steering Committees have spent little time on this issue and WAHSA encourages DHFS to address this matter more openly. Specifically, DHFS needs to directly confront the following related questions:

• If a client desires a more service-rich plan than can be financed by the capitation rate (even under a pooled system), will the State or the MCO have the responsibility to inform the client that their service demands are greater than the public funds they are eligible for and, therefore, cannot be fully met?
• If the organization determines that the client has health and LTC needs that can be best met within a congregate care facility, but the client desires to receive care in his/her own home, will the client be denied services or offered a service plan that does not adequately address needs identified by the comprehensive assessment?
• How will the new system deal with noncompliant clients? For example, the care and services plan requires the client to report changes in health status to the organization or to take certain medications but the client refuses to do so.16 The client's refusal to comply with the care and service plan can lead to utilization of more costly health and/or LTC services. How will the new system address these situations?17
• Research has shown that home and community-based care can be less costly compared to facility care if significant unpaid informal support systems are available. How will the new system maximize the use of informal support systems? Will options for clients with no informal support system be more limited than for other clients? If so, how will this be determined?
  
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