Improving Care for Dual Eligibles through Innovations in Financing
N Engl J Med 2011; 365:e21September 15, 2011DOI: 10.1056/NEJMp1108571
Elderly people and younger people with disabilities who are eligible for health coverage through both Medicare and Medicaid (“dual eligibles”) are among the sickest and poorest people in the United States. Dual eligibles' extensive needs for medical and long-term care are often complicated by a perplexing and inefficient system of overlapping benefits, skewed incentives for health care providers, and financing fragmented between the federal and state governments. Medicare is the primary payer for dual eligibles and covers services including hospitals, physicians, and prescription drugs; Medicaid covers long-term care and is a secondary payer for Medicare-covered services.
About 9.2 million Americans were enrolled in both Medicare and Medicaid in 2008. More than two thirds of them received full benefits from both programs; the remaining enrollees only received Medicaid assistance in paying their Medicare premiums and cost sharing.1 About two thirds of dual enrollees qualify for Medicare because they are 65 or older; one third are younger people with disabilities who qualify through their receipt of federal Social Security Disability Insurance. They all gain Medicaid eligibility by meeting financial and categorical (i.e., age or health-related) criteria defined by state and federal rules. Dual enrollees are among the poorest, sickest, and neediest people in either program: 55% of Medicare–Medicaid enrollees earned less than $10,000 in 2008, and about half were in fair or poor health, according to an analysis by the Kaiser Family Foundation and the Urban Institute.
The Kaiser Family Foundation and the Urban Institute estimate that health care–associated costs for dual enrollees will exceed $315 billion in 2011, with Medicare paying about 55% of the total. In each program, these enrollees account for about one sixth of enrollment but almost 40% of spending. Like health care spending more generally, spending on Medicare–Medicaid enrollees is skewed toward those with the greatest health care needs — the highest-cost decile accounts for almost two thirds of all health care spending for dual enrollees.2
Nearly a quarter of Medicaid spending for dual enrollees goes toward Medicare premiums and cost sharing, while 70% goes toward long-term care supports and services. The 15% of dual enrollees who use institutional long-term care are among the highest-cost enrollees: with average Medicaid spending of $55,214 per enrollee per year, they account for more than half of all Medicaid spending on dual eligibles.2
Medicare spending on dual enrollees is driven largely by inpatient stays and prescription drugs, with much of the remainder spent on ambulatory care. Although research suggests that as much as $6.4 billion yearly is spent on hospitalizations among dual eligibles for potentially preventable conditions (e.g., pressure ulcers and asthma),3 a solution has proved elusive. One possible reason is that the Medicare and Medicaid programs are governed by separate laws and service use is influenced by multiple entities with little incentive to integrate care either financially or clinically. Unnecessary hospitalizations could be reduced through better management and coordination of primary care and long-term care services and supports. But such a care improvement is unlikely to occur under the current system, since savings would probably accrue primarily to Medicare, and state Medicaid programs claim that Medicaid would bear the cost of the investments.
A very small proportion of dual enrollees participate in fully integrated systems of care, primarily through capitated models such as the small subset of Special Needs Plans that are fully integrated with Medicaid and the Program of All Inclusive Care for the Elderly. Most other capitated arrangements for dual eligibles do not integrate payment from Medicare and Medicaid. Moreover, more than 80% of dual enrollees are in traditional fee-for-service Medicare, fee-for-service Medicaid, and a “stand-alone” Medicare prescription drug plan.4 Thus, despite their high level of health care needs and other indications of a need for coordinated care, dual eligibles are likely to be enrolled in a patchwork of plans that have little incentive to coordinate care.
Yet the work of innovators in trail-blazing states and a recent focus by the Centers for Medicare and Medicaid Services (CMS) and others have energized efforts to develop new models for coordinating care for dual eligibles. In July 2011, CMS provided guidance to state Medicaid directors regarding demonstrations of options for improving care for dual eligibles, to be tested in a population of 1 to 2 million in 15 states for up to 3 years.1 The options fall into two types. Under the first model, participating plans provide comprehensive coverage to dual enrollees and receive a capitated payment based on Medicare and Medicaid health plan rates for enrollees in their geographic area. However, the payment rate must achieve savings for both the state and federal governments. The second model builds on the fee-for-service system by supporting investment in a managed fee-for-service delivery model, which may include accountable care organizations or Medicaid health homes as part of the primary care system. In this model, states would make up-front investments in the management of integrated delivery systems and in home- and community-based care, and state Medicaid programs would share in any savings that accrue to Medicare.
