By Katherine Jett Hayes

Background

According to the Centers for Medicare and Medicaid Services (CMS), in 2008 there were an estimated 9.2 million individuals who were eligible for and enrolled in both the Medicare and Medicaid programs (commonly referred to as “dual eligibles”). Two-thirds of dual eligibles qualify because they are over age 65, while the other third qualify because of a disability.^[1] Dual-eligible beneficiaries typically have multiple chronic conditions that require a higher level of care and result in increased spending relative to other Medicare and Medicaid beneficiaries; however, their care is not usually coordinated.^[2] Policymakers have expressed concern that the lack of coordination between the two programs results in higher costs and poorer health outcomes than would be achieved if Medicare and Medicaid services were better integrated.

In most states, Medicare beneficiaries who qualify for Medicaid because they receive cash assistance under the SSI program are eligible for the full range of Medicaid services offered by the state (known as full-benefit dual-eligibles), as well as coverage for Medicare premiums and cost-sharing. States also have the option of covering higher income Medicare beneficiaries under Medicaid, including those with high health care costs who spend down into Medicaid (the medically needy), those with incomes over the SSI level (74 percent of poverty) but below the federal poverty level (FPL), and certain individuals who are institutionalized or receiving services at home or in the community.

Medicaid pays the cost of Medicare premiums and cost-sharing for those Medicare beneficiaries with incomes below 100 percent of FPL and who do not qualify for full Medicaid benefits. For those with incomes between 100 and 120 percent of FPL, Medicaid pays only the Medicare premium. Finally, Medicaid pays Medicare part B premiums for individuals with incomes between 120 and 135 percent of the federal poverty level. Funding for the latter group is provided through a block grant to states, which expires on December 31, 2011.^[3]

Prior to enactment of the Affordable Care Act (ACA), federal law, regulations, program administration, and financing have limited the opportunities to fully integrate care between the Medicare and Medicaid programs. One major barrier to integration was a structure that created little or no financial incentive to integrate services. For example, should states enhance Medicaid benefits to cover additional services for seniors or persons with disabilities in an effort to avert deterioration and loss of function, any resulting savings from reductions in hospital admissions will accrue to the federal government under Medicare.^[4]

A few existing health plans coordinate services between the two programs; typically these are managed care plans that contract with the federal government to provide Medicare services as a Medicare Advantage Special Needs Plan (SNP), a Medicare managed care plan that provides Medicare-covered medical services and care coordination services to Medicare beneficiaries with special needs, including dual-eligible individuals. In a limited number of states, SNPs also contract with state Medicaid agencies to provide Medicaid services.^[5] Another challenge for SNPs has been uncertainty as to long-term support in Congress.^[6] Beyond SNPs, some integrated care models are implemented under federal waivers under sections 1115 and 1915(b) of the Social Security Act and the Program of All-Inclusive Care for the Elderly (PACE) program pays providers a capitated payment to assume the risk for providing all medically necessary Medicare and Medicaid services.^[7]

This Implementation Brief focuses on major provisions of the ACA that improve care coordination for dual eligibles. A future brief will address changes in the availability of Medicaid home- and community-based services.

Changes Made by the Affordable Care Act (P.L. 111- 148, §§ 2601, 2602, 2201, 2202)

The ACA includes a number of provisions designed to improve quality and coordinate care for dual eligible individuals. At the same time, the ACA includes a number of provisions that improve access to care and benefits for all Medicare and Medicaid beneficiaries. These improvements include the elimination of cost-sharing for preventive services in Medicare, incentives to states to cover preventive services under Medicaid, new options for home and community-based services and supports under Medicaid, lower beneficiary out-of-pocket costs under Medicare’s prescription drug program, and new demonstrations designed to help coordinate care for individuals with chronic conditions in both programs.^[8]

The provisions of the ACA that address care coordination for dual eligibles include:

Federal Coordinated Health Care Office^[9]

The ACA directed the Secretary of Health and Human Services (HHS) to establish a federal Coordinated Health Care Office (referred to as the Medicare-Medicaid Coordinating Office) within CMS. The purpose of the new office is to integrate benefits under the Medicare and Medicaid programs and to better coordinate care for dual eligible individuals. Goals stated in the law include assuring that duals receive access to the benefits to which they are entitled, making it easier for beneficiaries to access services, assisting beneficiaries in better understanding coverage, and improving beneficiary satisfaction.

