Demonstrations to Improve the Coordination of Medicare and Medicaid for Dually Eligible Beneficiaries: What Prior Experience Did Health Plans and States Have with Capitated Arrangements?

Individuals who are dually eligible for Medicare and Medicaid (“dually eligible beneficiaries”) constitute a diverse population with extensive and varied needs for services, requiring careful coordination of the benefits covered across the two programs. The Financial Alignment Initiative was developed by the Federal Coordinated Health Care Office in the Centers for Medicare and Medicaid Services (CMS) in an effort to work with states to improve the coordination of all Medicare and Medicaid covered benefits, and enhance the care provided to dually eligible beneficiaries.

Most states participating in the initiative are pursuing a capitated managed care model, which is the focus of this brief. In these capitated financial alignment demonstrations, health plans contract with the state and CMS (a three-way contract) to provide both Medicare and Medicaid benefits to dually eligible beneficiaries.  This brief reviews the demonstration projects established in 10 states — the nine states that had three-way contracts by December 2014 for capitated financial alignment demonstrations (California, Illinois, Massachusetts, Michigan, New York, Ohio, South Carolina, Texas, and Virginia), and one state that is administratively aligning Medicare and Medicaid (an administrative alignment demonstration) using its existing managed care model (Minnesota).   Five of these states’ demonstrations (California, Illinois, Massachusetts, Ohio, and Virginia), as well as the Minnesota administrative alignment demonstration, were operational as of December 2014.

This brief reviews the prior experience in states participating in the initiative and in the health plans in operating Medicare Advantage or Medicaid Managed Care (MMC) plans within the states, particularly those with financial alignment demonstrations currently underway.  The prior experience of states and health plans provides a foundation for understanding the existing infrastructure for implementing these demonstrations. States that are experienced in working with managed care plans, even if for other populations, are more likely to have expertise in setting capitation rates, negotiating terms for the contracts with plans, monitoring the quality of care, and overseeing the enrollment process. States’ prior experience may also be a proxy for how familiar beneficiaries and providers in the state are with similar capitated programs.   Health plans with prior experience in providing coverage for dually-eligible beneficiaries (or for those with just Medicare or Medicaid) are more likely to be familiar with the significant needs of this population, and the rules pertaining to various aspects of operating a plan (e.g., appeals and grievances, network requirements, enrollment procedures) and benefits that could ease implementation of the demonstration.

Key Findings

State Experience with MMC for Dually Eligible Beneficiaries and with Integrating Medicare and Medicaid. The 10 states participating in the demonstration using a capitated managed care model differ considerably in their prior experience in managing care for dually eligible beneficiaries. Four of the nine demonstration states (California, Massachusetts, New York, and Texas) provided some Medicaid services to dually eligible beneficiaries through capitated MMC and had programs that integrated Medicare and Medicaid services for dually eligible beneficiaries prior to the demonstration; the extent of experience differed across these states.  Massachusetts had a larger and more fully integrated program than the other three states. Five of the demonstration states (Illinois, Michigan, Ohio, South Carolina, and Virginia) did not previously contract with health plans to integrate Medicare and Medicaid benefits for dually eligible beneficiaries and dually eligible beneficiaries in these states were not enrolled in capitated MMC before these states began to develop their demonstrations.  Minnesota, which is implementing an administrative demonstration only, is building upon its prior program that integrated Medicare and Medicaid services for dually eligible beneficiaries.

Health Plans Participating in the Initiative. Twenty-nine health plans operated by 24 organizations participated in the five states with operational financial alignment demonstrations beginning in 2013 or 2014; another 38 health plans were scheduled to participate in the other state demonstrations beginning in 2015 (See Table ES-1 and Table ES-2 for a summary). Because health plan participation is not set until implementation begins, our analysis, conducted in the fall of 2014, focused most extensively on health plans in the five states with operational demonstrations at that time.

