Common use of Trend Clause in Contracts

Trend. Trend is an estimate of the change in the cost of providing a specific set of benefits over time, resulting from both unit cost (price and service mix) and utilization changes. Trend factors are used to estimate the cost of providing services in some future year (contract year) based on the cost incurred in a prior period (base period). Xxxxxx considered several information sources to develop the appropriate trend factors to use in the State’s rates. Several years of ABD <21 data by COS and the resulting trends were analyzed. This FFS data was a primary trend source. ABD <21 state fiscal year 2014 managed care data and six-month trends were also reviewed. Other sources, such as regional and national economic indicators and indices, provide broad perspectives of industry trends in the United States, the Midwest region, and the State. Examples of specific resources reviewed include the Department of Labor Consumer Price Index (local, regional, and national) data, federal reports and projections (for example, National Health Expenditures), and other health care industry reports (for example, Health Care Cost Institute). Xxxxxx’x proprietary information about other state Medicaid programs provides additional information about Medicaid patterns of care and how they affect trends. As part of the above, information regarding drugs that are moving off patent and those being introduced to the market is also used to inform the pharmacy trends. ENCLOSURE 4 Adjustments to Reflect an Efficient Managed Care Environment In addition to projecting the data forward (described in Enclosure 3), adjustments were made to reflect an efficient managed care environment. These adjustments are described within this section and are summarized below: • Managed Care Adjustments. • Provider Pricing Targets. • Care Coordination Expenses and Non-Claim Expense Load. • MCP/Hospital Incentive. • Applicable Taxes. • Affordable Care Act (ACA) Section 9010. • Pay for Performance. Managed Care Adjustments In alignment with ODM’s objective of purchasing more effective, efficient, and innovative health care, as well as actuarial rate setting assumptions moving from Medicaid FFS to managed care, Xxxxxx applied utilization and unit cost adjustments by COS. For unit cost adjustments, information from MCP surveys was also considered (see the Provider Pricing Targets section).

Trend. Trend is an estimate of the change in the cost of providing a specific set of benefits over time, resulting from both unit cost (price and service mix) and utilization changes. Trend factors are used to estimate the cost of providing services in some future year (contract year) based on the cost incurred in a prior period (base period). Xxxxxx Mercer considered several information sources to develop the appropriate trend factors to use in the State’s rates. Several years of ABD <21 data by COS and the resulting trends were analyzed. This FFS data was a primary trend source. ABD <21 state fiscal year 2014 managed care data and six-month trends were also reviewed. Other sources, such as regional and national economic indicators and indices, provide broad perspectives of industry trends in the United States, the Midwest region, and the State. Examples of specific resources reviewed include the Department of Labor Consumer Price Index (local, regional, and national) data, federal reports and projections (for example, National Health Expenditures), and other health care industry reports (for example, Health Care Cost Institute). Xxxxxx’x proprietary information about other state Medicaid programs provides additional information about Medicaid patterns of care and how they affect trends. As part of the above, information regarding drugs that are moving off patent and those being introduced to the market is also used to inform the pharmacy trends. ENCLOSURE 4 Adjustments to Reflect an Efficient Managed Care Environment In addition to projecting the data forward (described in Enclosure 3), adjustments were made to reflect an efficient managed care environment. These adjustments are described within this section and are summarized below: • Managed Care Adjustments. • Provider Pricing Targets. • Care Coordination Expenses and Non-Claim Expense Load. • MCP/Hospital Incentive. • Applicable Taxes. • Affordable Care Act (ACA) Section 9010. • Pay for Performance. Managed Care Adjustments In alignment with ODM’s objective of purchasing more effective, efficient, and innovative health care, as well as actuarial rate setting assumptions moving from Medicaid FFS to managed care, Xxxxxx Mercer applied utilization and unit cost adjustments by COS. For unit cost adjustments, information from MCP surveys was also considered (see the Provider Pricing Targets section).