Medicaid Advantage: A medical home for dual-eligibles

The authors propose a new Medicaid Advantage program that would integrate acute and long-term care benefits for dual-eligible beneficiaries into a single program.


Medicaid Advantage: A medical home for dual-eligibles


By Grace-Marie Turner and Robert B. Helms, Ph.D.

Submitted to the Medicaid Commission

Grace-Marie Turner of the Galen Institute and Bob Helms of the American Enterprise Institute have proposed a new Medicaid Advantage program that would integrate acute and long-term care benefits for dual-eligible beneficiaries into a single program. The program, submitted to the Medicaid Commission, would be managed by the states and would provide a medical home and better coordinated care for beneficiaries.

Background:
Our most vulnerable citizens – those dually eligible for Medicare and Medicaid – often fall into a fragmented care delivery system that perpetuates episodic rather than coordinated care. Patients may have difficulty accessing the medical care they need. And information about their care and their needs can be scattered among providers and facilities facing two different payment systems and sets of program rules.
Because physicians and others treating these patients don’t have the patient’s complete medical profile, patients can face gaps as well as duplication in treatments with no medical home responsible for optimizing their care.
To assure that Medicaid patients are receiving quality care, Medicaid must adopt new systems with better incentives to design more flexible and more effective care management programs for these recipients, especially those with disabilities and significant chronic illnesses. Having a medical home is central to this process. A comprehensive program that integrates Medicare and Medicaid coverage into a new integrated Medicaid Advantage plan would allow providers to focus on the best way to design and provide benefits to these beneficiaries with the right care in the right setting, rather than spending time on complying with rules for different payment systems. Significant efficiencies and better outcomes could be achieved through a comprehensive approach to providing health care for these Medicare and Medicaid-eligible beneficiaries.
Findings:
Cost-effectiveness studies of state Medicaid managed care programs have demonstrated that they generally save states money while providing better access to care for recipients. The commission also has heard numerous testimonies demonstrating the creativity of state and local governments in developing programs to target services to their vulnerable dually-eligible residents, often through contracts with private managed care organizations.
Vermont obtained a waiver to fine-tune delivery of long-term care services and demonstrated that better care can be provided more cost-effectively in appropriate settings when solutions are tailored to individual needs. We heard about similar examples in New York, Massachusetts, Arizona, and other states.
States are much more adept at tailoring these programs to their citizens than the Federal government because they are closer to the people being served and know better both their needs and the resources of the community to meet those needs. But states are not able to shoulder the full financial burden of providing these services. Continued Federal funding is essential.
Other options:
The Federal government has recognized the need to better integrate care for dually-eligible populations and has developed several programs as a result. The Program for All-Inclusive Care for the Elderly (PACE), targeted waivers, and Special Needs Plans (SNP) are the primary Medicare programs designed to achieve this goal.
• PACE is a capitated benefit program authorized by the Balanced Budget Act of 1997 and developed to provide better coordinated long-term care for Medicare and Medicaid recipients who have been certified as eligible for nursing facility care. PACE enables states to provide defined services to Medicaid recipients as a state option, and Medicare and Medicaid funds are integrated to allow a contracted plan to provide the care.
The state plan must include PACE as an optional Medicaid benefit before the state and HHS can enter into a program agreement with PACE providers.
While the program has had some success, it is a Medicare program with a Medicaid option and has not been widely adopted. And the BBA limits the number of PACE programs that may be implemented annually. As of January 2005, there were 73 PACE sites in the U.S. serving limited geographic areas.
• Several states (Massachusetts, Minnesota, and Wisconsin) obtained waivers to combine Medicaid and Medicare funds to purchase health care services for dually-eligible populations. But the waiver negotiations each took several years, limiting the appeal to other states interested in using this approach.
• The Medicare Modernization Act created a new coordinated care option called Special Needs Plans as part of the Medicare Advantage program. SNPs are distinct from regular Medicare Advantage plans in that they can enroll a group of individuals with “special needs,” such as 1) institutionalized beneficiaries; 2) dual eligibles; and 3) beneficiaries with severe or disabling chronic conditions.
SNPs are able to offer a full array of Medicare services, including supplemental benefits, through a single plan with a single benefit package and set of providers. Medicare Advantage payments to SNP plans are risk adjusted based upon beneficiary health conditions, dual eligible status, disability eligibility, and institutional status.
