What is Medicaid Capitated Payment Reconciliation?

Over the past decade, Medicaid has transitioned to a managed care model where states pay a monthly premium, called a capitation payment, to Medicaid managed care plans who then take on the financial risk for those Medicaid enrollees. It’s estimated that as many as 70% of Medicaid enrollees get health care coverage through a managed care plan.

Because of the complexities of enrollment, disenrollment, payment rates based on beneficiary attributes, and more, managing those capitated payments can become problematic.  As a result, many managed care organizations put manual processes in place to reconcile state capitated payments. Here’s an overview of Medicaid capitated payment reconciliation:

What are Medicaid capitated payments?

In many cases, Medicaid capitated payments are similar to premium payments that individuals or employers pay to health insurers. Typically the amount a managed care plan earns is based on the attributes of the beneficiary. These attributes are distributed among cohorts, groups of similar people. The number of cohorts will vary by state but typically they are based on things like age, gender, and health status. Because an 18-year-old male has a different risk factor than a 40-year-old pregnant female, their capitated rates will be different.

Those cohorts can lead to payment delays. For example, a beneficiary may be in an age-based cohort that required a change in rates based on their reaching a new age band. The state may not immediately enter that change in the state’s enrollment system. If the beneficiary’s birth date is in July, the state may not send that change to the managed care organization until October. That means in August and September the managed care plan was underpaid. If the state fails to send that retroactive payment, the state underpaid the plan for that beneficiary for those months.

States generally transfer these payments to the managed care health plan with a detailed list matching payments to individuals.

Why do payers need to reconcile Medicaid capitated payments?

Simply put, because enrollment data — especially at the volume common in state Medicaid enrollment- can be difficult to manage. Members may disenroll, enroll and change cohorts — and thus rates — frequently. Managing those changes can take time and lead to a significant amount of missing and retroactive payments that can be difficult to manage.

What is automated Medicaid capitated payment reconciliation?

Automated capitated payment reconciliation leverages technology — like Certifi’s William™ platform — to ingest state payment data and managed care plan enrollment data. The software then compares that data to create reports and views that detail any discrepancies. The plan can send those discrepancies to the state for reimbursement.

Automated Medicaid capitated payment reconciliation enables managed care organizations to streamline the reconciliation process with software to ensure accurate payments.

What types of capitated payment errors do managed care organizations typically experience?

Common payment errors discovered when reconciling payments include:

  • An underpayment, even though the beneficiary is in the correct cohort
  • An overpayment, even though the beneficiary is in the correct cohort
  • An underpayment because the beneficiary is in the wrong cohort
  • An overpayment because the beneficiary is in the wrong cohort
  • A non-payment, meaning the plan didn’t receive a payment for a member
  • Unknown member, meaning  the plan received a payment for a member that doesn’t exist

How much money can automated reconciliation save a managed care plan?

Reconciling capitated payments at an individual level can be a time-consuming task, which is why some managed care plans perform little manual reconciliation; the juice isn’t worth the squeeze. But they should. One managed care plan estimated that they were being underpaid anywhere from $3 to $5 million. For their population, numbering around 400,000, that translates to anywhere from $7 to $13 per beneficiary annually. Even those with relatively small populations may experience a significant revenue gain by performing and streamlining their reconciliation process.

How much does automated Medicaid capitated payment reconciliation cost?

Typically vendors charge an implementation that covers building data interfaces and any unique reports required. A per member per month fee covers ongoing reconciliation management. Typically, these fees pale in comparison to additional revenue gained by reconciling capitated payments.

Certifi’s William™ platform helps Medicaid managed care plans reconcile capitated payments, recapturing lost revenue and ensuring accurate payments.


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