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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?

Our analysis suggests that many of those engaged in the demonstrations (including states, health plans, and providers) will encounter a substantial learning curve. In some states, such as Massachusetts and Minnesota, the demonstrations are building on previous experience fully integrating care for dually eligible beneficiaries. Others (like California, New York, and Texas) have had some previous experience with integrating care, but on a more limited basis.

In all five of the 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 dually eligible beneficiaries and/or include MLTSS (see Table 4). This experience is useful, but by itself does not necessarily translate into high-quality care. Our findings show that across and within states, the quality ratings of care in existing Medicare and Medicaid plans vary considerably. For example, health plans participating in the Massachusetts demonstration all score relatively high on available quality metrics, whereas performance is lower and less consistent in California. Additionally, even in some more experienced states, some health plans have considerable gaps in their experience that is relevant to the demonstration. California’s Medicaid health plans generally did not include MLTSS in the past, and many of New York’s demonstration health plans have managed Medicaid MLTSS only and lack experience with managing Medicare, or even acute care services under Medicaid.

The other five states implementing capitated financial alignment demonstrations (Illinois, Michigan, Ohio, South Carolina, and Virginia) have much less experience on which to build. They have no previous enrollment of dually eligible beneficiaries in capitated MMC, and generally also have low D-SNP penetration. Even more so than in experienced states, this means that the complexities of developing provider networks, tailoring care management models for dually eligible beneficiaries, and providing integrated care may be more challenging for these states and their health plans. The three of these states that began demonstrations in 2014 (Illinois, Ohio, and Virginia) have generally contracted with health plans with considerable experience in their state in either Medicare or MMC, but not necessarily both. These states, and some others with less experience, are relying mainly on national companies that may be able to bring their Medicare and/or Medicaid knowledge from other states to bear, even though the specifics of the context and environment may be different.

It remains unclear how the financial alignment demonstration will play out. As indicated above, state and health plan experience with related capitated and/or integrated programs is quite variable. Additionally, though many states were interested initially, fewer are actively pursuing demonstrations now. Also, some health plans have lost interest in the demonstration as its details have emerged. Enrollment in demonstrations has been delayed repeatedly, but enrollment reached about 310,000 across financial alignment demonstration states as of January 2015, and further enrollment is expected in 2015.

All of these facts, as well as the complexity of integration and the care needs of dually eligible beneficiaries, make effective federal oversight of the demonstration, when done in ways that complement state activity, very important in assuring beneficiary protections. Because the goal of the demonstrations is to integrate care across the spectrum of needs covered by Medicare and Medicaid, effective oversight must assess not only how well Medicare and Medicaid each work for enrollees, but how well they work together.  The Financial Alignment Initiative has the potential to provide valuable lessons on these issues.

Health Plan Background and Experience Appendix

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Filling the need for trusted information on national health issues, the Kaiser Family Foundation is a nonprofit organization based in Menlo Park, California.