DEPARTMENT OF HEALTH & HUMAN SERVICES 
   Health Care Financing Administration 
_______________________________________________________________________________________________________                
                                                                                                                                      Center for Medicaid and State Operations 
       7590 Security Boulevard 
                                                                                                   
  Baltimore, MD 21244-1850 
 
 
October 5,  1998 
 
 
Dear State Medicaid Director: 
 
This letter transmits the enclosed final version of the guidance entitled "Key Approaches To 
The Use Of Managed Care Systems For Persons With Special Health Care Needs." 
 
Background 
 
This final version of the guidance, which was originally transmitted in draft in April 1998, 
reflects changes stemming from comments received by the Health Care Financing 
Administration (HCFA) from a variety of organizations, including State Medicaid agencies, 
State health departments, consumer and advocacy groups, and provider organizations. In 
general, the guidance was well received in its draft form and the changes that have been 
incorporated are intended to clarify certain issues and expand upon ideas that needed further 
elaboration (e.g., compliance with Americans with Disabilities Act requirements, 
differentiating between children and adults). 
 
This final version of the guidance is not mandatory. In our view, however, it does serve as a 
valuable resource to State Medicaid agencies as well as a broad statement of HCFA's goals for 
care delivery systems intended to serve persons with special health care needs. The Medicaid 
Managed Care Notice for Proposed Regulation has been released and requires each State to 
have a quality care system for managed care enrollees. This document provides a framework 
for States to consider when designing and implementing quality strategies for persons with 
special health care needs. When planning Medicaid managed care programs for persons with 
special health care needs (section 1115 and 1915(b) waivers, voluntary programs, and new 
State plan option programs) States should consider using this guidance to: 
 
o  quantify this population's needs; 
o  identify individual's special characteristics relevant to their access and use of primary and 
specialty services; 
 
   
Page -2- State Medicaid Directors: Guidance on Special Needs and Managed Care 
 
o  tailor purchasing specifications and delivery systems contracts to create value-based 
systems of care; and 
o  identify problems and provide solutions that assure adequate access to quality medical 
services and adequate provider networks, while addressing this population's social and 
support needs. 
 
HCFA is aware of at least one major advocacy organization that has used this guidance as a 
framework for developing its own guidance for a specific population group, the homeless. We 
encourage these and other efforts that use this guidance as a tool in developing managed care 
 
programs for special health care needs populations. This document has already proved useful in 
serving as a catalyst for dialogue and discussion at the Federal level, and we expect it will do the same 
among States, managed care organizations, providers, consumers, and advocacy groups. Once again, 
we encourage you to share this document with other individuals or organizations interested in this 
topic. We have posted this final version of the guidance on HCFA's Internet website (www.hcfa.gov) 
to assure the broadest dissemination possible of this document. 
 
This document is one step in our ongoing effort to provide technical assistance to you, particularly as 
in the area of purchasing strategies for persons with special needs. 
 
In addition, as you may know, an additional provision in the Balanced Budget Act requires the 
Secretary to conduct a study concerning safeguards that may be needed to ensure that the health care 
needs of Medicaid managed care enrollees who have special health care and chronic conditions are 
adequately met. We will use this framework as a starting point for discussions with you and other 
stakeholders to identify additional areas for technical assistance and further research. 
 
Any comments or questions on the final version of the guidance should be directed to 
Matt Barry, Center for Medicaid and State Operations, Mailstop S2-01-16, 7500 Security 
Boulevard, Baltimore, Maryland 212~, (410) 786-1176, or e-mailed to MBarry@hcfa.gov. 
 
Sincerely, 
 
 
                                                                            Sally K. Richardson 
Director 
 
 
 
  Page -3- State Medicaid Directors: Guidance on Special Needs and Managed Care 
 
Enclosure 
 
ccs: Dr. Earl Fox, HRSA Administrator 
All PHS Regional Administrators 
All HCFA Regional Administrators 
All HCFA Associate Regional Administrators for Medicaid and State Operations 
Lee Partridge, American Public Human Services Association 
Joy Wilson, National Conference of State Legislatures 
Nolan Jones, National Governors' Association  KEY APPROACHES 
TO THE USE OF 
MANAGED CARE SYSTEMS FOR 
PERSONS WITH SPECIAL 
HEALTH CARE NEEDS 
 
Guidance for States Considering the Development of Medicaid Managed 
Care Programs for Persons With Special Health Care Needs 
 
 
 
 
OCTOBER 1998 
 
 
 
 
This guidance was jointly developed by the Health Care Financing Administration, the Centers for 
Disease Control and Prevention, the Health Resources and Services Administration, the Indian Health 
Service, the Substance Abuse and Mental Health Services Administration, the Office of Disease 
Prevention and Health Promotion, and was reviewed and commented on by the Managed Care 
Technical Advisory Group, the Medicaid Purchasing Group, and the Center 
for Health Care Strategies' Stakeholder Group on Special Needs and Managed Care. 
 
