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?

Appendix A: Reconciling Differences Between Medicare and Medicaid Requirements in the Demonstration

Unlike Medicare, which is a national program, MMC programs and requirements differ across states, though they are required to meet minimum federal Medicaid standards. Although in concept, participating demonstration health plans are required to meet both state Medicaid and Medicare requirements for managed care, some of these requirements are inconsistent or lead to duplication; the differences thus needed to be reconciled when creating the demonstrations. To identify and begin to address these inconsistencies, on January 25, 2012, CMS released initial guidance for comparing requirements across the programs; it followed up on March 29, 2012 with additional guidance on Medicare selection criteria.1

Box 1 summarizes selected areas of inconsistency and how their reconciliation affected the way the demonstration is structured in several key areas, including the following:

  • Plan Choice. The demonstration allows state Medicaid programs to limit the plans that may participate, though Medicare must approve the participants as well. Plans under a Medicare enrollment or marketing sanction are not eligible, and past performance is considered in determining eligibility for passive enrollment.2
  • Plan Payment. The capitated rates paid to health plans in the demonstration are an integrated Medicare-Medicaid payment that builds on approaches used in each program, but is distinct to the demonstration. Bids and benchmarks, an important feature of Medicare Advantage payments, are not used in the demonstration. Instead, Medicare rates reflect the origins of Medicare enrollees in the program (traditional Medicare, Medicare Advantage) and Medicare’s estimate of their baseline costs. In addition, withholds rather than bonuses are the main vehicle for quality rewards to plans. Using administered pricing and assumptions on savings, demonstration rates reflect historical costs in each program and proportionate allocation of savings between Medicare and Medicaid.3 Demonstration savings assumptions vary by state, based on federal-state negotiations.
  • Enrollment and Time Frame. Under the demonstration, dually eligible beneficiaries may be passively enrolled in a health plan as long as they are allowed to opt out of such enrollment at any time (effective monthly) and the plan meets Medicare and Medicaid performance standards. (In Medicare, all enrollment in Medicare Advantage is completely voluntary.) Time lines for enrollment vary by state and, at least initially, are not closely linked to the Medicare open enrollment time line.
  • Benefits. Participating health plans must meet all Medicare and Medicaid benefit requirements, filing an integrated benefit package for federal approval. Demonstration plans are not allowed to charge premiums or cost sharing for Medicare benefits. Medicare rules for Part D benefits apply, with plans required to have an approved formulary consistent with Part D requirements. Medicaid benefits for aged, blind, and disabled beneficiaries, including LTSS, must be provided.
  • Care Management. The demonstration health plans must have an approved Model of Care, covering topics such as care plans and risk assessments. This requirement is similar to those for Special Needs Plans, but such Models of Care are not required in regular Medicare Advantage. Demonstration plans are also required to have a Medication Therapy Management Program consistent with Medicare Part D.
  • Oversight on Adherence to Program Requirements. Although the intention is that participating plans meet both Medicare and Medicaid requirements in key programmatic areas — including marketing standards and review, network adequacy, fiscal solvency, quality assurance, consumer protection, and administrative and management — the demonstration is structured in ways that seek to avoid duplication of requirements and address inconsistencies on a flexible basis that is reflected in the MOUs and three-way contracts. Reconciling differences in marketing standards and appeals processes so they reflect the characteristics of the population served by the demonstration (low health literacy, disproportionately lower income, and more vulnerable than the average Medicare beneficiary) posed issues of particular concern.4 Joint federal and state contract management teams were created in each demonstration state in order to oversee the health plans. Medicare retains authority for oversight of Part D.

Perhaps recognizing the vulnerability of dually eligible beneficiaries and the scope of many state demonstrations, the initiative also has stronger up-front processes to review the adequacy of health plans before demonstrations go live than Medicare Advantage, in which enrollment generally builds gradually, and on a voluntary basis. This up-front process occurs in the demonstrations through readiness reviews conducted jointly by states and CMS, covering topics such as assessment processes, care coordination, systems, and provider credentialing and networks.5 From a Medicare program perspective, the demonstration allows more flexibility in how Medicare Advantage requirements are interpreted in areas such as marketing materials than does the regular Medicare Advantage program; this helps to facilitate alignment with Medicaid and individual state practices.

