In the post yesterday concerning the Iowa Medicaid waiver, a commenter asked what the state meant by a “capitated commercial dental plan carve-out”.
This is a common arrangement for Medicaid, Medicare or most private health insurance companies and plans. There are four chunks of information in that phrase. The first is capitated which means a fixed fee per person covered that may or may not be risk adjusted. Given that this is a dental plan and the pool of new members is very large (150,000 or so people), I’m betting that there is minimal risk adjustment. Commercial means the state is outsourcing the benefit. Dental defines the type of benefit, and carve-out is the key piece here. A carved-out benefit is where the general or over-arching policy will not provide a certain set of services but those services will be provided by a third party vendor.
Carve-out benefits are common in three areas; pharmacy, vision and dental. This is because these three areas are very different beasts for institutional and clinical reasons compared to major medical. Expertise in the healthcare world does not easily translate into appropriate expertise in the pharmacy, dental or vision worlds. It is often cheaper and better for a third party vendor to provide dental services. My company is a health insurance company with long standing contracts with a outside vendors to provide dental, vision and pharmacy services for our members. Every time that we have analyzed bringing these knowledge bases in house, the costs don’t pay off for half a generation. In the Iowa case, they indicate that they want a third party to provide a Dental HMO plan.