Dual eligible financing proposals differ from state to state

State proposals for new dual eligible financial alignment models are currently being considered by the Centers for Medicare & Medicaid Services (CMS), as part of the agency's efforts to fix costly and fragmented delivery systems for the roughly 9 million Americans eligible for both Medicare and Medicaid.

[See also: Coordination of care for dual eligibles remains problematic]

Nationwide, annual per capita health spending for dual eligibles is around $16,000, more than twice the costs for the average American. In total, dual eligible patients are estimated to cost around $300 billion a year.

Only 10 percent of dual eligibles are currently served through managed care organizations, and budget-strapped state governments are increasingly turning to managed care for dual eligibles. The market for managed care services is expected to grow to between $86 billion and $183 billion with the next five years, the consulting firm Booz & Company has estimated.

How much exactly will be spent is an open question, but some of it depends on the financing model states choose. As a recent Kaiser Family Foundation report explains, there are two models CMS has offered to the states, one a capitated model, with a few variations, and another more traditional fee-for-service model.

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In the spring of 2012, 26 states submitted proposals to CMS, asking to test either or both of the models. So far, only Massachusetts’ plan has been approved, with a demonstration using community-based managed care and a global capitated payment model.

Of the 26 states, the Kaiser report found, 21 want to use the demonstration plans for all of their dual eligible population. Massachusetts will focus on people ages 21-64. South Carolina’s plan focuses on seniors who are not in nursing homes, and the proposals of Wisconsin, Missouri and New York focus on people with certain conditions and in certain age groups.

Eighteen states want to test the capitated model, five want to test the managed fee-for-service model, and three — New York, Oklahoma and Washington — want to test both, according to the Kaiser report. For the capitated model, CMS will have to approve a prospective blended rate for Medicare-covered services. The capitated rate plan must also provide upfront savings to both CMS and the state.

Only a few states guessed at what they might save from adopting managed care for dual eligibles, according to Kaiser, and only a few have suggested what they’d do with the potential savings. Arizona said it wants to expand Medicaid benefits, reduce drug co-pays and provide care managers. Colorado wants to reinvest its savings, offering more benefits or expanding provider incentives. Texas wants to reinvest savings in its long-term care services and support programs.

Half of the states propose sharing savings with insurers and organizations running the managed care organizations and half of the states said they would share savings with providers.

Hawaii, Massachusetts, Michigan, Minnesota, Tennessee and Wisconsin will require risk provisions like risk corridors or stop loss provisions, and another six states may require risk corridors or other risk sharing arrangements. Only one state, Idaho, requires that the plan assume full risk.

Massachusetts, New Mexico, Oregon, Rhode Island and South Carolina will require plans to include community-based healthcare workers in their integrated care teams.

Massachusetts, North Carolina and Ohio will offer independent long-term services and support coordinators. [See also: ACO study reflects cost savings and reduced readmissions]

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