CARVING OUT CONDITIONS FROM GLOBAL CAPITATION RATES - PROTECTING HIGH-COST PATIENTS, PHYSICIANS, AND HEALTH PLANS IN A MANAGED CARE ENVIRONMENT

The purposes of this study were (1) to develop a method for identifyin g individuals with high-cost medical conditions, (2) to determine the percentage of healthcare spending they represent, and (3) to explore p olicy implications of ''carving out'' their care from managed care cap itation. Annual payments over a 2-year period to enrollees of three he alth plans-a traditional fee-for-service plan, a moderate-sized manage d care organization, and a state Medicaid program-were determined by u sing a cross-sectional analysis of insurance claims data. The main out come measures were the number of enrollees with total annual payments in excess of $25,000 and the contribution of these high-cost enrollees to each health plan's total costs. Forty-one groups of diagnosis and procedure codes representing a combination of acute and chronic condit ions were included on the list of carve-out conditions. Pulmonary insu fficiency and respiratory failure together accounted for the largest n umber of high-cost individuals in each health plan. Solid organ and bo ne marrow transplants, AIDS, and most malignancies that required high- dose chemotherapy were also important. The carve-out list identified m ore than one third of high-cost individuals enrolled in the Medicaid p rogram, approximately 20% of high-cost managed care enrollees, and 10% of high-cost fee-for-service enrollees. These data confirm that it is possible to identify high-cost individuals in health plans by using a carve-out list. Carving out high-cost patients from capitation risk a rrangements may protect patients, physicians, and managed care organiz ations.