As compared with the fee-for-service model, the capitation model contains stronger incentives for improving efficiency that could be more effective in, for example, reducing hospitalization rates and unnecessary nursing home use. However, enrollees' experience also depends on whether CMS and states ensure that capitated plans develop and support an adequate network of providers. Moreover, the extent to which the savings from capitation will be redirected into investments in care management, coordination, or home- and community-based long-term care services is unknown. Without a requirement that the state and federal governments reinvest much of the savings, dual eligibles may not benefit from a capitation model under which they receive less care.
The fee-for-service model could be strengthened by requiring that the programs clarify or eliminate overlap between the services that Medicare and Medicaid cover, such as home health care. Both models miss an opportunity to capture savings by requiring that dual eligibles' prescription drugs, now covered under Medicare Part D, be subject to rebates at least as large as those provided to the state Medicaid program.5 This change could lead to annual savings of up to $2.8 billion, according to the U.S. House Committee on Oversight and Government Reform.
In both models, enrollee choice needs more protection. Dual eligibles' participation in a plan or a system should be voluntary, although enrollment can be encouraged by offering enhanced benefits such as additional personal care services (e.g., assistance with activities of daily living or meal preparation), and enrollees should have the option of continuing to receive care from their current providers. Rigorous monitoring will be necessary to verify that enrollees have these protections and are receiving the care they need.
Notwithstanding the efforts of some innovative states, Medicaid and Medicare have shown a striking lack of leadership in addressing the need to coordinate care for dual eligibles. Medicare's inattention to payment innovation and lack of focus on improving Special Needs Plans are particularly puzzling, since the federal government pays for the overwhelming majority of dual enrollees' costs — it pays all Medicare costs and the majority of Medicaid costs.
There's an urgent need for Medicare and Medicaid to lead efforts to reform care for dual eligibles, whose numbers are expected to grow as the population ages and as life expectancies increase among Americans with disabilities. Even so, financial innovations that make care cheaper but reduce its quality are unacceptable. Policy innovation should not be viewed as an opportunity for budgetary savings or a way to replace state funds with Medicare funds, but rather as an opportunity to improve the quality and cost-effectiveness of care for the neediest Americans.
Disclosure forms provided by the authors are available with the full text of this article at NEJM.org.
This article (10.1056/NEJMp1108571) was published on August 31, 2011, at NEJM.org.
From the Health Policy Center, the Urban Institute, Washington, DC.
Centers for Medicare & Medicaid Services. Letter from Cindy Mann and Melanie Bella to state Medicaid directors. Financial models to support state efforts to integrate care for Medicare-Medicaid enrollees. July 8, 2011. (http://www.cms.gov/smdl/downloads/Financial_Models_Supporting_Integrated_Care_SMD.pdf.)
Rousseau D, Clemans-Cope L, Lawton E, Langston J, Connolly J, Howard J. Dual eligibles: Medicaid enrollment and spending for Medicare beneficiaries in 2007. Washington, DC: Kaiser Commission on Medicaid and the Uninsured, December 2010.
Jiang HJ, Wier LM, Potter DEB, Burgess J. Potentially preventable hospitalizations among Medicare-Medicaid dual eligibles, 2008. H-CUP statistical brief #96. Rockville, MD: Agency for Healthcare Research and Quality, September 2010. (http://www.hcup-us.ahrq.gov/reports/statbriefs/sb96.pdf.)
Rosenbaum S, Thorpe JH, Schroth S. Supporting alternative integrated models for dual eligibles: a legal analysis of current and future options. Hamilton, NJ: Center for Health Care Strategies, July 2009. (http://www.chcs.org/usr_doc/Supporting_Alternative_Integrated_Models_for_Dual_Eligibles.pdf.)
- Citing Articles (1)
Amanda Reichard, Michael H. Fox. (2013) Using population-based data to examine preventive services by disability type among dually eligible (Medicare/Medicaid) adults. Disability and Health Journal 6:2, 75-86