 
 
Health Care Financing Administration  October 1998  KEY APPROACHES TO THE USE OF MANAGED CARE SYSTEMS FOR 
 
PERSONS WITH SPECIAL HEALTH CARE NEEDS 
 
Table of Contents 
 
 
Section Title               Page Number 
 
Introduction                 2   
             
The Environment                4 
 
Purchasing Strategy              5 
 
Access and Quality               8 
 
Evaluation and Reporting            13   
 
Benefits and the Delivery System          14 
 
Finance                  18   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Health Care Financing Administration  October 1998  2 
 
KEY APPROACHES TO THE USE OF MANAGED CARE SYSTEMS 
 
FOR PERSONS WITH SPECIAL HEALTH CARE NEEDS 
 
Introduction 
 
This guide is provided to States for review and consideration during the planning stages of Medicaid 
managed care programs (Section 1115 and 19 15(b) waivers, voluntary programs, and new State 
option programs) for persons with special health care needs. The medical, social and financial needs 
of persons with special health care needs are often complex and unique to each individual. The 
application of these key approaches hopefully will assist States in identifying and resolving potential 
problems associated with providing adequate access to qua!ity medical services, assuring an adequate 
provider network for these populations, and addressing social and support needs. This guide is not 
mandatory, and serves as a resource to States as well as a broad statement of HCFA's goals for care 
delivery systems intended to serve persons with special health care needs. While the guidance is 
written from the standpoint of service delivery within a managed care setting, the vast majority of the 
guidance is appropriate regardless of the service delivery model being employed by a State. The intent 
for this guide is to help facilitate actions at the State and community level as programs are initially 
conceived and developed in order that the issues raised in this guide are addressed by a State. 
 
Before presenting these approaches, it is important for States to develop a comprehensive profile of 
the health of the specific population and their service needs. The development of this profile should be 
epidemiologically-oriented and based on the following processes: 
(1) assessing the incidence and prevalence of medical conditions within a community as well as 
specific social and demographic features associated with Medicaid eligibility and service use; (2) 
assessing health-related service (as well as social and other support services) needs necessary for 
improving the population's health; and (3) identifying and coordinating existing public and private 
resources to create a system to meet the needs of Medicaid beneficiaries in the new health delivery 
system. 
 
Based on the above process, States will be able to quantify the population's need, identify social or 
demographic characteristics related to the access and use of primary and specialty services, and tailor 
purchasing specifications and delivery systems (considering existing funds or structures) to create 
cost-effective systems of care for adults and children with special needs. This information may also 
contribute  to  identifying  population-based  variations  in  expenditure  patterns  for  purposes  of  rate 
setting and risk adjustment. Data 
 
 
Health Care Financing Administration  October 1998  3 
 
that are commonly available to State Medicaid agencies include: vital statistics; reportable events 
(tuberculosis, HIV/AIDS ); statewide surveys such as the National Immunization Survey and the 
Behavioral Risk Factor Surveillance System; and, intra-agency data exchanges. 
 
The following framework covers six broad areas related to the planning and development of care 
delivery networks  the environment, purchasing strategy, access and quality, evaluation and reporting, 
-- 
benefits and the delivery system, and finance. Each area includes a series of statements which reflect 
those items that should be considered when including persons with special health care needs in 
managed care systems. 
 
Finally,  the  framework  contained  in  this  guidance  is  not  targeted  at  any  specific  special  needs 
populations, although, where appropriate, the guide reflects differences between the needs of children 
and adults. This guide identifies core elements that are shared by most special needs populations. Thus 
this  guidance,  while  not  targeted,  does  address  many  of  the  issues  shared  by  all  special  needs 
populations. It is also important to recognize that this guidance will evolve as the knowledge base in 
the field continues to evolve (it may further evolve and change based on the ongoing implementation 
of the many Medicaid related provisions contained in the Balanced Budget Act of 1997). Further, 
HCFA recognizes that care delivery systems for persons with special health care needs are designed 
for the unique needs of a population within a particular State or region. As such, all State programs 
are different and at varying stages of development and therefore this guidance may be more useful to 
States that have less historical experience in the area of managed care for special needs populations. 
However, States that have experience in this area can always learn from the experiences (good and 
bad) and best practices of other States. 
 
To this end, this document may serve as a catalyst for dialogue and discussion among States, managed 
care organizations, providers, consumers, advocacy groups, and any other organizations that could 
shed new light on this matter. In value-based purchasing, the goal is to improve systems of care for 
the persons for whom the State is purchasing and this guidance is a starting point in efforts to 
purchase for persons with special health care needs. 
 
