Executive Summary
Over 12 million Americans are eligible for both Medicare and Medicaid, including roughly 7.5 million adults aged 65 and over and roughly 4.5 million people with disabilities under age 65. Many of these dual-eligible individuals have complex health care needs, contributing to their disproportionate share of Medicare and Medicaid program costs. Dual-eligible individuals represent 15%-20% of enrollment in each program but roughly one-third of each program's total spending.
Most dual-eligible individuals receive care in uncoordinated Medicare and Medicaid fee-for-service delivery systems, where Medicare pays for their hospital, primary care and preventive care services, and Medicaid pays for their long-term services and supports (LTSS), such as nursing facility and home health services, and most behavioral health care. The lack of coordination between Medicare and Medicaid benefits across these systems increases the likelihood that already high-risk individuals will experience suboptimal care and adverse health outcomes. It also encourages Medicare and Medicaid to shift costs to the other program, because there is no financial incentive to work together and allocate resources efficiently. Finally, it discourages Medicare and Medicaid health plans and providers from coordinating "whole-person" care for dual-eligible individuals, because they have limited incentive or data to do so.
Recognizing these disadvantages, federal and state policymakers have pursued various approaches for better coordinating care for dual-eligible individuals, nearly since the inception of the Medicare and Medicaid programs. These approaches include the Programs of All-Inclusive Care for the Elderly (PACE), Medicare Advantage (MA) dual-eligible special needs plans (D-SNPs), and the federal Financial Alignment Initiative (FAI) or "duals demonstration," which is set to expire by 2025. Despite these efforts, approximately 12% of dual-eligible individuals were enrolled in integrated care programs as of 2020.1 One major barrier to their growth, particularly D-SNPs, is the lack of clear financial incentives for states to pursue developing them, including the ability for states to share in Medicare savings accruing from their investments in LTSS and behavioral health for dual-eligible individuals.
This report highlights two existing strategies state policymakers can deploy for improving the financial integration of Medicare and Medicaid and, to the extent possible, allowing states to share in savings accruing to Medicare from Medicaid investments, which was an explicit feature of the FAI. Implementing these strategies will help expand access to and grow enrollment in integrated care models for dual-eligible individuals. The report focuses on pursuing these approaches through fully integrated D-SNP, or FIDE-SNP, models (see Figure 3 for more information on these models), which are the most integrated and permanent care models for dual-eligible individuals under current Medicare and Medicaid rules despite representing only 10% of the D-SNP market. Additionally, the strategies themselves are permissible within the current Medicare and Medicaid statutory framework and do not require congressional action, although additional regulatory or programmatic guidance from the Centers for Medicare & Medicaid Services (CMS) may help clarify and encourage more states to pursue these approaches. Several states have already implemented the following two complementary strategies:
Benefit Design: States can influence the design of the FIDE-SNP benefit to drive efficient resource allocation across Medicare and Medicaid and seamless, holistic and equitable care for dual-eligible individuals. For example, states can leverage the D-SNP model of care (MOC) or Medicaid care management requirements as a vehicle for aligning and integrating care coordination across Medicare and Medicaid services within FIDE-SNPs. States also can require or encourage FIDE-SNPs to cover specific supplemental benefits that complement Medicaid-covered services or are designed to avert the need for intensive Medicaid-covered LTSS or nursing home services. States can implement this strategy by adding state-specific requirements to their State Medicaid Agency Contract (SMAC) with FIDE-SNPs in their state.
Medicaid Rate Setting: Working with their actuaries, states can assess and incorporate expected savings to their Medicaid programs arising from their aligned FIDE-SNP benefit design and integrated care more broadly in their Medicaid rate-setting processes. The preamble to CMS' CY 2023 Medicare Advantage and Part D Final Rule2 confirms that Medicaid capitation rates can be actuarially sound if they consider "[t]he impact of MA supplemental benefits and any State-specific requirements for dual-eligible individuals on the projected costs and utilization of the Medicaid benefits covered by the Medicaid managed care capitation rates." That means that state Medicaid agencies can consider MA spending and requirements in Medicaid capitation rate determinations for FIDE-SNPs and the potential savings that could accrue from integration.
For each strategy described above, there are important state considerations related to the timing and processes for aligning benefit design and rate setting across the Medicare and Medicaid programs, as well as related to accessing Medicare data and to the impacts of these strategies on beneficiaries, FIDE-SNPs and providers.
Given these strategies, clear opportunity exists to improve the financial integration of Medicare and Medicaid to discourage cost-shifting across programs, incent states to pursue more integrated care models for dual-eligible individuals (particularly FIDE-SNPs) and, ultimately, to ensure the delivery of care across the two programs is as seamless and unified as possible for the beneficiary. Although these approaches currently are allowed under program rules, additional guidance, guardrails or technical assistance from CMS would be helpful for states and their actuaries to better understand and operationalize the opportunities.
Click here to continue reading . . .
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