In 2006, 276 SNPs are available, with more than 500,000 enrolles, including 440,000 dually-eligible beneficiaries.
Absent other legislation, SNP authorization in the MMA will sunset on January 1, 2009.
But even with these programs, the Federal government -- through CMS -- still is in control of decisions for PACE, waivers, and SNPs, providing states much less flexibility than if they were running the plans themselves. For example, states must get authorization to put a dually-eligible patient into a managed care plan – an unnecessary administrative hurdle.
Recommendation for Medicaid Advantage
Some people have called for Medicare to take full responsibility for duals, but this centralization would move away from, rather than toward, more finely-tuned care for this vulnerable population. States need more flexibility than Medicare’s top-down system of rules can provide for patients requiring tailored care and services. States have demonstrated that they are up to the task.
On average, total spending for duals, including Medicare and Medicaid contributions, is more than twice as high as that for non-duals -- $20,840 compared to $10,050. It is essential to find a way to manage these costs and care delivery more efficiently.
We recommend creating a new Medicaid Advantage program modeled after the Medicare Advantage program, but with States, rather than the Federal government, in control.
Medicaid Advantage would offer dually-eligible recipients a medical home where they would receive a seamless continuum of medical care and care management under one program and not have care split between Medicare and Medicaid programs. But unlike Medicare Advantage, SNPs, and PACE, the states rather than the Federal government would be the primary managers of their Medicaid Advantage programs.
The Federal government would continue to provide financial support to the states for Medicare services, but through a risk-adjusted, capitated system of Medicare payments. States and the Federal government would continue to share the cost of the Medicaid portion of the benefit.
States or the plans they select could manage the full spectrum of services to provide an integrated care delivery program for dual eligible populations. These plans would be close to the patient, collecting and evaluating treatment data, and states would monitor the plans to make sure obligations are being met.
The Federal government would set and monitor goals, not micromanage processes, so that the states, in conjunction with health plans, can work to improve the quality of care, design plans to fit the needs of patients, and benefit from greater efficiency.
Mechanisms:
• The states would have the option of participating in the new Medicaid Advantage program which they would be primarily responsible for managing, with the goal of developing a better system of providing more efficient, coordinated care for their dually-eligible residents.
• Participating states would contract with competing health plans* to provide the full spectrum of care for dually-eligible populations and would enroll individuals into these integrated Medicaid Advantage care management plans.
o Patients could choose from among competing plans.
o Patients would have the ability to opt-out.
o Medicaid Advantage plans would be required to provide core Medicaid and Medicare services to duals, but states would have more authority and flexibility to design benefit packages that meet the specific needs of patients without having to request waivers.
o Plans would participate in a bidding process, submitting bids representing their cost of providing Medicare and Medicaid-covered services as well as other services determined by the states.
o States would build in incentives for plans to compete on the basis of quality and value and could reward health plans that provide higher quality care at a reduced price. States could also share in a portion of these savings.
o *States would have the option of managing the care and assuming the risks themselves, as Kentucky is doing with its new KY HealthChoices Medicaid reform plan.
• Financing: The states and the Federal government would each contribute, as they do today, to the costs of providing services to dually-eligible beneficiaries but through the new Medicaid Advantage program which would be managed by the states.
States and the Federal government already have some experience with the basic mechanisms that would be needed to calculate payments for this new program. The rate-setting and risk-adjustment systems that Medicare currently uses to pay Medicare Advantage plans and that states use to pay for standard Medicaid managed care programs would provide a foundation for their calculating payments that would fund this new integrated care management program for duals.
There would be three funding streams:
o Federal Medicare payments, which are generally provided through Medicare’s defined benefit structure, would be allocated to the states through a new funding mechanism. The Federal government would develop a system of capitated, risk-adjusted Medicare payments. These payments would be sent to the states to fund the Medicare portion of services for dual-eligible residents. This is not a block grant because funds would follow each recipient and would be adjusted for that patient’s risk profile. Medicare would use its actuarial data and payment history in determining the capitated rate it pays per dual eligible patient, and this funding stream would continue to be updated.