 
 
 
 
 
 
 
 
 
Health Care Financing Administration  October 1998  4 
 
KEY APPROACHES TO THE USE OF MANAGED CARE SYSTEMS FOR 
PERSONS WITH SPECIAL HEALTH CARE NEEDS 
 
I. THE ENVIRONMENT 
 
Critical to the success of any State managed care initiative is the building of understanding and 
support from the grassroots level (which includes relevant State and local public agencies, advocacy 
groups,  consumers,  providers,  and  managed  care  organizations  (MCOs))  for  the  value-based 
purchasing approaches being considered and developed by the State. Such stakeholder involvement 
should begin early in the conceptual stages of the project and is needed in order to receive feedback 
on the feasibility of a State's proposal and the degree of knowledge and support of the provider 
community, the beneficiary community (or the advocates who represent them), as well as the MCO 
community.  Such  efforts  can  be  formally  built  into  a  process  in  the  form  of  advisory  councils, 
ombudsman programs, and routine public forums to name a few possible options. 
 
States should consider: 
 
Developing  processes  to  ensure  early,  ongoing  and  adequate  input  from  key 
stakeholders such as other public agencies serving this population (e.g., mental health 
and substance abuse agencies), private purchasers, beneficiaries and families, MCOs, 
providers,  consumer  advocacy  groups,  and  professional  associations  (e.g.,  advisory 
committees, focus groups, etc...). 
    Establishing a key stakeholders advisory committee that has regular meetings 
    and a formalized structure and provides direct, documented input in the 
    development and implementation of the strategy design and implementation. 
    Examples of the types of functions the committee could address include: 
 
  identifying the goal of the strategy; 
  reviewing different interventions and oversight mechanisms; 
  identifying appropriate health care outcome measures; and, 
  assessing tools to improve the quality of care for special needs populations; 
       Defining key terms related to the use of purchasing strategies for persons 
    with special health care needs, such as: populations considered to have 
 
 
 
 
 
 
Health Care Financing Administration  October 1998  5 
 
special needs, case management, case worker, utilization review management, supports, 
practice guidelines, performance measures, types of gatekeepers, medical necessity. 
 
  Assuring that definitions of special needs populations are not limited to nor equated 
solely with Supplemental Security Income (SSI)-eligibility. While individuals on SSI 
most likely are persons with special needs, using only SSI is limiting and may miss key 
elements  of  a  target  population  (e.g.,  seriously  and  persistently  mentally  ill  adults, 
seriously emotionally disturbed children, etc...). 
 
  Monitoring access and satisfaction measures for persons with special health care needs, 
such  as  ongoing  meetings  between  Medicaid  staff  and  MCO  management,  medical 
directors, beneficiaries and family members, providers, and advocacy groups. 
 
 
II.  PURCHASING STRATEGY 
 
The focus of the Medicaid program, whether it is a program specifically designed for persons with 
special  health  care  needs  or  a  more  general  approach,  is  moving  from  paying  health  claims  to 
purchasing high quality health care services. The goal of this effort is to protect and improve the 
health and satisfaction of beneficiaries. To this end, developing and implementing a strategy to buy 
quality health care services that gives value for the dollar to beneficiaries and purchasers needs to be a 
priority for States. While seeking the lowest possible cost, a value-based purchasing strategy is one 
that does not seek the lowest price in isolation. It recognizes that there must be value in return for the 
investment. This is of particular importance when addressing purchasing strategies for persons with 
special health care needs wherein a singular focus on saving money could put the health and well-
being of individuals at undue risk. 
 
This strategy encompasses fee-for-service and capitation reimbursement mechanisms; acute, long-
term, and continuing care; voluntary, mandatory, Section 1915(b), Section 1115, and State Plan option 
approaches.  Value-based,  quality-focused  purchasing  seeks  to  enhance  performance  and 
accountability in a quality health care delivery system  one that is affordable, effective and safe, while 
-- 
protecting, improving enrollee health and satisfaction, and responding to the specific health needs of 
each individual. 
 
 
 
 
Health Care Financing Administration  October 1998  6 
 
An effective strategy is one that will continually manage the improvement process, set priorities, 
involve stakeholders. identify and adopt performance measures, collect appropriate data, identify 
improvement  opportunities  and  implement  appropriate  improvement  interventions.  Improvement 
interventions would function as tools in a toolbox and would include enforcing performance standards 
and guidelines; using purchasing specifications; giving technical assistance to care delivery systems 
and  providers;  giving  beneficiaries  assistance  and  information;  using  payment  and  coverage 
mechanisms for quality goals; monitoring; and rewarding performance. To meet these goals, 
 
States should consider: 
 
  Identifying  potential  beneficiaries,  through  effective  outreach,  bringing  potential 
beneficiaries into the Medicaid program and facilitating the effective enrollment of each 
Medicaid beneficiary into the most appropriate care delivery system. States should also 
consider  whether  and  how  approaches  must  vary  in  order  to  be  most  effective  for 
enrolling children versus adults into a program. 
 
  Determining  who  to  contract  with  through  the  use  of  tools  such  as  performance 
standards, purchasing specifications, past performance data, "quality" as a factor in 
selection,  adequate  choice,  etc.  Further,  States  should  consider  collaborating  with 
appropriate  Federal  and  State  agencies  and  with  public  and  private  purchasers  to 
identify and obtain information on successful and not-so-successful purchasing policies 
and strategies. 
 
