Funder: West Health Policy Center

Author: Debra Lipson, Mathematica Policy Research

August 2016 | Technical Assistance Brief


Many states are creating or expanding Medicaid managed long-term services and supports (MLTSS) programs to improve quality and control costs. To accomplish these goals, capitation rates paid to managed care plans should reflect the expected costs of care for the LTSS beneficiaries enrolled in these plans. This brief, supported through the West Health Policy Center, explains the role of risk adjustment in setting accurate, actuarially sound capitation rates for MLTSS plans, and the challenges in developing risk adjustment models that are suited to MLTSS programs. Risk adjusting MLTSS capitation rates to account for enrollees’ functional and cognitive status may improve the accuracy of rates paid to each plan. However, risk adjustment is technically challenging, and the importance of using risk adjustment in MLTSS programs may vary based on state-specific program features, such as which population groups are enrolled, the benefits covered, whether enrollment is mandatory or voluntary, and the number and type of participating health plans. State officials should ensure they understand the benefits and challenges of adopting an MLTSS risk adjustment model for their programs.