Arizona is adding long-term care to its prepaid, capitated alternative to Medicaid. This article discusses the potential for this major cost-control experiment. Experience suggests that those able to qualify for long-term care will fare better than the poor did in the previous system. However, limiting eligibility will be the primary means of controlling costs; significant price competition is not likely to develop. The bidding process will serve more to transfer risk to contract providers than to improve program efficiency. Potential cost savings will be more than offset by an increased identification of need.

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