The Medicare-Medicaid Coordinating Office is charged with eliminating regulatory conflicts between the two programs that impede continuity of care. In addition, the Coordinating Office is directed to improve quality of care and to eliminate cost shifting between the programs. Additional responsibilities include assisting states, SNPs, and providers with benefit alignment, supporting state efforts to coordinate and align acute and long-term care services, providing support for coordination of contracting and oversight by CMS, consulting with MedPAC and the Medicaid and CHIP Payment and Access Commission (MACPAC), and studying prescription drug coverage for new full-benefit dual eligibles.^[10]

Center for Medicare and Medicaid Innovation

The ACA establishes a new Center for Medicare and Medicaid Innovation (CMMI) to test innovative payment and service delivery models with the goal of improving quality and reducing costs under the Medicare and Medicaid programs. One of the initiatives outlined in the law would permit states to test and evaluate models to fully integrate care for dual eligibles, as well as other models to improve care coordination for Medicare beneficiaries. CMMI will work with the Medicare-Medicaid Coordinating Office to test a series of models of integrated care for dual eligibles. To implement service delivery models, the HHS Secretary may waive any Medicare requirement and Medicaid requirements relating to statewide-ness, payments, and actuarial soundness for Medicaid managed care plans. If the Secretary determines that the model of care reduces spending without reducing quality of care or improves quality without increasing spending, the Secretary may expand the model.^[11] For more information, see the implementation brief on the Center for Medicare and Medicaid Innovation.

Demonstrations Involving Dual-Eligible Individuals

The ACA also made changes permitting Medicaid demonstration projects that involve dual eligible individuals to be approved for a period of 5 years. If a state requests an extension of the waiver at the end of the 5 year period, the HHS Secretary must extend the waiver unless she determines that the waiver conditions were not met or the waiver would no longer be cost-effective and efficient, or consistent with the purpose of the waiver.^[12]

Additional Provisions that Affect Dual-eligible Individuals:

• Medicare Part D: Waives cost-sharing for prescription drugs for dual eligible individuals receiving home- and community-based services who, but for those services, would be institutionalized.^[13] For more information regarding changes in Medicare part D, see Medicare Prescription Drug Coverage: Discount and Rebate Program and Aid to Low-Income Beneficiaries.
• Medicare Advantage Special Needs Plans: Extends the authorization for Special Needs Plans until 2014. Limits enrollment to certain individuals, and requires plans to transition individuals without special needs to non-specialized Medicare Advantage.^[14]
• Increases the income limit for individuals needing home- and community-based services to the same level established by the state for individuals who receive institutional care. Permits states to expand the provision of home- and community-based services under Medicaid (not limited to dual-eligible individuals).
• Effective January 1, 2014, and continuing for a period of 5 years, the ACA requires states to apply spousal impoverishment rules protecting certain assets of the spouses of individuals who receive home- and community-based services under Medicaid, as well as when determining eligibility for medically needy individuals applying for certain Medicaid home- and community-based services.^[15]
• Permits states to allow all hospitals that participate in Medicaid to make presumptive eligibility determinations, based on a preliminary determination of likely Medicaid eligibility, for all Medicaid-eligible populations.^[16]
• Offers a state option to permit chronically ill Medicaid beneficiaries to designate a provider as a “health home”.^[17]
• Offers a new long-term care option through which individuals may buy public long-term care coverage, called the CLASS Act (not limited to Medicaid beneficiaries).
• Simplified Enrollment in Medicaid: Requires the Secretary of HHS to develop a single streamlined application process that may be used to enroll in Medicaid online, in person, by mail, or by phone.

Implementation

Agency

The Medicare and Medicaid programs fall under the jurisdiction of HHS/CMS. A number of entities within CMS are working on issues related to dual-eligible individuals, including the newly established Coordinated Health Care Office and the Center for Medicare and Medicaid Innovation, as well as the Center for Medicaid, CHIP and Survey and Certification, and the Center for Medicare.

Key Dates

The ACA required the federal Coordinated Health Care Office to be operational by March 1, 2010 (prior to passage of the law), and required CMMI to be operational by January 1, 2011.

Process

Because the ACA does not provide specific direction to the Secretary regarding the administrative process used to implement provisions relating to dual eligibles discussed above, the agency has the discretion to use a range of tools to implement the statute, such as publishing regulations in the Federal Register with a public notice and comment period, or using other types of approaches such as posted policy instructions, funding availability announcements (where applicable), official letters to affected entities (such as letters to state Medicaid agencies), and posted rulings and notices. Agency websites can be checked regularly for updates.

Key Issues

In developing new models of care, the HHS Secretary will have broad authority to waive provisions of federal Medicare law to improve clinical outcomes and reduce expenditures. Taking this approach would permit the Coordinating Office to take advantage of the waiver authority and permit the expansion of successful models of care.

Waivers of federal Medicare and Medicaid provisions:

• Federal waiver requirements. What criteria will the Secretary use in determining whether to waive provisions of federal Medicare and Medicaid law?
• Mandatory managed care enrollment. A significant barrier to the expansion of fully integrated models of care for dual eligibles has been opposition to mandatory enrollment in Medicare managed care arrangements by consumer advocacy organizations. Under what circumstances, if any, would the Secretary permit a waiver of Medicare beneficiaries’ “freedom-of-choice of providers”? If the Secretary does permit mandatory enrollment in an integrated model of care, what safeguards might be put in place to assure beneficiary access to care?
• How will the Secretary reconcile differences in beneficiary protections such as notice, hearings, appeals and grievance requirements in Medicare and Medicaid?

