AHIP Health Plan Finance and Risk Management : AHM-520

With regard to the Medicaid program in the United States, it can correctly be stated that

• A. States are prohibited from carving out specific services from the capitation rate that health plans receive for providing Medicaid services
• B. A state's payment to health plans for providing Medicaid services cannot be more than it would have cost the state to provide the services under Medicaid fee-for-service (FFS)
• C. The federal government provides none of the funding for state Medicaid programs
• D. Federal Medicaid law is different from Medicare law in that the federal government explicitly sets forth the methodology for payment of Medicaid-contracting plans but not Medicare-contracting plans

The Puma health plan uses return on investment (ROI) and residual income (RI) to measure the performance of its investment centers. Two of these investment centers are identified as X and Y.
Investment Center X earns $10,000,000 in operating income on controllable investments of $50,000,000, and it has total revenues of $60,000,000. Investment Center Y earns $2,000,000 in operating income on controllable investments of $8,000,000, and it has total revenues of $10,000,000. Both centers have a minimum required rate of return of 15%.
One difference between the RI method and the ROI method is that

• A. Only RI is useful to Puma for comparing investment centers of different sizes
• B. The RI method demands greater goal congruence from Puma's managers than does the ROI method
• C. Only RI can lead to decisions that improve Puma's short-term profits at the expense of its long-term objectives
• D. The RI method favors Puma's small investment centers more than does the ROI method

Dr. Jacob Winburne is compensated by the Honor Health Plan under an arrangement in which Honor establishes at the beginning of a financial period a fund from which claims approved for payment are paid. At the end of the given period, any funds remaining are
paid out to providers. This information indicates that the arrangement between Dr. Winburne and Honor includes a provider incentive known as a:

• A. Withhold, and any deficit in the fund at the end of the period would be the sole responsibility of Honor
• B. Withhold, and any deficit in the fund at the end of the period would be paid by both Dr. Winburne and Honor according to percentages agreed upon at the beginning of the contract period
• C. Risk pool, and any deficit in the fund at the end of the period would be paid by both Dr. Winburne and Honor according to percentages agreed upon at the beginning of the contract period
• D. Risk pool, and any deficit in the fund at the end of the period would be the sole responsibility of Honor

A product is often described as having a thin margin or a wide margin. With regard to the factors that help determine the size of the margin of a health plan's product, it can correctly be stated that the

• A. greater the risk a health plan assumes in a health plan, the thinner the product margin should be
• B. longer the premium rates are guaranteed to a group, the wider the health plan's margin should be
• C. more that competition acts to force prices down, the wider the product margins tend to become
• D. greater the demand for the product, the thinner the margin for this product tends to become

One way that the Medicare and Medicaid programs differ is that under Medicare, a smaller proportion of provider reimbursement goes to the primary care providers and a greater proportion of the reimbursement goes to hospitals and specialists.

• A. True
• B. False