This Note examines the methodology New York State used to set capitation rates for a Medicaid health maintenance organization. After examining the methods used and the assumptions made in a particular case, the authors are able to draw lessons about the ratesetting process. They suggest the need for greater reliance on statewide data to assure fair and statistically stable estimates. Although the Note focuses on one state and its ratesetting for one particular plan (Health Care Plus), the issues raised have general interest for other plans and for other states concerned with setting capitation rates for Medicaid enrollees in prepaid plans.
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