Stabilize dual eligible pay

Dual eligibles-people who are enrolled in both Medicare and Medicaid-represent some of the poorest, least-healthy and most-costly beneficiaries served by either program. Dual eligibles have typically been forced to navigate three sets of benefits--one set of benefits financed by a state Medicaid program, medical benefits financed by Medicare, and a third set of benefits for prescription drugs paid for under Medicare Part D.

  To better integrate benefits, Congress created the Dual Eligible Special Needs Plan (D-SNP) program as part of the Medicare Modernization Act of 2003. The Affordable Care Act took the integrated care model for dual eligibles a step further by establishing Financial Alignment Demonstrations (“duals demonstrations”), which aim to improve care coordination and outcomes, implement new care delivery systems for beneficiaries, and control costs.  

Although these demonstrations are in their early stages, some states are migrating their dual-eligible populations to this new model. In San Mateo County, California, about 7,000 beneficiaries have moved from Health Plan of San Mateo’s D-SNP to its Medicare-Medicaid Plan (MMP) that participates in the California duals demonstration, Cal MediConnect. The plan’s MMP implemented a pilot program that connects high risk members to medical care, intense case management and housing support services that help them live and thrive in the community.  In one case, a 69-year-old woman was admitted to a skilled nursing facility for rehabilitation after shoulder surgery. She had lived for 26 years in a Section 8 apartment. After a year at the nursing facility, her barrier to discharge was securing a new Section 8 unit. Her case manager worked with a local housing non-profit to find a unit that would accept her Section 8 voucher. They found an apartment, helped her move in, and secured a waiver to help her obtain furniture and houseware free of charge.

That’s the kind of thing Safety Net Health Plans can do through the duals demonstrations. MMPs manage almost all Medicare and Medicaid benefits for dual eligibles, which incentivizes innovation and better care management.  However, these plans know through experience that these gains are precarious. Policymakers can stabilize D-SNPs and duals demonstrations by addressing the way that plans serving dual eligibles are reimbursed.

An ongoing challenge particular to plans serving duals is a gap between the plans’ reimbursement rates and the health status of the populations they serve. The current Medicare Advantage risk-adjustment methodology does not adequately account for the higher costs of the sickest dual-eligible beneficiaries.

In its Rate Adjustment and Final Call Letter issued in April, the Centers for Medicare & Medicaid Services (CMS) took one particularly promising step to address issues with risk adjustment for dual eligibles: CMS signaled its intent to pay more accurately based on the extent to which a plan serves full-benefit or partial-benefit (i.e., only eligible for cost-sharing assistance) duals.  A report by MedPAC and MACPAC shows that full-benefit duals are costlier than partial-benefit duals. But the Medicare Advantage risk-adjustment system pays the same for these two groups of beneficiaries. CMS’ willingness to look into this issue could improve the accuracy of payments to plans that serve full-benefit dual eligibles.

However, CMS is implementing a “clinically-revised” risk-adjustment model that would effectively slash reimbursement rates up to four percent for D-SNPs and MMPs.  The revised model will harm most plans that exclusively enroll high-cost, full-benefit dual eligibles, because these plans do not enroll healthy Medicare beneficiaries whose costs are overestimated by risk adjustment.

Many not-for-profit net plans already operate in negative margins. This change could drive plans out of the duals demonstration and D-SNPs, and introduce uncertainty and change for beneficiaries.  These programs hold tremendous promise. Let’s make changes early on to ensure their success.