CMS is developing a system of risk adjustment that includes not only health status but also geographic payment variation, frailty, and other factors which could be employed in this new program.
o States would have two options in setting their payments for the Medicaid portion of services for their dual-eligible residents:
Those states that decide to contract with private managed care plans to provide coordinated care for their dual populations could calculate an actuarially-sound capitated rate for the state share of the Medicaid set of services. The plans, not the state, would be at risk.
• While many states have experience in setting payments for Medicaid managed care, their experience is in settings payments for acute care services, not long-term care support. As a result, they would need assistance in calculating these capitated payments for state-financed Medicaid services for duals.
Those states that decide to operate the program themselves and assume the risk (as well as potentially garnering more savings) could make contributions based upon their own Medicaid payment experience for services for duals, again with assistance in making the calculations.
In either case, a transition period would be required where the federal government and the states would share the risk until they have gathered enough information to refine this new system of payments.
Whether the state chooses to contract with Medicaid Advantage managed care plans or to operate the program itself, the states would still receive a federal match for their Medicaid contribution based upon existing formulas.
• Alternatively, CMS/Medicaid could determine a capitated amount of Medicaid funds that it would allocate per recipient based upon data about the cost of its share of Medicaid-covered services in that state for this population.
o Drug coverage, currently paid by Medicare, would be integrated into the Medicaid Advantage plans. Medicare would calculate a Part D allocation that would be returned to each state in the form of a capitated, risk-adjusted payment. This would be another part of the patient’s Medicaid Advantage funding stream.
Since implementation of Part D that assigned duals to drug plans, skilled nursing facilities have had many problems tracking many different drug plans and formularies for these residents. Medicaid Advantage would provide a mechanism to coordinate drug coverage, as well as medical care, through one plan.
States would have access to the pharmacy data that they lost after the transition to Part D in January, 2006.
• The joint Federal and state Medicaid contributions plus the Federal Medicare and part D contributions would be combined into one funding stream to finance care for duals through the new Medicaid Advantage plans. States could use this pool of money in designing benefits for duals and negotiating with health plans that would deliver required services. Duals would receive a full range of services currently financed separately through Medicare and Medicaid through this new integrated program, from hospitalization and skilled nursing care to physicians’ visits, personal care, home and community based services, prescription drugs, diagnostic and laboratory tests, etc.
o States would gain new flexibility in designing benefit packages in exchange for receiving a capitated, risk-adjusted payment from Medicare with fewer strings attached.
• Once the Medicaid Advantage plan has agreed on a contracted fee, the plans would be at risk for providing care to dual eligibles (except for those states that decide to carry the risk themselves). The plans or state contractors would be responsible for providing care, for collecting and providing performance data on treatments and outcomes for each patient, and for reporting this information to the states for their monitoring activities. The plans would be accountable for outcomes with strict oversight by the states, but they would have the flexibility to manage care creatively to meet the needs of patients.
• States also would be given greater flexibility to coordinate treatment for those with mental illness through Medicaid Advantage plans. Providing targeted case management, rehabilitation services, medication management, community mental health center services, and other less-costly services through a Medicare Advantage medical home could reduce the use of expensive hospital and emergency room services while providing improved care for these patients.
• The Federal government and the States would be responsible for carefully monitoring the plans and for bringing action against plans that do not meet their contractual obligations.
Benefits:
Medicaid Advantage (MD-Advantage) would minimize the current incentive to avoid caring for the most costly patients and would better align incentives for Medicare, Medicaid, plans, and recipients. Medicaid Advantage would allow states to:
• Integrate acute and long-term care benefits into a single program they would oversee in which competing private plans (or the states) would provide a coordinated care management program for dually-eligible beneficiaries
• Share in the savings achieved through innovative policies, such as disease management and care coordination
• Streamline cumbersome rules governing marketing, enrollment, performance monitoring, quality reporting, rate setting, bidding, and grievances and appeals
• Eliminate redundant and inefficient spending
• Provide both the Federal and state governments more predictability in budgeting for the significant part of their Medicare and Medicaid spending on dual eligibles.


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