  Identifying where Medicaid coverage and benefits end and where other systems of care, 
either other Federal programs (e.g.,  Medicare, Title V grants, Ryan White CARE Act) 
or State or local funding sources begin to assure coverage across the continuum of care 
and ways to maximize those collective resources (e.g., group purchasing strategies) in a 
manner that enhances quality of care. Efforts that do not look to non-Medicaid funding 
sources will be limited in their efficacy by such an approach, most notably by the Upper 
Payment Limit restrictions that are imposed by Federal statute upon Medicaid managed 
care programs (i.e., the managed care program cannot exceed the cost of delivering the 
same  set  of  services  to  a  comparable  population  in  a  fee-for-service  environment). 
Examples of this type of activity include: joint purchasing efforts with the same network 
by the 
 
 
 
 
 
Health Care Financing Administration  October 1998  7 
 
Medicaid agency and Mental Health agency, and the Medicaid agency purchasing on 
behalf of the Mental Health agency as is the case in Massachusetts. 
 
  Determining what to contract for in assessing the contracted benefit package for each 
specific  population  in  relationship  to  the  overall  State  Medicaid  Program  benefit 
package. This includes what remains in fee-for-service, what goes through a Primary 
Care  Case  Management  (PCCM)  service,  what  is  included  in  a  partial  capitation 
contract, what is included in a full-risk contract, etc. 
 
  Determining  where  and  when  to  contract,  including  a  process  to  define  "adequate" 
capacity/capability regarding network specifications, geographic dispersion, linguistic 
capacity,  cultural  diversity,  the  ability  of  potential  contractors  to  meet  contract 
standards/criteria and the development and implementation of standards for contractor 
compliance. 
 
  Determining how to monitor through a "quality oversight system" using tools that are 
developed or are being developed. 
 
While it is important for States to develop a broad-based purchasing strategy focused on value and 
cost effectiveness, it is equally important for States to articulate the specific goals they want to 
achieve in developing a program to serve persons with special health care needs. These are issues such 
as: 
 
  Are you trying to improve access to care or build capacity in a particular area? 
  What priority do you place on protecting the revenue base of "safety net" providers? 
  Are you trying to move services away from an institutional bias? 
  Are there existing or potential partnerships with other public programs (e.g., Title V, 
Ryan White, Medicare) that you do not wish to disrupt? 
 
 
 
 
 
 
 
 
 
 
 
Health Care Financing Administration  October 1998  8 
 
III. ACCESS AND QUALITY 
 
Of fundamental importance to any health care service delivery system is the ability of enrollees to 
access appropriate services in a timely manner. Issues that impact upon access include: efforts by a 
State to market the program to beneficiaries; outreach and education efforts to increase the rate at 
which beneficiaries choose and access their MCO or provider; the availability of written materials in 
threshold languages along with staff capable of communicating in those threshold languages; assuring 
that the provider network is experienced and has the expertise needed to care for persons with special 
health needs; whether and how the State's auto-assignment process takes into account time sensitive 
and continuity of care issues for persons with special health needs; and what steps the State is taking 
to comply with relevant Federal statutes regarding persons with disabilities (e.g., the Americans with 
Disabilities Act) when designing, implementing and monitoring its care delivery systems. Together, 
the issues identified below should be given due consideration in order to assure access to services for 
persons with special health needs. 
 
States should consider: 
 
  Assessing the types of assistance or information that will be targeted to persons with 
special health care needs (beyond the standard material given to all enrollees) to assist 
their understanding of the capacity of various MCOs in meeting their special health 
needs. 
 
Enrollment materials should be made available for persons with sight or hearing 
- 
impairments or for people who do not speak English. Also, the establishment of 
thresholds  for  these  materials  should  be  considered  by  the  State.  These 
individuals need to be identified by the State prior to initiating the enrollment 
process. 
 
Multi-language materials (written and audiovisual) should be made available at 
- 
an appropriate comprehension level (based on community standards). 
 
Assurances should be provided that services (to aid in enrollment) are available 
- 
for persons with cognitive impairments (or their guardians) during the MCO 
selection process. 
 
Mechanisms should be developed to reach homeless beneficiaries and 
- 
 
 
Health Care Financing Administration  October 1998  9 
 
others without a phone/mailbox. 
 
Outreach materials and intake services should be made available at locations that 
- 
are especially convenient to persons with special health care needs. 
 
  Assessing the adequacy of access to care delivery systems recognizing and accounting 
for  the  distinct  and  fundamental  differences  (e.g.,  developmental,  physiological) 
between children and adults with special health care needs. 
 
