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Medicaid Health Plans: Are ASPs Right for You?

© Pat Kelly and Gregory Legrow with assistance from Roy Sailor

For decades, the private sector has successfully used managed care programs as a means of providing cost-effective health care to millions of Americans. Attempting to achieve savings similar to the private sector, state Medicaid programs have also turned to the use of selected provider networks, medical management, and financial incentives to tighten spending and control costs. In 1991, only 9.5 percent of the 28.3 million Americans enrolled in Medicaid were covered by some type of managed care program. Data published by the Health Care Financing Administration (HCFA) in June of 1999, clearly show a steady increase with more than 55 percent now enrolled in some type of managed care program. Medical and administrative costs continue to climb and stretching capitation dollars to cover costs is no easy task. Couple this with a high-risk population, an ever changing membership roster, and the state’s unique reporting requirements, and managing a Medicaid health plan becomes a considerable challenge.

Information technology (IT) has become an essential tool for all health plans to run their businesses. For managed Medicaid plans the needs for sophisticated systems are no less, nor are the challenges of managing those systems. Common issues include the high capital costs associated with acquiring technology, high maintenance costs, and a competitive IT labor market where a limited number of qualified candidates flock to organizations that can afford to pay high salaries and offer attractive incentive options.

This report addresses an alternative approach to obtaining the administrative applications and support necessary to run a health plan. This approach has the potential to:

• reduce the need for capital investments,
• guarantee performance levels and application up-time,
• minimize maintenance, and
• lower total cost of ownership.

The use of Application Service Providers (ASPs) is a new twist to service bureau and outsourcing offerings. It is important that Medicaid health plans understand the ASP approach to acquiring software and support so they can use it appropriately and to the benefit of their organization. To that end, this report is a guide for managed Medicaid plans to evaluate core administrative ASP vendor offerings against traditional licensing agreements.

For additional background information on ASPs, please see ASPs: An Executive Report.

The copyright of the article Medicaid Health Plans: Are ASPs Right for You? in E-Health/Telemedicine is owned by Pat Kelly and Gregory Legrow with assistance from Roy Sailor. Permission to republish Medicaid Health Plans: Are ASPs Right for You? in print or online must be granted by the author in writing.