1. HealthChoice CY 2009 Rate Setting Update Medicaid Advisory Committee Meeting September 25, 2008

2. 2 Process b Met with MCOs monthly starting in February to discuss new rate compilation and any issues b Met with DBM in July to discuss rate impact and request approval of rate increase b Submitted rates to MCOs in August 2008 and met individually with all plans b Submitting regulations to AELR for January 2009 effective date b MCOs are expected to give notice of intention to participate in CY 2009 by October 1, 2008

3. 3 Rating Trends – CY 2009 vs. CY 2008 PMPM Trends used in Developing January 2008 Rates PMPM Trends to be presented in Developing January 2009 Rates ServiceCY05/06 CY06/07CY07/08CY06/07CY07/08CY08/09 Inpatient4.9%7.7%6.5%6.0%3.3%4.7% Outpatient6.1%7.1%6.2%8.2%8.4%8.2% Physician4.3% 2.6%4.9%6.0% Pharmacy6.3% 3.1%6.4%5.8% Dental5.3% 13.4%9.8%8.8% All Other5.2% 0.6%1.0%1.3% Total 5.2%6.5%5.9%5.3%5.0%5.7%

4. 4 2009 Rate Setting b Overall rate increase of 5.5% with a FY 2009 budget impact of $ 28M GF b Rates are based on CY 06 audited consolidated financial data trended forward b Other observed trends include: City(4.7%) vs Rest of State(5.9%) differential Family and Children(9.3%) vs Disabled(3.1%) b Issues included in the base: physician and dental fee increases and decreases due to efficiency adjustment, HIV/AIDS drug carve out and 1% budget action

5. 5 MCO Financial Results b Year Result Rate Margin Increase % b CY 00 $ 3,850,332 margin.4% b CY 01 $ 2,511,347 margin 4.5 %.2% b CY 02 $ 106,587 margin 7.9 % --- b CY 03 $29,511,052 margin 8.5 % 2.2% b CY 04 $26,400,623 margin 5.3 % 1.8% b CY 05 $58,396,843 margin 5.8 % 3.7% b CY 06 $62,112,557 margin 6.3% 3.6% b CY 07 $35M margin projected 5.2% b CY 08 $10M margin projected 4.4%* b CY 09 5.5% *Actual increase of 6.7% was reduced to account for HIV/AIDS drug carve out.

6. 6 Rate Setting Adjustments b Most significant adjustments for CY 09 rate setting: Fixed percentages for profit (1.5%) and contingency margin (.34%) as a percentage of medical expenses Administrative percentage is 12.6% of expenses Reviewed regional analysis with the final decision to remain with two regions, City and Rest of State Mid year adjustment will continue and include the HSCRC hospital factor updates Dental will be carved out effective July 1 and the adjustment will be made in the mid year rates Statewide incentive methodology changed to increase the qualification criteria to 24 of 24 jurisdictions by January 2010. Amount was reduced by one third $5 M set aside for a quality initiative Continuing 1 % cost containment