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Incentives in a Medicaid Carve-Out: Impact on Children with Special Health Care Needs


  • Moira Inkelas

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    • Address correspondence to Moira Inkelas, Ph.D., Department of Health Services, UCLA School of Public Health, Center for Healthier Children, Families, and Communities, 1100 Glendon Ave., Suite 850, Los Angeles, CA 90024.


Objective. To evaluate whether a specialty care payment “carve-out” from Medicaid managed care affects caseloads and expenditures for children with chronic conditions.

Data Source. Paid Medicaid claims in California with service dates between 1994 and 1997 that were authorized by the Title V Children with Special Health Needs program for children under age 21.

Study Design. A natural experiment design evaluated the impact of California's Medicaid managed care expansion during the 1990s, which preserved fee-for-service payment for certain complex medical diagnoses. Outcomes in time series regression include Title V program participation and expenditures. Multiple comparison groups include children in managed care counties who were not mandated to enroll, and children in nonmanaged care counties.

Data Collection/Extraction Methods. Data on the study population were obtained from the state health department claims files and from administrative files on enrollment and managed care participation.

Principal Findings. The carve-out policy increased the number of children receiving Title V-authorized services. Recipients and expenditures for some ambulatory services increased, although overall expenditures (driven by inpatient services) did not increase significantly. Cost intensity per Title V recipient generally declined.

Conclusions. The carve-out policy increased identification of children with special health care needs. The policy may have improved children's access to prevailing standards of care by motivating health plans and providers to identify and refer children to an important national program.