Oversight of Demonstrations:

• Demonstration oversight. One proposed model to be tested would allow states to manage Medicare funds and to share in the savings associated with a successful model of care. What methods of federal oversight should be employed to assure that Medicare spending does not ultimately supplant Medicaid spending without corresponding improvements in outcome?
• Outcome measures. What types of outcomes measures will be used to determine whether the demonstration should move from testing under CMMI authority into an expansion of the models of care?

Models of Care Integration: Although MedPAC recommended using models of care that fully integrate Medicare and Medicaid services under capitated payments, at least in the early stages of care, less than 2 percent of duals are enrolled in fully integrated models of care, and those are primarily through SNP and the PACE programs, which have existing provider networks (or, in the case of PACE, been limited in size).^[18] Medicare Advantage SNPs for dual eligibles are capitated, but not fully integrated with Medicaid.

• Network challenges. How might the Secretary assure the development of integrated care models in areas without existing networks?
• Continuity of Care. How will the Secretary minimize disruption in beneficiaries’ existing provider relationships?

The Medicaid health home demonstration contemplates the use of Federally Qualified Health Centers to coordinate care, and indicates that dual eligible individuals will participate in those demonstrations.

• Scope of the health home demonstration. Does the agency envision a model that integrates all care, including acute, preventative, behavioral health, prescription drug, and long-term care?
• Role of FQHCs. How will FQHCs partner with other service providers in local communities to assist in the provision of non-clinical services?

Agency Action

New Offices within CMS

HHS provided public notice of the organization, function, and delegation of authority to the Center for Medicare and Medicaid Innovation^[19] and the Federal Coordinated Health Care Office. Dr. Richard Gilfillan was named acting director of CMMI, and Melanie Bella has been appointed as the Director of the Federal Coordinated Health Care Office.^[20]

Demonstration Projects to Coordinate Care for Dual Eligibles

CMS selected 15 states to participate in demonstration projects to implement “person-centered models that fully coordinate primary, acute, behavioral and long-term supports and services for dual eligible individuals.” Working through the Medicare-Medicaid Coordinated Care Office and the Center for Medicare and Medicaid Innovation, CMS awarded up to $1 million to each of the 15 states, which include: California, Colorado, Connecticut, Massachusetts, Michigan, Minnesota, New York, North Carolina, Oklahoma, Oregon, South Carolina, Tennessee, Vermont, Washington and Wisconsin.^[21] Of these states, Massachusetts, Minnesota, New York, and Washington have operated fully integrated models through SNPs or PACE..^[22]
Demonstration outcomes:

• How will success in the demonstrations be measured, and how will positive outcome evidence be disseminated and used in replication?

Federally Qualified Health Centers Medical Home Demonstration

HHS announced a demonstration project to provide medical homes for up to 195,000 Medicare-eligible individuals through federally qualified health centers (FQHCs).^[23] Under the demonstration, up to $42 million will be made available to as many as 500 FQHCs to coordinate care for Medicare-eligible individuals, including dual eligibles. The project will last 3 years and will be jointly administered by CMS and the Health Resources Services Administration (HRSA).^[24]

Joint Oversight and Performance standards:

• How will success within the FQHC medical homes demonstration be measured?
• How will CMS and HRSA replicate successful approaches?

Request for Information on Alignment of Medicare and Medicaid for Dual Eligibles

CMS issued a Request for Information (RFI) seeking public comments on ways to better “align benefits and incentives to prevent cost-shifting and improve access to care” for dual eligible individuals.^[25] In addition, the RFI states that, consistent with the Alignment Initiative (Executive Order 13563), the Medicare-Medicaid Coordinating Office is working to identify conflicting requirements that create barriers to “high-quality, seamless and cost-effective care.” The RFI seeks comments on a list of regulatory and legislative initiatives, and will determine which issues to address and in what timeframe based on comments as well as future discussions with stakeholders, including beneficiaries, payers, states and providers.^[26] The initial list of issues identified by the Medicare-Medicaid Coordination Office as areas in which conflicting requirements pose a barrier to coordination fall into six broad categories:

• Coordinated care
• Fee-for-service benefits
• Prescription drugs
• Cost-sharing
• Enrollment; and
• Appeals

Financial Models to Support Integrated Care for Duals

CMS issued a State Medicaid Director letter announcing that CMMI, in concert with the Medicare-Medicaid Coordination Office, will test two financial alignment models designed to fully integrate delivery system and care coordination for dual eligibles.^[27] One model is a fully capitated model, while the other will test integration through managed fee-for-service (FFS). Under the capitated model – a three-way contract between CMS, a state, and health plans – plans will receive a blended capitated rate for the full continuum of benefits provided under Medicare and Medicaid. CMS indicates that plans will be selected through a competitive joint procurement by States and CMS. Under the managed FFS model, states will be able to provide coordinated care through existing delivery systems, as well as new Accountable Care Organizations (ACOs) and through Medicaid medical homes. States choosing to participate must submit a Letter of Intent to CMS by October 1, 2011.

Authorized Funding Levels

Provisions relating to dual eligibles are changes in individual entitlements under the Medicare and Medicaid programs and do not specify an aggregate amount of spending.