  Complying with all relevant provisions of the Americans with Disabilities Act (ADA), along 
with other relevant Federal statutes, in relation to the development of care delivery systems for 
persons with special health care needs. A complete listing of ADA resources is available at the 
U.S. Department of Justice's ADA Home Page Internet website at:  
  http://www.usdoj gov/crt/ada/adahom 1. htm. 
. 
 
  Developing condition-specific training for State and contractor staff involved in the 
enrollment process. 
 
  Advising persons with special health care needs of how they can continue to obtain care 
from their current system or provider under the new strategy or how to transition to a 
new system/provider. States should consider conducting an assessment of the health 
care risks for special needs beneficiaries if critical patient-provider relationships are 
severed. 
 
  Developing mechanisms to use a "health needs assessment" process or other process 
(such  as  review  of  past  Medicaid  claims  data)  to  identify  existing  or  undiagnosed 
medical  conditions.  This  process  could  be  used  to  assist  beneficiaries  in  selecting 
appropriate MCOs and providers based on identified medical and social needs. This 
process could include trained enrollment counselors or community-based organizations 
offering face-to-face, confidential enrollment information to assist persons with special 
health care needs during the enrollment process. 
 
  Developing beneficiary enrollment materials that include information regarding each 
MCO's network of services and providers available to special needs populations. These 
materials should clearly describe enrollment 
 
 
 
 
Health Care Financing Administration  October 1998  10 
 
options, including: 
 
  options for MCO/provider selection and the selection of specialty providers as 
gatekeepers; 
  pre-authorization and referral guidelines, covered specialty services and available 
specialists; 
  availability  of  any  special  services,  expertise,  and  experience  offered  by 
providers and MCOs; 
  exemption options; 
  disenrollment provisions; 
  lock-in periods and rules for changing MCOs/providers; 
  excluded services. 
 
  Offering a beneficiary enrollment hotline. If the State chooses to do so, it should assure 
that beneficiary enrollment hotline operators are knowledgeable of enrollment options 
and MCO service and provider capabilities for persons with special health care needs. 
Further, the State should consider ways to assure that the hotline is able to address the 
language needs of non-English speaking persons with special health care needs. 
 
  Demonstrating  that  patient  confidentiality  is  assured  throughout  the  enrollment, 
disenrollment, default assignment, and care delivery processes and that penalties are 
associated  with  breaches  of  privacy  or  confidentiality.  Communications  with  MCO 
enrollees must be consistent with the ADA prohibition on unnecessary inquiries into the 
existence of a disability. 
 
  Providing assurances that persons with special health care ~needs are assigned to MCOs 
capable  of  serving  their  particular  needs  (if  the  State  permits  auto-assignment  for 
persons with special health care needs), both for children and adults. States should 
further  consider  what  unique  variables  are  most  appropriate  in  the  auto-assignment 
algorithm that address the needs of persons with special health care needs. And, States 
should consider developing a process to investigate those instances where there are a 
significant number of persons with special health care needs being auto assigned and a 
process to take corrective action if appropriate. 
 
  Exploring how to develop an auto-assignment process that assigns persons 
 
 
 
 
Health Care Financing Administration  October 1998  11 
 
with special health care needs first to a managed care entity (MCE  MCO or primary 
- 
care case manager) that includes their current Medicaid provider of care. States should 
further explore ways to determine how to obtain, identify and account for this variable. 
The significance of the traditional provider of care relative to current health status 
should  also  be  taken  into  consideration  (e.g.,  rehabilitation  therapists  may  be  less 
important than an oncologist under certain circumstances). 
 
  Incorporating into their default assignment processes providers who have demonstrated 
experience and expertise in the provision of care for people with special health care 
needs. [Note: the State should consider describing any standards/process for designating 
providers as "experienced" or "expert" in providing care for persons with special health 
care needs.] 
 
  Providing assurances that once default has occurred that notification to the beneficiary 
of his/her MCO assignment occurs within the shortest possible time. States should also 
consider ways to provide assurances that life-sustaining, ongoing treatment needs are 
provided for during transition periods and that financial responsibility for care provided 
during this period is clearly articulated. 
 
  Developing mechanisms to take advantage of the data currently accessible regarding 
individuals enrolled in Medicaid but who will be transitioning to a care delivery system 
versus individuals newly eligible for Medicaid. Specifically, how will this available 
information be used by a State or a designated organization such as an enrollment 
broker regarding current patient-provider relationships, the type(s) of special needs of 
enrollees, etc? 
 
  Developing  mechanisms  to  permit  individuals  to  choose  from  not  less  than  two 
managed care entities (either MCOs or primary care case managers). 
 
The delivery of quality care and the ability to monitor MCO performance are vital functions that a 
State must be able to perform (directly or through its contractors). Quality improvement (which 
includes  maintenance  of  functional  status  for  persons  with  special  health  care  needs)  activities 
(including the development and deployment of tools to enhance data collection to support quality 
improvement efforts) have increased in scope and importance as Medicaid MCO enrollment has 
become more common. The use of data generated from these efforts needs to be systematically 
incorporated into monitoring efforts 
 
 
 
Health Care Financing Administration  October 1998  12 
 
in order to hold MCOs and providers accountable for their performance under that system. 
 
