Evaluation of the Arizona Health Care Cost Containment System
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EVALUATION OF THE ARIZONA HEALTH CARE COST CONTAINMENT SYSTEM Final Report January 1989 Prepared for Health Care Financing Administration Office of Research and Demonstrations Oak Meadows Building 6325 Security Boulevard Baltimore. MO 21207 SRI International 333 Ravenswood Avenue Menlo Park. CA 94025 (415) 326-6200 TWX: 910-373-2046 Telex: 334 486 ACKNOWLEDGMENTS The authors would like to express their appreciation to the many people over the course of the AHCCCS evaluation who have contributed to the project either through their work on various aspects of the project or their comments on draft or final reports or articles. We are especially grateful for their comments to those at the AHCCCS administration as well as to Sidney Trieger, Paul Lichtenstein, Richard Yaffee, William England and Henry Tyson from the HCFA Central and Regional Offices. Those who have worked on the AHCCCS Evaluation all contributed to the thinking presented in this final report and should be acknowledged directly: Donald Balaban, Laurie Meier-Bauer, Rose Chu, Deborah Freund, Susan Haber, Douglas Henton, Deborah Jay, Howard Marantz, David McKusick, Stanley Moore, Gordon Trapnell, and Richard West. We are also grateful to the following people for their administrative, clerical, editorial and research support during the course of the project: Suzanne Andrick, Gwen Berends, Patricia Brabant, Kathleen Campbell, Kate Dochez, Susan Ehrlich, Sheila Igne, Klause Krause, Ellen Dunn-Mai hotra, Alec Peters, Patricia Peterson, Marisa Saunders, Michele Solloway, and Huguette Touchette. ii \ CONTENTS I INTRODUCTION The AHCCCS Evaluation The AHCCCS Program ' Eligibility [ and Enrollment Trends I J^ription of tne Participating Plans n AHCCCS Financing ,^ lo II THE IMPLEMENTATION AND OPERATION ISSUES 23 Overall Administration of the Program ? 7 The Bidding Process \i Eligibility, Enrollment andMarketing II Quality Assurance ' and Member Satisfaction ' lo Plan Financial Performance . H Information Systems ' ;? Gatekeeping and Copayments . LI Setting '. Arizona's '. '. '. '. '. '. Capitation Rates '. '. '. '. [ 92 III THE OUTCOME ISSUES 1Q3 Overview Cost of the Program }J: Utilization of Services JVJ Quality of Care .... \\z Access and Satisfaction •.....'.'.'.'..'.'.'.][' 135 IV SUMMARY AND CONCLUSIONS 155 Implementation and Operation ,r 7 Outcome Findings }„ Conclusions :z., 151 APPENDICES Appendix A: Evaluation of Arizona Health Care Cost containment System Reports 165 Appendix B: AHCCCS Chronology 16g iii I INTRODUCTION This report is the final Arizona Health Care Cost Containment System (AHCCCS) Evaluation Report. It is an evaluation of the AHCCCS program from its beginning in October 1982 through calendar year 1987. AHCCCS is Arizona's alternative to traditional Medicaid coverage for acute medical care. The state receives federal funding as a Medicaid program with waivers to permit its demonstration aspects. Below we begin with a short description of our overall AHCCCS evaluation and of the AHCCCS program. Following that we present trends in the numbers of those eligible for AHCCCS and enrolled in AHCCCS plans, and describe participating AHCCCS plans and the financing of the AHCCCS program. In Chapter II we summarize the implementation and operation findings. Chapter III summarizes the outcome findings. Finally, we conclude with a discussion of overall findings and policy implications. The AHCCCS Evaluation The evaluation of the AHCCCS project began in July of 1983. It was conducted by SRI International under contract to the Health Care Financing Administration (HCFA) . The evaluation team also includes Actuarial Research Corporation, Lovelace Medical Foundation, and Research Triangle Institute. The evaluation included two main kinds of analyses: an analysis of program implementation and operation and an analysis of program outcomes. The implementation and operation analyses initially focused on six innovative cost containment features and seven operational functions of the AHCCCS program. The six innovations are: primary care gatekeepers; mandatory nominal copayments; restrictions on freedom of choice; statewide 1 competitive bidding; prepaid capitated financing; and capitated payment to the state from HCFA. The seven operational issues are: administration of the program; eligibility determination, marketing, and enrollment; claims and encounter data processing; selection bias; imDac + nn l^na-term care; relationship to the private sector; and overall effects on the health delivery system. Four implementation and operation reports were prepared. Although these issues were covered in one or more of these implementation and operation reports, not all the issues were studied in detail over the entire