Department of Health
Department of Social Services

Managed Care Rate Setting and Payment Practices

In managed care programs, the medical services needed by program participants are arranged for by a single service provider. This provider generally receives a flat fee for each program participant, rather than a fee for each service provided.

We examined the procedures used to set the rates paid to the managed care providers in New York's Medicaid program, which is administered by the Department of Health and the Department of Social Services. We found that the rate setting process is not adequately controlled. For example, 96 percent of the rates were put into effect an average of nine months after their effective dates, and incorrect information was used in setting some rates; as a result of this incorrect information, one provider was overpaid $2.4 million. (This overpayment was recovered when we brought the matter to the attention of Department of Social Services officials.) In addition, certain automated controls generally used in processing claims from Medicaid providers were not always used to process claims from managed care providers. We estimate that, if these controls were used for all managed care providers, at least $5 million a year in overpayments could be prevented. We recommend a number of improvements in the procedures used to set rates for Medicaid managed care providers.

For a complete copy of 95-S-135 click here.
For a copy of the associated follow-up report click here.
For a copy of the 90-day response click here.