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?

Executive Summary

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.

 

Table ES-1: Comparison of Plan and State Experience Across States with Operational Financial Alignment Demonstration for Dually Eligible Beneficiaries prior to January 2015
	California	Illinois	Massachusetts	Ohio	Virginia
Total Number of Plans	10	8	3	5	3
Number of plans with in-state experience managing Medicare benefits, including Medicare Advantage non-SNPs or D-SNPs	9 . 3 non-SNPs; 9 D-SNPs	6 . 6 non-SNPs; 3 D-SNPs	3 . 2 non-SNPs; 3 D-SNPs	5 . 2 non-SNPs; 4 D-SNPs	2 . 2 non-SNPs; 1 D-SNPs
Number of plans with any in-state experience managing Medicaid benefits for dually eligible beneficiaries	10	0	3	0	0
Number of nonprofit plans	6	1	3	1	1
Number of plans affiliated with national firms operating demonstrations in 2+ states	2	5	0	5	2
Relative Medicaid quality ratings	Low(generally)	Not available (generally)	High (generally)	Average (generally)	Average (generally)
Relative Medicare quality ratings for D-SNPs	Average (generally)	Not available (generally)	High (generally)	Not available (generally)	Average (generally)
State Experience
Prior to demonstration, state contracted with health plans to provide some Medicaid benefits to dually eligible beneficiaries?	Yes	No	Yes	No	No
Prior to demonstration, state contracted with health plans to integrate Medicare and Medicaid benefits to dually eligible beneficiaries?	Yes	No	Yes,but only for seniors	No	No
SOURCE: Authors’ analysis, 2015. See tables 3 through 7 for all data sources.

Introduction

Individuals dually eligible for Medicare and Medicaid are a diverse population, with characteristics and care needs that create vulnerabilities and account for a disproportionate share of health care spending.¹ About 40 percent are low-income, under age 65, and disabled, including a majority with significant mental health or substance abuse service needs, and many with extensive long-term services and supports (LTSS) needs. The others are low-income elderly individuals, many of whom have multiple chronic conditions or are frail, and may require LTSS.² Many of these individuals have a diversity of needs and require complex care management that leverages a wide variety of services and provider types.

Medicare is the primary payer for acute care services required by dually eligible beneficiaries, whereas Medicaid provides additional benefits not covered by Medicare (primarily LTSS) and covers cost sharing and premiums associated with the Medicare program.^3,4 Although effective care typically requires coordinating the benefits covered by these different programs, the means for doing so have been limited historically, with each program operating independently.⁵ Beneficiaries generally have received services paid on a fee-for-service basis, with no single entity responsible for seeing that services are coordinated appropriately to meet the needs of individual beneficiaries.

Existing Managed Care Options for Dually Eligible Beneficiaries

Medicare Advantage is the main managed care option within Medicare. Although all beneficiaries may enroll, there have been limited incentives for dually eligible beneficiaries to do so because they have typically received the extra benefits offered by Medicare Advantage plans (such as lower cost-sharing and limited benefits for vision and dental services) through Medicaid. To better serve their needs, the Medicare Modernization Act of 2003 allowed for the development of Dual Eligible Special Needs Plans (D-SNPs) that could be tailored to those dually eligible for Medicare and Medicaid. D-SNPs have recently been required to have contracts with state Medicaid agencies (in addition to Medicare) and coordinate delivery of Medicare and Medicaid benefits. However, states have little financial incentive to integrate benefits unless Medicaid LTSS are included in the benefit package because Medicaid coverage of acute care benefits is very limited for dually eligible beneficiaries).

Integration is less challenging for states with prior experience in aligning Medicare and comprehensive Medicaid benefits.  While most D-SNPs provide only Medicare benefits in their capitated benefit packages, Fully Integrated Dual Eligible (FIDE) SNPs are D-SNPs that coordinate Medicare and Medicaid services and contract with states to provide Medicaid services, including LTSS, on a risk basis. Demonstration states that have implemented FIDE SNPs (California, Massachusetts, Minnesota, and New York) have had more experience with integration for dually eligible beneficiaries than others, as discussed later in this brief.

