A Performance Audit
Actuarial Analysis of the Health and Human Services Commission’s Fiscal Year 2023 Medicaid Managed Care Rates
August 2022
Summary Analysis
Rider 5, page X-7, the General Appropriations Act (87th Legislature) directed the State Auditor’s Office to conduct an actuarial analysis of the Health and Human Services Commission’s (Commission) fiscal year 2023 Medicaid managed care rates and report on the actuarial soundness of the rates, as well as provide an analysis of key factors that affect the rates. This is the first of three reports that the State Auditor’s Office will release to address the Rider 5 requirements.
The State Auditor’s Office contracted with the actuarial firm Milliman, Inc. (Milliman) to evaluate the actuarial soundness of the rates and analyze key factors that affect the rates, including rate structure, historical cost and enrollment data, data validation, adjustments, trend assumptions, program changes, non-benefit cost assumptions, and COVID-19 impacts. Milliman concluded that, overall, the Commission followed methods to produce actuarially sound fiscal year 2023 capitation rates. Additionally, Milliman did not identify a program-wide pattern of over- or under-funding or material issues that indicate the rates are not actuarially sound. However, Milliman made several recommendations to improve the actuarial process and mitigate the risk of future unsoundness.
Milliman concluded that, overall, the Commission followed methods to produce actuarially sound fiscal year 2023 capitation rates. Additionally, Milliman did not identify a program-wide pattern of over- or under-funding or material issues that indicate the rates are not actuarially sound. However, Milliman made several recommendations to improve the actuarial process and mitigate the risk of future unsoundness.
Milliman made 25 recommendations to improve the actuarial process and mitigate the risk of future unsoundness.
Jump to Summary of Recommendations
Milliman’s report also includes observations, which either (1) indicate Milliman’s agreement with key aspects of the rate development process or (2) identify less significant methodological or technical deviations from best practices.
The STAR managed care program covers the greatest number of Texans with Medicaid. The STAR population includes low-income families, children, pregnant women, and some former foster care youth.
The STAR managed care program is estimated to cover roughly 4.0 million beneficiaries in FY 2023 at a program cost of roughly $12.3 billion (excluding directed payments).
The STAR Health program primarily covers children in foster care and is managed in partnership with Texas Department of Family and Protective Services.
The STAR Health managed care program is estimated to cover roughly 35,000 beneficiaries in FY 2023 at a program cost of roughly $465 million (excluding directed payments).
Children and young adults have access to dental health services through the Medicaid Dental program.
The Medicaid Dental managed care program is estimated to cover roughly 3.7 million beneficiaries in FY 2023 at a program cost of roughly $1.4 billion (excluding directed payments).
STAR+PLUS is a Texas Medicaid managed care program for adults with disabilities or age 65 or older.
The STAR+PLUS managed care program is estimated to cover roughly 551,000 beneficiaries in FY 2023 at a program cost of roughly $10.5 billion (excluding directed payments).
The STAR Kids program serves children with disabilities. The STAR Kids managed care program is estimated to cover roughly 169,000 beneficiaries in FY 2023 at a program cost of roughly $4.2 billion (excluding directed payments).
The Dual Demonstration managed care program serves certain clients dually enrolled in Medicare and Medicaid (also known as dual-eligible).
The program is open to eligible beneficiaries in the following counties: Bexar, Dallas, El Paso, Harris, Hidalgo and Tarrant.
The dual demonstration managed care program is estimated to cover roughly 36,000 beneficiaries in FY 2023 at a program cost of roughly $513 million (excluding directed payments).
The Commission’s response to Milliman’s report is included as Attachment 2. In its response, the Commission emphasized that its rates are actuarially sound and provided comments to support its current methodology. It stated it would continue to monitor its rate-setting processes to determine if adjustments are appropriate.
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