Opportunities For States To Promote Financial Integration For Dual-Eligible Individuals

Editor’s Note

This article is the latest in the Health Affairs Forefront major series, Medicare and Medicaid Integration. The series features analysis, proposals, and commentary that will inform policies on the state and federal levels to advance integrated care for those dually eligible for Medicare and Medicaid. The series is produced with the support of Arnold Ventures. Included articles are reviewed and edited by Health Affairs Forefront staff; the opinions expressed are those of the authors. Submissions will be accepted on a rolling basis.

As described in an earlier Forefront article by Laura Keohane and Ann Hwang, 2022 was a year of renewed congressional interest in advancing Medicare and Medicaid integration for dual-eligible individuals. Several bipartisan bills were introduced that would support the development of state integrated care strategies, as recommended by the Medicaid and CHIP Payment and Access Commission in its June 2022 report to Congress, or that would provide states with the option of creating a wholly new program for dual-eligible individuals that would combine Medicare and Medicaid funding, care delivery, and program rules into a single program, as described in the Comprehensive Care for Dual Eligible Individuals Act of 2022. Federal lawmakers also solicited public input on ways to “build a lasting, effective legislative solution” for an integrated system of care for dual-eligible individuals.

Even without new legislative authorities, however, there is significant opportunity under existing Medicare and Medicaid program rules for states to implement or expand integrated care programs for dual-eligible individuals. The most promising model is through Fully Integrated Dual-Eligible Special Needs Plans, or FIDE-SNPs, which the Centers for Medicare and Medicaid Services (CMS) recently endorsed as the most integrated, permanent program option available for dual-eligible individuals and which provide opportunities for enhanced financial alignment and more efficient resource allocation between the Medicare and Medicaid programs and potential financial benefits for states.

This article highlights two existing strategies state policy makers can deploy now to improve financial integration of Medicare and Medicaid and, to the extent possible, allow states to share in savings accruing to Medicare from Medicaid investments. Implementing these strategies—namely, strategic benefit design and Medicaid rate-setting for FIDE-SNPs—will also help states expand access to and grow enrollment in integrated care models for dual-eligible individuals with the goal of improving beneficiary experience and outcomes. These strategies, and important implementation considerations, are described in more detail in a report that Manatt Health published in January 2023 with support from Arnold Ventures; this article builds upon that report.

Dual-Eligible Individuals Are A High-Need, High-Cost Population

There are more than 12 million dual-eligible individuals today, including older adults (ages 65 and older) and people with disabilities across the lifespan. Many of these dual-eligible individuals have complex health care needs, including chronic health conditions, dementia, and mental illness, contributing to their disproportionate share of Medicare and Medicaid program costs compared to their share of enrollment in each program.

Since the Medicare and Medicaid programs were established, federal and state policy makers have recognized the need to better integrate administrative activities, such as grievance and appeals processes, benefit coordination, care delivery, and financing for dual-eligible individuals enrolled in both programs. Efforts to date have resulted in several integrated care models, such as the Program of All-Inclusive Care for the Elderly, the Financial Alignment Initiative (FAI), and Dual-Eligible Special Needs Plans (D-SNPs), which include FIDE-SNPs. Despite the promise of integrated care models, as Allison Rizer notes in an earlier Forefront article, today, more than half of all states use Medicaid fee-for-service care delivery models for dual-eligible individuals.

Overview Of Financial Integration Strategies

Described below are two strategies that states can currently deploy as they consider or pursue expanding integrated care programs to promote Medicare and Medicaid financial integration. While these strategies are focused on states with FIDE-SNP models, they also could apply to states with other D-SNP models, such as Highly Integrated D-SNPs and Coordination-only D-SNPs, especially those with exclusively aligned enrollment (EAE). EAE occurs when the state’s contract with the D-SNP limits D-SNP enrollment to full-benefit, dual-eligible individuals who receive their Medicaid benefits through the D-SNP, the D-SNP’s parent organization, or another entity that is owned and controlled by the D-SNP’s parent organization. However, the level of financial integration that states could expect to achieve is likely less in either of these models than in the FIDE-SNP model, where the plan is responsible for most, if not all, of a dual-eligible individual’s Medicare and Medicaid services, including Medicaid-covered long-term services and supports (LTSS) and behavioral health services.

Strategy 1: Benefit Design

The first strategy involves states aligning coverage of Medicare and Medicaid benefits, to the extent possible, through the FIDE-SNP benefit package to provide a seamless benefit package to FIDE-SNP enrollees. This approach may be more attractive to the individual than a traditional Medicare or a Medicare Advantage (MA) plan and, therefore, encourage increased enrollment in FIDE-SNPs. Strategic benefit design also can help eliminate cost-shifting across the Medicare and Medicaid programs, whereby one payer deploys coverage tactics that avoid or shift costs to the other payer for overlapping benefits, such as home health services, or for complementary benefits, such as acute hospital and nursing home services.

