Opportunities To Promote Financial Integration For Dual-Eligible Individuals – Healthcare
Manatt, Phelps & Phillips LLP
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More than 12 million Americans are eligible for Medicare and Medicaid, including about 7.5 million adults age 65 and older and about 4.5 million people with disabilities under the age of 65. Many of these dual-eligible individuals have complex health care needs, which contributes to their disproportionate share of Medicare and Medicaid program costs. Dual eligible individuals account for 15% to 20% of enrollments in each program, but approximately one-third of each program’s total spend.
Most dual-eligible individuals receive care in uncoordinated Medicare and Medicaid fee-benefit schemes, 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 long-term care facilities and home health services and the most behavioral health care. The lack of coordination between Medicare and Medicaid benefits in these systems increases the likelihood that those already at risk will experience suboptimal care and adverse health effects. It also encourages Medicare and Medicaid to shift costs to the other program since there is no financial incentive to work together and allocate resources efficiently. Finally, it prevents Medicare and Medicaid health plans and providers from coordinating “whole-person” care for dual-eligible individuals because they have limited incentives or data to do so.
Recognizing these disadvantages, almost since the inception of the Medicare and Medicaid programs, federal and state policymakers have taken various approaches to better coordinate care for dual eligible individuals. These approaches include the All-Inclusive Care for the Elderly (PACE) programs, Medicare Advantage (MA) Dual-Eligible Special Needs Plans (D-SNPs), and the Federal Financial Alignment Initiative (FAI) or “Dual Demonstration.” scheduled to expire by 2025. Despite these efforts, as of 2020, approximately 12% of dual-eligible individuals were enrolled in integrated care programs.1 A key impediment to their growth, particularly D-SNPs, is the lack of clear financial incentives for states to continue their development, including the ability for states to Participate in Medicare savings resulting from their investments in LTSS and behavioral health for dual eligible individuals.
This report highlights two existing strategies that government policymakers can use to improve the financial integration of Medicare and Medicaid and to allow states to participate as much as possible in Medicare savings accruing from Medicaid investments, which was an explicit feature of the FAI. Implementation of these strategies will help expand access to integrated care models for dual eligibles and increase enrollment. The report focuses on tracing 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 durable 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 legal framework and do not require action by Congress, although additional regulatory or programmatic guidance from the Centers for Medicare & Medicaid Services (CMS) may help clarify and encourage additional states to pursue these approaches . Several states have already implemented the following two complementary strategies:
utility design: States can influence the design of FIDE-SNP performance to drive efficient resource allocation across Medicare and Medicaid and seamless, holistic, and equitable care for dual-eligible individuals. For example, states may use the D-SNP model of care (MOC) or Medicaid’s care management requirements as a means of aligning and integrating care coordination across Medicare and Medicaid services within FIDE SNPs. States may also require or encourage FIDE SNPs to cover certain ancillary services that supplement Medicaid-covered services or are designed to offset 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 tariff setting: Working with their actuaries, states can more broadly assess and incorporate the expected savings for their Medicaid programs resulting from their aligned FIDE-SNP benefit design and integrated care into their Medicaid rate setting processes. The preamble to CMS Medicare Advantage CY 2023 and Part D Final Rule2 affirms that Medicaid per capita rates can be actuarially sound when they consider:
For each strategy described above, there are important governmental considerations related to the timing and processes for aligning benefit design and pricing in the Medicare and Medicaid programs, as well as access to Medicare data and the impact of these strategies on the population Beneficiaries, FIDE SNPs and Providers.
Given these strategies, there is a clear opportunity to improve the financial integration of Medicare and Medicaid to prevent cost shifting between programs, encourage states to pursue, and ultimately ensure, more integrated models of care for dual-entitlement individuals (particularly FIDE-SNPs). The delivery of care in the two programs is as seamless and consistent as possible for the beneficiary. Although these approaches are currently permitted under the program rules, additional guidance, guard rails or technical assistance from CMS would be helpful for states and their actuaries to better understand and implement the possibilities.
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