Page 25 - Management Theory 2023-2024 Edition

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1. Diagnostic services, clinic services, prosthetic device related services
2. Transportation, rehabilitation and physical therapy related services
3. Prescription, optometrist and eyeglasses related services

According to the federal government, the state shall emphasize four basic criteria when providing Medicaid
benefit services. These include:

1. Each covered service under the plan must be sufficient in amount, duration and scope to justify the
successful therapeutic outcomes. For example, if the recommended therapy to treat community
acquired pneumonia requires a 21 day regimen of Amoxicillin, and if the state Medicaid programs cover
only a 7-day supply of medicine, then the state Medicaid program does not meet the federally required
criteria, and therefore is ineligible to receive the help from the federal government.

2. The state must not arbitrarily restrict or limit benefits that discriminate individuals on the basis of
medical diagnosis or disease.

3. The state must apply its Medicaid services to the whole geographical area of the state.

4. The state must provide its recipients a freedom of choice that allows recipients to obtain services from
any enrolled or participating providers.

Medicaid Reimbursements

Most states normally contract with MCOs on the capitation fee basis to provide services to Medicaid recipients.
For example, Maryland State may contract with the RX Care organization to provide medical benefits to
Medicaid recipients where the RX Care organization shall receive the flat fee of $150 per month per member
regardless of the service taken by Medicaid recipients.

However, under this fixed monthly capitation fee structure, the RX Care organizations have to provide all
medically necessary services to Medicaid recipients.

Most states normally fix the capitation fees based on prior claim histories; however fees may also vary because
of other factors such as geographical region, provider service types, etc. Many times this capitation rate or fee
may also include pharmacy services as part of medicaid benefits.

Many states now ask for prescription copayments for prescription related services. These copays may range
from $0.50 to $3.00 per prescription, however even a small amount of copayment may restrict the patient from
getting prescription benefits and result in larger expenses such as an emergency hospitalization expenses due to
not taking medications. For this reason many states are now trying to eliminate copayments from their Medicaid
plans.

The typical copayment reimbursement can be calculated by the following formula:

1. The dispensing fees generally range from $0.50 to $1.00 when managed care organizations (MCO)
manage the Medicaid benefits, and may increase up to $3.00 when the state manages Medicaid plans
on its own without the help of MCOs or PBMs.

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