Since the Medicaid program was created by Congress in 1965, states have had great flexibility in how they manage their Medicaid programs. The same is also generally true of how states conduct Medicaid quality assurance and improvement activities. Government rules grant states wide latitude in establishing their own goals for Medicaid quality and in choosing the methods they use to achieve these goals. For example, CMS requires states to collect Medicaid encounter data, but the states are free to determine many of the specific features of the data, including the data elements themselves, reporting frequency, and level of aggregation (Matthews, 2000). As a consequence, state-to-state comparisons of Medicaid quality are largely infeasible.

Performance measures have become a popular state tool for assessing and promoting quality improvement in Medicaid managed care, but there are few useful quality performance measures for Medicaid FFS health care. Most states use a combination of publicly available measures and state-developed measures for Medicaid managed care (Kaye, 2001). In 2000, Medicaid HEDIS and Medicaid CAHPS were the most common national measure sets used by the states. However, states usually modify the specifications to tailor data collection to their own specific program needs (French and Miele, 2001). Many states have developed consumer report cards drawing from HEDIS, CAHPS, and other performance measures (Verdier and Dodge, 2002). Many states have also implemented provider incentive programs that employ performance indicators (Dyer et al., 2002).

Despite the variation in states’ HEDIS data specifications, the NCQA and the American Public Human Services Association have established a national database of Medicaid HEDIS statistics. In 2001, the database incorporated 168 individual Medicaid managed care plan HEDIS submissions (for 29 plans the data were unaudited). NCQA reports that although there were across-the-board improvements in commercial plans’ HEDIS performance, from 1998 to 2000, Medicaid performance was mixed (French and Miele, 2001).

There may be greater uniformity in performance data for Medicaid managed care once CMS implements related rules under the Balanced Budget Act of 1997, which directed CMS to develop specific protocols to guide the states’ conduct of external quality review of Medicaid managed care plans. In their current form, the protocols assume that states will continue to have flexibility in developing performance measures because they will be required to conduct their performance reviews only in a manner consistent with but not necessarily identical to the protocols (Centers for Medicare and Medicaid Services, 2001d).10 States will be free to specify


The draft protocols were still out for public comment while this report was being prepared.

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