course of the evaluation. Different implementation and operation issues were given emphasis in each of the four implementation and operation reports. For example, for the first two reports, sections dealing with the plans and their structures and organization were prepared. In the later two reports, emphasis was placed on overall AHCCCS program management issues. Chapter II of this report highlights the overall implementation and operation findings. The outcome analyses focused on four issues: program cost, utilization of services, quality of care provided, and access and satisfaction of AHCCCS beneficiaries. Separate reports were issued on each of these topics. Three reports were prepared on the overall cost of the AHCCCS program, as compared with a traditional Medicaid program, for its first 5 years of operation. A utilization analysis was performed on Year 4 and Year 5 program encounter data. Data before Year 4 were found to be insufficient to conduct an analysis. The quality of care analysis, based on a review of medical records, was conducted in the summer of 1988. A household survey of beneficiaries in Arizona and a matched sample in New Mexico was conducted in the summer of 1985 on program access to care and satisfaction with care received. The results of these outcome analyses are summarized in Chapter III. Appendix A lists all the detailed reports prepared as part of this project. More detailed discussion of the issues presented in this final report can be found in these reports. 2 The AHCCCS Program AHCCCS, the Arizona Health Care Cost Containment System, is an innovative system for providing acute medical care services to the indigent population in Arizona, the only state without a traditional Medicaid program. Arizona receives federal funding for AHCCCS as a HCFA demonstration project. AHCCCS differs substantially from other states' indigent health care programs. It contracts with plans to provide medical care services through a competitive bidding process; these plans are reimbursed under a prepaid capitated system. The state is reimbursed for federally eligible enrollees on a prepaid capitation basis by the federal government. Under the program, beneficiaries select or are assigned to a primary care "gatekeeper" who manages their care, and beneficiaries are required to pay small copayments for some of the services they receive. The original state legislation required that most of the program's administrative functions be contracted to a private administrator. The state has now taken over this function. In addition, the original state legislation called for the program to include private, state, and county employees in addition to the indigent. These groups have not been included. However, under a grant from the Robert Wood Johnson Foundation, AHCCCS developed a program for the working uninsured, which began operation in 1987. The counties determine eligibility for medically indigent and medically needy beneficiaries and provide those services not covered under AHCCCS, including long-term care. Eligibility for AHCCCS includes Aid to Families with Dependent Children (AFDC) recipients, Supplemental Security Income (SSI) recipients, the medically indigent (MI ) and medically needy (MN), the State Children's Program and Sixth Omnibus Budget Reconciliation Act (SOBRA) eligibles. Benefits covered by AHCCCS as of December 1987 include most acute-care services: hospital, physician, laboratory, radiology, medical supplies, medical equipment and prosthetic devices, pharmacy, emergency 3 services, emergency dental care, and Early and Periodic Screening, Diagnosis, and Treatment (EPSDT) services. Skilled nursing facility and home health services are not included in the AHCCCS program's benefits. AHCCCS does cover acute medical care services rendered to AHCCCS-el igible residents of long-term care facilities. Family planning and nurse midwife services, when approved by the primary care physician, are offered at the option of the health plan but are not covered services. Mental health services are limited to 72 hours per acute episode and 12 hospital days per contract year for each eligible person or member. Prior authorization is required for acute mental health services that extend beyond 24 hours of hospitalization. Provisions covering medically necessary transportation and some dental care have been offered by AHCCCS plans from the beginning of the second year. Dental care coverage includes emergency care and tooth extractions for adults and EPSDT services for children. Dentures can also be covered if they are medically necessary and authorized by the primary care physician and the AHCCCS director. Before AHCCCS, the counties provided medical care to Arizona's indigent population. Eligibility criteria and services covered differed from county to county. Legislation