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Washington, D.C.'s Performance-Based Medicaid Reimbursement

In August 2005, the District of Columbia's Department of Health announced it would incorporate performance-based payments into its contracts with managed care organizations (MCOs) serving Medicaid enrollees, following the lead of New York, California, Rhode Island, and other states.

Many of Washington's leading health indicators, particularly the incidence of diabetes and HIV, are significantly higher than national averages. In response, the district has begun requiring the three Medicaid MCOs to submit 41 HEDIS measures to illustrate how the plans are performing in various clinical and patient service areas.[1] The district plans to adjust for population demographics and health conditions when evaluating the HEDIS measures and comparing the health plans. "This is the first step in developing a pay-for-performance program in our Medicaid program," said Rob Maruca, Washington, D.C.'s Medicaid director. "We are vitally concerned that we are not only getting good service for our Medicaid patients, but that we are also getting positive health outcomes," he said.

The district is currently developing its quality-based reimbursement system. It is considering a system in which plans would be given capitated payments up front and, if they exceed performance measures, enhanced rates as bonuses. If a plan underperforms, it would be penalized. There is also a possibility that the district will use plans' performances to assign Medicaid beneficiaries into plans. Currently, beneficiaries are randomly assigned to one of three Medicaid MCOs at an equal rate. With the performance measures, the district could assign twice as many beneficiaries to the plan with the best results—creating a major impetus for plans to perform well.

The first reports with the HEDIS measures are due in July 2006. Washington is now in the process of procuring new MCOs. The new contracts will require MCOs to report the HEDIS measures and all, for MCOs serving Medicaid enrollees, to be accredited by the National Committee for Quality Assurance (NCQA). "Accreditation by a nationally recognized quality assurance organization such as NCQA will further enhance the quality of care for the beneficiaries of the DC Medicaid program," says Maruca.

[1] The Health Plan Employer Data and Information Set (HEDIS), developed by the National Committee for Quality Assurance, includes indicators of clinical care and customer service and enables comparisons among health plans.

For More Information
Contact: Robert T. Maruca, DC Medicaid Director, (202) 442-5988, [email protected],

See: Quality Matters: Pay-for-Performance in Medicaid, The Commonwealth Fund, April 2005.
Quality-Related Provider and Member Incentives in Medicaid Managed Care Organizations, Center for Health Care Strategies, July 2004.

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