Evidence record
An Actuarial Analysis Of The Health And Human Services Commission’s Fiscal Year 2024 Medicaid Managed Care Rates Actuarial Soundness
- Jurisdiction
- Texas
- Publishing agency
- Texas State Auditor's Office
- Publication date
- September 1, 2023
- Source record
- Original document linked
Findings
7
Recommendations
7
Overall conclusion
The FY 2024 Texas Medicaid managed care capitation rates are actuarially sound overall, with no material program-wide under- or over-funding detected. Milliman identifies several recommendations to strengthen the rate-setting process and reduce future risk, and notes that CMS compliance and ongoing monitoring will continue to be important.
Scope
This actuarial analysis evaluates the FY 2024 Texas Medicaid managed care capitation rate development process for six certified programs (STAR, STAR Health, Dental, STAR+PLUS, STAR Kids, and Dual Demonstration) overseen by the Health and Human Services Commission (HHSC). The review covers the concurrent rate-setting process used to set annual capitation payments, including rate structure, base data validation, trend assumptions, programmatic adjustments, non-benefit expenses, CMS compliance, and related documentation. The scope encompasses for each program the enrollment data, historical costs, service categories, and the interrelationships among these factors, with attention to potential risk areas, credibility of risk groups (notably STAR Kids), and potential impact on program funding. Attachments include Milliman’s actuarial report and the Commission’s responses. The analysis relies on materials provided by HHSC and does not independently verify all data.
Findings (7)
Each finding has a stable link.
- F-364
Milliman concluded that overall HHSC FY 2024 capitation rates are actuarially sound and that there is no program-wide pattern of over- or under-funding.
- F-365
Actuarial soundness is a forward-looking determination; there is not a binary yes/no outcome, and reasonable variations may exist in rate development given uncertain future experience.
- F-366
Milliman identified 16 recommendations to improve the actuarial process and mitigate future risk, with 14 retained from the FY 2022 analysis and 2 new recommendations for FY 2024.
- F-367
Key recommendations include combining STAR Kids risk groups to improve credibility and reduce volatility; applying trends and adjustment factors to more granular service categories (inpatient facility, outpatient facility, ER, physician, etc.); expanding rate report documentation for non-benefit expenses so oversight bodies or another actuary can understand the development of these assumptions; and other methodology enhancements.
- F-368
Milliman observed that 23 observations were identified; 18 of these observations were retained from the FY 2023 review, with several removed or merged; two observations are new for FY 2024.
- F-369
The Commission’s response (Attachment 2) indicates continued support for the current methodology and a commitment to monitor rate-setting processes; attachments include Milliman’s Actuarial Report (Attachment 1) and the Commission’s response (Attachment 2).
- F-370
Caveats and limitations include reliance on data provided by the Commission and no independent verification; results are contingent on data completeness and accuracy.
Recommendations (7)
- R-330
Merger/clarification of overlapping recommendations from prior years as they are addressed by the Commission.
Related finding F-368 - R-324
Combine STAR Kids risk groups to enhance credibility and reduce annual volatility.
Related finding F-367 - R-325
Develop and apply trend assumptions and other adjustment factors at more granular service categories (e.g., inpatient facility, outpatient facility, emergency department, physician services).
Related finding F-367 - R-326
Expand rate report documentation for non-benefit expenses to allow CMS or another actuary to reasonably understand the development of these assumptions and compare community rates to MCO experience rates in STAR and STAR Kids.
Related finding F-367 - R-327
Retain and implement the remaining recommendations from the FY 2023 review where applicable, noting that 14 recommendations from FY 2023 are retained for FY 2024, and 2 new recommendations were added for FY 2024.
Related finding F-366 - R-328
Address documentation and methodological enhancements that improve transparency, CMS compliance, and the ability to monitor costs against actual experience.
Related finding F-367 - R-329
Evaluate and adjust recommendations related to administrative cost allocations and patient liability in program structures where applicable.