States should consider: 
 
  Developing a plan describing how it intends to monitor MCO compliance with Federal 
and State requirements. Specifically, how the State will monitor whether: 
 
MCOs allow enrollees, to the extent possible, to choose their health practitioner, 
- 
maintain a program that allows enrollees to voice complaints, and provide for 
timely resolution of grievances; 
MCOs have complied with appropriate access standards; 
- 
MCOs are not discriminating against enrollees on the basis of health status or 
- 
need of health services; 
MCOs  have  not  terminated  enrollment  based  on  an  adverse  change  in  an 
- 
enrollees's health status; and, 
MCOs  have  maintained  an  internal  quality  assurance  program  that  addresses 
- 
special need populations. 
 
  Developing  mechanisms  that  assure  that  the  complaint  and  grievance  processes  are 
expedited  for  people  with  life-threatening  conditions  such  as  AIDS,  and  that  such 
mechanisms provide maximum expected time-frames for resolution of complaints and 
grievances for such individuals. 
 
  Requiring  HEDIS  performance  measures  for  its  MCO's  quality  assessment  and 
improvement programs and assessing the need for and utility of performance measures 
specific to special needs populations (e.g.. measures of functional status). 
 
  Conducting consumer satisfaction surveys of persons with special health care needs. 
Such  an  effort  should  address  the  need  for  over-sampling  in  the  general  survey 
population to assure fair and adequate representation. 
 
  Developing a strategy for assessing specific aspects of quality care for persons with 
special  health  care  needs  enrolled  in  MCOs  for  purposes  of  early  identification  of 
potential problem areas and for long-term assessment. States should further consider the 
need to conduct targeted quality of care studies or investigations by external entities to 
assess quality of care for 
 
 
 
Health Care Financing Administration  October 1998  13 
 
persons with special health care needs as a part of their external reviews. 
 
  Developing  continuous  quality  improvement  (CQI)  goals  to  incorporate  as  part  of 
contractual  agreements  with  MCOs  for  the  purpose  of  building  MCO  capacity  in 
meeting the needs of persons with special health care needs. 
 
  Evaluating patterns of referrals to specialists and subspecialists. 
 
  Developing safeguards on conflict of interest issues as they relate to providing adequate 
assurances  that  organizations  that  conduct  enrollment,  guardianship,  or  eligibility 
determination  activities  on  behalf  of  the  State  are  not  the  same  organizations  that 
ultimately become MCO contractors with the State. 
 
 
IV.  EVALUATION AND REPORTING 
 
MCOs must be held accountable based on systematic and objective evaluations of their performance 
under Medicaid purchasing strategies, particularly ones that serve persons with special health care 
needs. Such efforts need to take into consideration the human and financial resources needed to 
commit to such an undertaking, the target population(s) to be served, what outcome measures are most 
meaningful for those groups, the systems needed to collect, process, and validate the data being 
collected, and how the findings from these efforts are translated into improved systems of care and 
improved health outcomes. To ensure that the information that is collected, analyzed and reported is 
useful to consumers, States, MCOs and other interested parties, the State should engage these groups 
from the outset in the design of its data collection strategy in order to gauge the feasibility and utility 
of its proposed efforts. 
 
States should consider: 
 
  Developing a mechanism to collect encounter, or other patient-level data, from MCOs 
for persons with special health care needs. Such an approach should account for current 
resources  (financial  and  personnel)  available  and  what  additional  resources  are 
necessary to accomplish this task. Also, such an approach should describe the State's 
time frames for developing and validating a data collection methodology and what 
specific  strategies  the  State  will  employ  to  collect  information  on  special  needs 
populations. 
 
 
Health Care Financing Administration  October 1998  14 
 
  Conducting studies using person-level encounter data among persons with special health 
care needs, such as: 
 
  patterns of health service use, including patterns of under utilization, 
  access to providers servicing special needs groups, 
  movement of high cost patients between MCOs, and 
  patterns of adverse selection by selected diagnosis. 
 
  Developing specific outcome measures for special needs populations (in addition to any 
utilization review activities). Such measures if developed should describe how these 
outcome measures will ~e used to assess MCO performance, whether such measures 
will be tied to financial incentives, and how the results of these efforts are linked to 
improving (or maintaining the functional status or independence) the health status of 
Medicaid  beneficiaries  (e.g.,  Massachusetts  and  Arizona  have  undertaken  such 
initiatives). 
 
  Conducting an assessment to determine any differences in access and use of services 
based on racial or ethnic factors or other access priorities based on review and analysis 
of prior utilization patterns. 
 
  Undertaking medical record reviews, consumer surveys, focus studies, or other types of 
studies to assess the quality of care within MCOs for persons with special health care 
needs. 
 
