Mental health capitation for children and adolescents under Medicaid.

Abstract

average cost of services is lower than the capitation rate. Otherwise the contractor experiences a loss. If a contractor realizes a net loss, it may reduce the number of services provided or change the types of services offered, both of which may have negative effects on access to and quality of care for the enrollees (7). The contractor may opt to file for bankruptcy and cease to provide services, also negatively affecting access to and quality of care. Finally, the contractor may seek to raise the capitation rate, which increases the Medicaid budget. Therefore, ensuring a contractor’s financial solvency is not only in the interest of the contractor, but also of the payer and the enrollees. When multiple contractors are involved, some will have net profits while others will have net losses, creating a profit variation among the contractors. It is desirable to minimize this variation so that the negative effects on access, quality, and costs of care are limited. This study examined profit variations in multiple simulated scenarios of capitation of mental health services for children and adolescents eligible for Medicaid in Arkansas. Although the study looked at a single state, the results may provide guidance for policy makers in other states interested in structuring similar capitation arrangements.