Financial Incentives Key Considerations
HCBS Incentives
A checklist developed by the Center for Health Care Strategies outlined the following approaches that states have used to increase HCBS incentives.
- Arizona blends its capitated rate assuming a targeted mix of nursing facility and HCBS use. Contractors can achieve savings by serving a greater number of beneficiaries in the community. The state has used this method to steadily increase HCBS assumptions over time.
- Minnesota pays an incentive payment for members who move out of nursing facilities and into community settings. Although Minnesota’s strategy pre-dates the national Money Follows the Person (MFP) initiative, it offers a blueprint for how you could incorporate your state’s MFP initiative in an MLTSS program.
- Massachusetts continues paying at the higher nursing facility rate for a set period of time if a long-term resident is discharged to an HCBS setting and continues paying at the lower HCBS rate for a period of time for persons admitted to nursing facilities. This provides an incentive to help people move out of nursing facilities and a disincentive to unnecessary admissions.
You are not limited to the incentives developed by these three states. As long as your payment methodology complies with Federal actuarial soundness requirements, you have great flexibility in including HCBS incentives.
Capitation of Targeted Benefits
Capitation of targeted benefits and the risk of cost shifting: Some MLTSS programs include some, but not all of the MLTSS program's covered services in a monthly capitated payment. Remaining services are reimbursed on a fee-for-service basis. An example of this approach is the Pennsylvania Adult Community Autism Program (ACAP).
You may be considering a similar approach because you want to use a community-based contractor (like Pennsylvania did in the ACAP) that does not have sufficient experience or risk reserves to be at risk for all services. This may help you achieve your program goals, but it introduces the risk of cost shifting to the services that remain fee-for-service.
Consider the following strategy to mitigate against cost-shifting:
- Make the MLTSS contractor responsible for coordinating both the capitated and FFS components to ensure good coordination of care, and set utilization targets for the FFS component. (You can do this by analyzing historical use of those services.) Consider a payment incentive that rewards the MLTSS contractor for using less than the targeted amount, and a penalty for using more.
Risk Adjustment
Risk adjustment may be a good risk-mitigation alternative to partial capitation. Risk adjustment refers to a range of strategies that you may use to make capitated payments more predictive of member costs. Risk adjustment helps ensure that payments are neither too high nor too low. They are based on characteristics of the members that have been correlated with costs over time. Therefore, risk adjustment provides an incentive to serve people with greater needs, since the payment for those persons will be greater.
Risk adjustment for LTSS populations is not highly evolved. Health- and diagnosis-based adjustors are thought to be predictive of acute care costs but not LTSS costs. Some states have incorporated a frailty adjuster, based on a functional assessment of need.
Performance Incentives
In addition to establishing incentives specific to HCBS, you may want to create performance incentives that address issues of particular relevance to your target group. For example, data from your traditional LTSS programs may indicate inadequate access to dental services or high turnover of direct support workers. You may want to craft measures for improving these issues, using your historical experience to establish a baseline. You would then set an improvement goal and can tie bonus payments to achieving or surpassing the goal.