 
V.  BENEFITS AND THE DELIVERY SYSTEM 
 
The system of care for persons with special health care needs must be capable of responding to both 
the routine and unique medical and social needs of these enrollees. As a result of this uniqueness, 
there  is  no  single  model  of  care  that  is  most  appropriate.  Creativity  and  flexibility  needs  to  be 
encouraged  to  assure  responsiveness  to  individual  needs  in  a  timely  manner.  There  are  issues, 
however, which all models share and which must be addressed. Among the issues that all care 
delivery models must address are: 
assuring the availability of adequate numbers of providers to care for the target population, assessing 
provider experience and expertise against the population to be enrolled, assuring linkages with non-
Medicaid services needed to care for the target population, and any special accommodations needed in 
order to care for persons with special health care needs. 
 
Health Care Financing Administration  October 1998  15 
 
An essential component of providing successful care and services to individuals with special health 
care needs is the effective provision and coordination of needed supports. The generic term "supports" 
means material and personal assistance that is directly related to the individual's ability to experience 
the best possible outcomes from the medical care provided. For example, the provision of consumer-
directed  personal  assistance  services  has  been  shown  to  be  a  major  variable  in  both  avoiding 
institutionalization and in improving physical health and quality of life for persons with special health 
care needs. The State needs to demonstrate how its network of inter-related health services and 
supports  operates  to  achieve  the  best  possible  outcomes  for  the  consumer,  including  improved 
consumer satisfaction, quality of life and physical health. This and other important benefits and 
delivery system issues are identified below and should be taken into consideration in the State's 
design. 
 
States should consider: 
 
  Approaches  for  delivering  services  to  persons  with  special  health  care  needs  that 
encourage  innovation  along  with  improved,  more  efficient  service  delivery.  Such 
approaches include, but are not limited to: 
 
  Selective contracting with MCOs that want to develop new approaches for care 
delivery. 
  Risk adjustment (see Finance section) so as not to penalize MCOs that provide 
needed services in an exceptional manner. 
  Partnering with MCOs to jointly develop new or better service delivery models. 
  Tailoring contract specifications for special needs populations to the geographic 
area being served. Approaches in rural communities where there are often a lack 
of any services, not just specialty care, varies from large urban settings. 
 
  Including providers that possess the technical expertise and experience needed to care 
for special needs populations into the provider network for delivering services (e.g., 
Title V programs for children with special health care needs, Ryan White CARE Act 
programs for HIV/AIDS). 
 
  Defining  the  benefits  package  for  special  needs  populations,  for  both  children  and 
adults, and describing the range of services (and any limits on those services) provided 
for the physical and mental health needs of 
 
 
 
 
Health Care Financing Administration  October 1998  16 
 
beneficiaries. 
 
  Developing  policies  and  procedures  for  assuring  that  special  needs  beneficiaries 
enrolled in MCOs will be referred by the MCO to fee-for-service Medicaid-covered 
benefits  covered  as  State  Plan  services  carved  out  of  the  capitated  rate  (e.g., 
pharmaceuticals,  dental  care,  mental  health  services,  substance  abuse  treatment)  or 
under 1915(c) programs. 
 
  Providing  adequate  assurances  on  the  extent  to  which  new  pharmaceuticals  (e.g, 
multiple drug therapies for HIV care), related tests, and new treatment modalities will be 
accessible in the care delivery system environment. 
 
  Making  the  delivery  system  accessible  to  beneficiaries  with  mental  and  physical 
disabilities  in  accordance  with  the  ADA.  Further,  the  State  should  describe  the 
mechanisms it has identified to respond to situations in which services are not accessible 
or persons with disabilities experience discrimination in attempting to access services. 
 
  Determining appropriate mechanisms, in conjunction with MCOs, to permit specialists, 
when appropriate, to act as gatekeepers for persons with special health care needs. 
Further, States/MCOs should consider establishing procedures to permit persons with 
special health care needs to obtain standing referrals to a specialist in-network or out-of-
network if the MCO does not have a provider with appropriate training and experience. 
And, States should consider ways of determining appropriate training and experience. 
 
  Assessing how the State intends to address medical necessity in the contract and how 
this relates to what is contained in their State Plan. Such discussions should consider 
issues involving maintenance and increased functional status versus traditional medical 
models  which  focus  more  on  the  issue  of  improvement.  Further,  medical  necessity 
discussions need to be held in the context of the total spectrum of services needed by 
persons with special health care needs and whether all those services are available under 
the Medicaid program or whether appropriate linkages and service agreements need to 
be made with other providers with alternative sources of funding (e.g., Title V, Ryan 
White CARE Act, Medicare). 
 
 
 
 
 
 
Health Care Financing Administration  October 1998  1
7 
 
  Assessing whether there are additional services that would be of particular 
benefit to persons with special health care needs, not contained in the State 
Plan or in the State's definition of medical necessity, that the State could 
include in its contracts with MCOs that go beyond the standard benefit 
package (e.g., habilitative care). However, no additional Federal payment 
from the Medicaid program (FFP) would be available for such additional 
services. 
 