In part because of these unique features, and also to facilitate monitoring and reporting, CMS contracts separately for each plan in the demonstration, assigning a separate contract number for the legal entities associated with each demonstration plan – even if the firm already participates in Medicare Advantage. Enrollment is tracked separately and counted as part of the demonstration rather than as part of D-SNP or as a general Medicare Advantage plan.

At least initially, CMS also was flexible in establishing separate time lines for approval of the Medicare component of the demonstration plan. Once health plans are established, however, they are asked to follow time lines more consistent with the overall Medicare Advantage program.6 CMS posts a complete list of plan requirements, and the documents that underlie them, on its website.7

Appendix Table 1: Selected Differences in Medicare Advantage and Medicaid Managed Care Requirements
Design Issue Federal Medicaid Requirements Medicare Advantage Requirements Financial Alignment Demonstration Design
Plan Selection States can limit the number of health plans as long as two choices are offered if there is mandatory enrollment. They also can choose the time frame for selecting new plans. Plans are selected on an annual basis; all that meet specified requirements can participate. A joint federal-state selection process allows limits on the number of qualified plans. However, previous performance in Medicare and Medicaid is considered in approval.
Plan Payment Rates (Capitation) Must meet CMS actuarial soundness standards, but states have flexibility on aspects such as methods and use of risk corridors. Plans submit separate bids for Part C (A and B benefits) and Part D (pharmacy benefits) that are reviewed against federal benchmarks by county, using standardized rules and risk adjustments. Reflects government estimates of baseline spending in both programs and assumptions on anticipated savings, which are shared proportionally across Medicare and Medicaid.
Quality Incentives At state option. MA has quality “star” bonuses. No star bonuses but, at state option, plans can earn back withholds if they meet quality objectives. (All states so far have this feature.)
Enrollment Voluntary or mandatory with CMS approval and at least one opportunity to change annually. Voluntary, with lock-in through the year, but dually eligible beneficiaries can change monthly, with limited exceptions. New dually eligible beneficiaries may be enrolled into zero-premium Part D plans randomly (although they may change plans). CMS, at state request, can approve passive enrollment with advance notice to beneficiary and option for “opt out” at any time (effective the first day of the following month).
Enrollment Effective Date No federal requirements, so it varies by state. (States with lock-in must allow at least an annual change.) January 1 contract year starts with an open enrollment period from October 15—December 7. Dually eligible beneficiaries can change plans monthly, effective the first of the following month. A Medicare website helps beneficiaries identify the available plans and plan characteristics. The start dates for demonstrations are negotiated individually with each state. As the demonstration goes forward, CMS plans to review existing demonstration plans against Medicare standards annually (effective for the 2015 plan solicitation).
Model of Care Requirements None, though state contracts need to address primary care source, coordination, and (for special needs individuals) assessment and treatment. Required of Special Needs Plans (regular Medicare Advantage Plans are required only to coordinate care). Part D plans are required to have medication therapy management programs. Model of care requirements apply. Plans also must have an approved Medication Therapy Management Program consistent with Part D.
Oversight of  Access, Quality, Program Integrity, and Financial Solvency Individual states set requirements consistent with minimum federal standards for Medicaid. Medicare Advantage has uniform national requirements and an integrated oversight structure for the program. Oversight is consistent with the MOU but the three-way contract is the explicit statement of requirements that supplants it. The intent is that oversight be at least as rigorous as under Medicare Advantage, Part D, and relevant state programs. Medicare retains authority for oversight of Part D. CMS documents provide that a joint federal-state management team oversee the demonstrations.
Medicare and Medicaid requirements are the authors’ summary of analysis in Appendix 1 of CMS comparison of Medicare and Medicaid requirements (January 25, 2012). The last column reflects how these requirements ultimately were addressed as reflected in the March 29, 2012 CMS memorandum, review of three-way contract requirements, and authors’ knowledge of Medicare Advantage requirements.

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