Health Plan Experience with Medicare Advantage and Medicaid Managed Care. Most, but not all, health plans in state demonstrations operational in 2014 had prior experience within the states with either Medicaid managed care and/or Medicare Advantage health plans of some type. Of the 29 health plans, seven had no previous in-state Medicaid enrollment (mostly in Illinois, in which organizations developed Medicaid plans at around the same time as the demonstration). Four of the 29 organizations had no in-state Medicare Advantage enrollment, though two of those had Medicare Advantage plans in other states.

Looking across all the participating states, most health plans (50 out of 67 plans) have some experience managing Medicare benefits in the state in which they would be operating a demonstration plan, either through regular Medicare Advantage plans or Special Needs Plans for dually eligible beneficiaries (D-SNPs). However, 17 of the health plans, some of which had Medicare Advantage plans in other states, have no in-state experience managing Medicare benefits. In particular, most of the demonstration plans in South Carolina and many of the plans in New York lack in-state Medicare experience.  In New York, this lack of experience may be attributable to the state’s selection of plans based on their experience managing long-term services and supports (LTSS) in Medicaid.  In South Carolina, enrollment in Medicare Advantage plans has historically been relatively low, and fewer organizations have any experience with Medicare Advantage relative to other states with higher Medicare Advantage enrollment. In states with prior enrollment of dually eligible beneficiaries in capitated MMC, the demonstrations are contracting with companies that also operate health plans in their existing Medicaid programs that serve dual eligible and/or include managed LTSS.

National Affiliations and Profit Status. Of the 29 plans in states with demonstrations that were operational before 2015, 10 were local (mainly in California and Massachusetts), 9 were affiliated with four national firms operating in more than one demonstration state (Centene, Humana, Molina, and Anthem), and 10 with other organizations.  Twelve operated on a nonprofit basis (all 10 local plans and two others — Blue Cross Blue Shield of Illinois and CareSource) and the other 17 on a for-profit basis.  In the four demonstration states beginning operations in 2015 (Michigan, New York, South Carolina, and Texas), the participating health plans are mostly operated by large, multi-state, for-profit organizations.  New York is the main exception as it has many local, nonprofit, provider-based plans that are also part of its Medicaid Managed Long Term Care (MLTC) program.

Plan Quality Ratings. Among demonstrations operational in 2014, plans in Massachusetts have high ratings for their Medicare and Medicaid product lines, whereas almost all of California’s health plans have relatively low Medicaid ratings.  Because of limited prior enrollment, there are few Medicaid quality ratings for Illinois health plans (with one exception).  The health plans participating in the Ohio and Virginia demonstrations generally have average quality ratings.

Discussion

The findings of this study suggest that in states and health plans engaged in capitated financial alignment demonstrations, there is considerable variation in the relevant prior experience brought to the demonstration. In some states, such as Massachusetts and California, plans participating in the demonstrations have had prior experience with dually eligible beneficiaries in both Medicare and Medicaid capitated arrangements.  However, in other states, plans, beneficiaries, and providers have had minimal exposure to capitated arrangements for Medicaid or Medicare. In these latter states, plans will need to ramp up the knowledge, provider networks, and infrastructure that will be needed to address the complex needs of dually eligible beneficiaries.  States with relatively little experience with capitated arrangements for Medicaid populations (including beneficiaries dually eligible for Medicare and Medicaid) may face greater challenges in setting payment rates, negotiating contracts with plans, and overseeing the care provided by plans in that state.  Health plans with relatively little experiences may face greater challenges in developing new provider networks, tailoring care management models for dually eligible beneficiaries, and providing integrated care for a high-need population through capitated arrangements.  Even in states with a fair amount of experience with managed care, some health plans are more oriented toward Medicaid’s low income families than with Medicare beneficiaries, which could pose challenges as these demonstrations get underway. How well all this is accomplished is important because the Financial Alignment Initiative seeks to improve care for dually eligible beneficiaries, a population widely recognized as having extensive needs that are challenging to address and not necessarily well addressed by the current health care system, with its division of benefits between Medicare and Medicaid.