In particular, states could align benefits in two specific areas: the MA Model of Care (MOC) and MA supplemental benefits.

Leveraging The MA MOC As A Vehicle For Aligning And Integrating Care Coordination

The MA MOC provides the framework for how the plan will meet the needs of each of its enrollees through the plan’s care management and care coordination processes. CMS requires all D-SNPs, including FIDE-SNPs, to obtain National Committee for Quality Assurance approval for their MOC. States can fold Medicaid requirements into Medicare MOC requirements. Pursuing this approach encourages plans to assess and identify an individual’s needs more holistically, and to staff and deliver a care management benefit that is person-centered, simplifies the beneficiary experience, and is centered on the Medicare program, which covers primary, specialty, and hospital care for dual-eligible individuals. Ultimately, this helps reduce duplication of overlapping care management requirements present in both Medicare and Medicaid.

For example, California recently transitioned its capitated FAI demonstration program to an integrated, EAE D-SNP program. As part of its broader Medicaid transformation, known as CalAIM, the state also is implementing enhanced care management (ECM), a high-touch, comprehensive care management benefit for qualifying Medicaid beneficiaries. Because of the significant overlap across the Medi-Cal ECM and D-SNP MOC care coordination requirements, the state is strengthening its expectations for D-SNPs to provide comprehensive care coordination beginning in 2023, with the goal of minimizing complexity and beneficiary and provider confusion, and avoiding duplication of services and care managers.

Optimizing Medicare Supplemental Benefits

States also can influence FIDE-SNPs’ coverage of supplemental benefits by requiring or incentivizing FIDE-SNPs to cover supplemental benefits that complement Medicaid-covered services or that may avert the need for more intensive or costly Medicaid-covered services, such as nursing home care. MA plans, including FIDE-SNPs, can use their plan “rebates” (for example, the refund resulting from MA plan bids that are below the MA rate-setting benchmark to provide additional or supplemental benefits and/or reduced cost sharing for beneficiaries). In recent years, both Congress and CMS have provided MA plans with flexibility to expand the scope of primarily health-related benefits they can offer, including services to address LTSS and social drivers of health (SDOH)-related needs. Additionally, with the passage of the Creating High-Quality Results and Outcomes Necessary to Improve Chronic Care Act, as of 2020, MA plans have been able to offer Special Supplemental Benefits for the Chronically Ill, which are intended to address broader SDOH needs for certain chronically ill beneficiaries.

For example, in its 2023 contracts with D-SNPs, New York encourages D-SNPs to use at least 10 percent of their rebates to cover Medicaid benefits as supplemental benefits The contract also requires D-SNPs to work in good faith to coordinate supplemental benefits with Medicaid-covered benefits, and to adjudicate any D-SNP supplemental benefits that overlap with Medicaid benefits as D-SNP claims before treating them as Medicaid claims.

Strategy 2: Medicaid Rate Setting

The second strategy involves states working with their actuaries to assess and incorporate expected Medicaid program savings or cost avoidance (Medicare-related savings) resulting from integrated care in their Medicaid capitation rates to FIDE-SNPs. States can pursue this strategy in conjunction with the aligned benefit design strategy discussed above and can consider other efficiencies that may accrue from integration and reflect these efficiencies in Medicaid rate-setting. This approach encourages Medicaid agencies to consider MA administrative and program spending in their Medicaid capitation determinations for FIDE-SNPs.

For example, in Arizona, Medicaid rate certifications consider the impact of changes in Medicare coverage by adjusting for changes in guidance surrounding application of the Medicare deductible and Medicare coverage of opioid treatment programs.

Looking Ahead

Although the strategies described above are allowed under current Medicare and Medicaid program rules, only a handful of states are deploying these strategies to expand access to integrated care for dual-eligible individuals. States and actuaries have indicated that additional guidance, guardrails, or technical assistance from CMS would be helpful to clarify and operationalize these opportunities. These stakeholders strongly suggest that CMS provide specific guidance in its annual rate development guide and address some of the key implementation considerations described in more detail in our report. These considerations include the ability to access the required Medicare data and information necessary to deploy the strategies and the need to address current Medicare and Medicaid rate-setting timing misalignment. With a greater understanding of these strategies and additional guidance from CMS, more states may pursue FIDE-SNP models of integrated care in an effort to better align Medicare and Medicaid financing and provide a more seamless experience of care for dual-eligible individuals.

Authors’ Note

Manatt Health works with a diverse group of clients, including states; state and federal policy makers and agencies; payers; health care providers and systems; foundations; associations; consumer organizations; and pharmaceutical, biotech, and device companies. In particular, Manatt has worked with California and Washington, which are mentioned in this article.