  Assessing  the  role  of  gatekeepers  and/or  specialists  in  determining 
authorization for services. Further, States should consider ways to assess 
the role of the case manager and patient in the use of specialty providers 
and services. 
 
  Establishing  linkages  with  social  programs  such  as  special  education, 
criminal  justice,  welfare,  transportation,  housing,  and  other  public 
assistance programs. States should assess the extent to which efforts are 
being made (by the State and through the State's contracts with MCOs) to 
coordinate non-Medicaid health care services and enabling services. 
 
  Developing  a  mechanism  to  assess  and  provide  access  to  specialized 
adaptive equipment and medication that are covered in their State Plan. 
 
The need for case management and care coordination for persons with special health care 
needs in a care delivery system is important to assure identification of service needs, 
timely receipt of services, the sharing of information within the care system, and efficient 
use of resources. The integration and coordination of services (and information related to 
those services) is of particular importance to individuals with special health care needs 
who often receive services from multiple providers in multiple locations. In addition, as 
some special health needs populations receive some of their care through an MCO and 
the remainder outside the MCO, the need for case management and coordination is even 
more  critical  to  assure  appropriate  receipt  of  services,  quality  monitoring,  and 
reimbursement. 
 
States should consider: 
    Assessing the availability of case management services to coordinate 
services 
    and gauge the types of training case managers receive. Further, States 
    should consider efforts to develop and utilize individual care plan or health 
    needs assessment tools to assist in management decisions based on  expected 
 
 
 
 
 
Health Care Financing Administration  October 1998  18 
 
goals  along  with  ways  to  assess  how  effective  case  managers  are  in 
procuring needed services for persons with special health care needs. And, 
States  should  consider  developing  qualifications  (e.g.,  degree,  license, 
experience) that case managers need to participate. 
 
  Ensuring that services are coordinated between acute care and long term 
care  needs,  where  appropriate,  to  assure  integration,  coordination,  and 
nonduplication of services and payments. 
 
  Identifying  the  most  appropriate  ways  patients  with  complex  medical 
conditions are managed  e.g., designated advocates (with specific training 
-- 
in  needs  of  patient),  "exceptional  needs  coordinators".  general  case 
manager, tracking authorization of services, or others. 
 
  Enabling  persons  with  special  health  care  needs  and  their  families/care 
givers to participate in the development of care plans and to have informed 
choice of providers. 
 
 
VI. FINANCE 
 
The manner in which States decide to reimburse MCOs and providers for the delivery of 
services plays a major factor in how those systems of care operate and how enrollees 
access services. The methodologies used by State's to reimburse MCOs and providers 
continue to evolve, particularly as State's contemplate serving persons with special health 
care needs. The issues States face when providing services to special needs populations 
include a recognition that resource use is more frequent and intense and that MCOs and 
providers experienced in the delivery of care to special needs populations may cost more. 
Therefore reimbursement methodologies should not place MCOs and providers at undue 
risk for caring for these groups. It should be noted that reimbursement approaches vary 
widely, from risk-based approaches to fee-for-service or hybrid models, each having its 
own set of pros and cons, both from the standpoint of a purchaser and as a provider of 
care. This issue is raised at the outset so as not to leave the impression that the choice of 
managed care as a delivery system for persons with special health care needs necessitates 
a particular reimbursement approach. 
 
 
Health Care Financing Administration  October 1998  19 
 
States should consider: 
 
  Developing rates of payment to MCOs, prior to enrollment of persons with 
special health care needs, that assure adequate payments. These methods 
could include risk-based, capitated strategies or lower [financial] risk, fee-
for-service or primary care case management (fee-for-service plus monthly 
case management fees) reimbursement strategies. 
 
  Developing  reimbursement  methodologies  (e.g,  diagnosis-based  risk 
adjusted capitation rates, fee-for-service, risk sharing, risk corridors, stop-
loss protection, reinsurance coverage) that address concerns related to the 
possibility of adverse selection (e.g., protections against undue financial 
risk or MCOs de-marketing their services to avoid financial risk resulting 
from enrollment of persons with special health care needs). 
 
  Determining whether new pharmaceuticals or other new technologies or 
treatment  modalities  (e.g.,  for  HIV  care)  are  to  be  provided  within  a 
capitation rate and what adjustments will be made to account for these 
potentially costly new drugs or treatments. 
 
  Providing  appropriate  financial  incentives  to  providers  and  MCOs  to 
encourage appropriate delivery of care to persons with special health care 
needs. Such approaches also must recognize that serving individuals with 
special health care needs takes more time and resources than with healthier 
patients and that treatment of persons with special health care needs is an 
ongoing investment that may entail higher short-term expenditures but will 
result in longer term savings due to appropriate and timely treatment. 
 
 
 
 
 
 
 
 
 
 
 
 
 
Health Care Financing Administration  October 1998