MDHHS, Milliman explain Medicaid capitation rate process as department seeks midyear adjustments

The Michigan Department of Health and Human Services and Milliman told the House Appropriations Committee how Medicaid managed‑care capitation rates are developed, why base data are lagged, and what triggers midyear rate amendments as the department pursues supplemental adjustments to close fiscal‑year gaps.

Amy Eppke, senior deputy director of financial operations at MDHHS, said the department is committed to maintaining access to care while setting actuarially sound managed care rates. She told the committee that the department’s supplemental request for health plan services includes a $55,000,000 adjustment needed to close out fiscal year 2024 and to align rates for fiscal year 2025. MDHHS emphasized that capitation rates must follow federal rules and be certified by a qualified actuary and reviewed by the Centers for Medicare & Medicaid Services (CMS).

Jeremy Cunningham and Chris Pettit of Milliman, the department’s actuarial contractor, walked the committee through the technical steps of capitation rate development. Key points they described: • Base data period and timing: certified capitation‑rate development typically uses a completed 12‑month historical period and, for the FY2025 rates discussed at the hearing, encounter and plan data from state fiscal year 2023 were used. That approach means base data commonly is two years behind the rating period because the state waits for a complete and reconciled historical year before projecting forward. • Steps…