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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. 

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:

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.


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