Summary of Reports

Actuarial Analysis of the Health and Human Services Commission's Medicaid Managed Care Rates

The General Appropriations Acts enacted by the 87th and 88th Legislatures directed the State Auditor’s Office to conduct an actuarial analysis of the Health and Human Services Commission’s (Commission) fiscal year 2023 and 2024 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. Additionally, those General Appropriations Acts required the State Auditor’s Office to provide an audit report on the rate-setting process used by the Commission.

Reports on Fiscal Year 2024 Rates

Actuarial Analysis of the Health and Human Services Commission's Fiscal Year 2024 Medicaid Managed Care Rates

SEPT 2023 | Full Report

Summary

SAO Cover Letter

The State Auditor’s Office contracted with the actuarial firm Milliman, Inc. to evaluate the actuarial soundness of the rates and analyze key factors that affect the rates. Milliman concluded that, overall, the Commission followed methods to produce actuarially sound fiscal year 2024 capitation rates and did not identify a program-wide pattern of over- or under-funding or material issues. However, Milliman made several recommendations to improve the actuarial process and mitigate the risk of future unsoundness.

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Milliman's Report: Review of FY 2024 Texas Medicaid Managed Care Capitation Rate Development Process

Jump to: Executive Summary
Jump to: Review Conclusions
Jump to: Exhibits

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Response from the Health and Human Services Commission to the Milliman Report

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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Follow-up on SAO Audit Recommendations

The Implementation Status of Recommendations from a Prior Audit of the Health and Human Services Commission’s Medicaid Managed Care Rate-setting Process

OCT 2023 | Full Report

Summary

Fully Implemented

The Commission developed and implemented a process to consistently communicate to its Actuarial Analysis Department the results of the agreed-upon procedures engagements and year-end reconciliations of Managed Care Organizations' financial statistical reports.

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Fully Implemented

To enhance communication with state oversight entities in its preliminary and final rate reports, the Commission:

Included a thorough explanation of all rounding methodologies used in the rate-setting process.
Explicitly addressed whether analyses pertinent to the rate-setting process were conducted by the Data Analysis Unit.

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ONGOING

The Commission should verify that it obtained all contract team members’ required certifications and disclosures when completing its solicitation review checklist.

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Reports on Fiscal Year 2023 Rates

Actuarial Analysis of the Health and Human Services Commission's Fiscal Year 2023 Medicaid Managed Care Rates

AUG 2022 | Full Report

Summary

SAO Cover Letter

The State Auditor’s Office contracted with the actuarial firm Milliman, Inc. to evaluate the actuarial soundness of the rates and analyze key factors that affect the rates. Milliman concluded that, overall, the Commission followed methods to produce actuarially sound fiscal year 2023 capitation rates and did not identify a program-wide pattern of over- or under-funding or material issues. However, Milliman made several recommendations to improve the actuarial process and mitigate the risk of future unsoundness.

Jump to Cover Letter

Milliman's Report: Review of FY 2023 Texas Medicaid Managed Care Capitation Rate Development Process

Jump to: Executive Summary
Jump to: Summary Tables of Recommendations and Observations
Jump to: Appendices

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Response from the Health and Human Services Commission to the Milliman Report

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An Audit Report on the Health and Human Services Commission's Medicaid Managed Care Rate-setting Process

OCT 2022 | Full Report

Summary

NOT RATED

MEDICAID MANAGED CARE COST DRIVERS

Significant cost drivers include: (1) expected changes in the cost of providing health care services and (2) changes in enrollment requirements. Health care costs comprise between 88 percent and 92 percent of the rates.

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LOW

RATE-SETTING PROCESS

The Commission established effective business processes for setting the fiscal year 2023 Medicaid managed care rates and established oversight processes for data critical to setting the rates.

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MEDIUM

COMMUNICATION WITH OVERSIGHT ENTITIES

The Commission’s rate reports addressed most required information; however, it could enhance communication with oversight entities by explicitly addressing certain General Appropriations Act requirements.

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LOW

CONTRACT PLANNING, PROCUREMENT, AND FORMATION

The Commission planned, procured, and formed its actuarial services contract in accordance with applicable requirements.

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HIGH

VENDOR SELECTION

The Commission followed applicable requirements in selecting its actuarial services contractor. However, contract team members did not consistently complete required certification and disclosure forms.

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LOW

CONTRACT OVERSIGHT

The Commission issued payments to its actuarial services contractor in compliance with applicable rules and monitored that contractor for compliance with the terms of its contract.

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