Within Medicaid, comprehensive risk-based managed care is the broadest-based managed care program.⁶  Historically, these programs were developed to serve low-income families and children. However, programs have been expanded in some states to cover those eligible for Medicaid based on disability, and health plans have had to adjust their provider networks and care management tools to address this population’s needs. Typically, these programs have been restricted to Medicaid-only individuals because of the challenges in coordinating benefits across Medicare and Medicaid. When state Medicaid programs focused on managed care for dually eligible beneficiaries, they generally did so primarily to coordinate and limit cost growth in LTSS, which are state responsibilities.⁷

The health plans participating in Medicare and Medicaid are not necessarily the same plans, and therefore health plans serving dually eligible beneficiaries may not already have experience serving members under each program.⁸ Medicare Advantage plans are more likely to have had experience in managing acute care benefits for both aged and disabled beneficiaries, whereas Medicaid health plans generally have managed benefits for low-income families and children and, in some states, acute care services and/or LTSS for adults with disabilities. Enrollment in health plans is voluntary in Medicare but can be mandated in Medicaid if states meet federal terms and conditions.

An Overview of the Financial Alignment Initiative

With the goal of better coordinating care financed by the Medicare and Medicaid programs for dually eligible beneficiaries, the Affordable Care Act authorized the creation of a new Medicare-Medicaid Coordination Office within the Centers for Medicare and Medicaid Services (CMS). Its goal is to enhance dually eligible beneficiaries’ access to benefits, simplify and make more consistent the requirements and processes used across the two programs, better coordinate the programs’ benefits, and enhance the quality and cost-effectiveness of care.⁹

The Financial Alignment Initiative is one major strategy being pursued to achieve these goals. Under the initiative, states were solicited to participate in a partnership with the federal government to develop demonstrations to better align care for dually eligible beneficiaries across Medicare and Medicaid.¹⁰  States were provided with two basic models: a Capitated Managed Care Model and a Managed Fee-for-Service Model.¹¹  The initial design of the financial alignment demonstrations was very ambitious, with the expectation that, by 2012 and 2013, a large number of states would be actively engaged in operational programs that served large numbers of individuals; this expectation generated some concern about the wide scope and rapid pace of change sought and the potential disruptions to services for vulnerable beneficiaries.¹²  Although 26 states initially expressed interest in some form of the demonstration involving either model, at least 11 later withdrew and the time frame for other states was delayed.¹³

This brief focuses specifically on the capitated managed care model being pursued under the demonstration. The model involves contracting with health plans on a capitated basis to provide coordinated benefits across Medicare and Medicaid. Some experts believe that a managed care approach offers the greatest potential to modify fee-for-service incentives (which can incentivize provision of unnecessary services) and achieve better coordination of services and across benefits covered in different programs. Capitated payment, by its nature, focuses on the totality of care for people enrolled in the health plan. Conceptually, capitation provides incentives to manage  care in ways that prevent, where feasible, avoidable conditions or complications that can be expensive to treat and harmful to the health of the enrollee.  Because they are responsible for all the covered benefits received by this population, managed care plans  must develop provider networks and other policies that support adequate access to covered by their contracts with Medicare and Medicaid. Contracts with these payers in turn include requirements that plans must meet and stipulate processes of oversight. They typically also require reporting of performance metrics that reflect care for the populations they serve.  Such requirements are harder to implement in fee-for-service and are especially important in caring for the dual eligible population.

There are, however, also inherent risks that capitation’s financial incentives will lead to underservice and suboptimal care, particularly if contracts are signed with plans and associated providers that have limited experience in providing services for the dually eligible population. Their provider networks may not necessarily include the full range of specialized services that dually eligible beneficiaries are likely to require (such as specific types of substance abuse, mental health, and LTSS providers); also, care management tools developed for a healthier population may not be adequate for dually eligible beneficiaries. There are concerns regarding potential trade-offs between cost containment and quality of care, and the potential that dually eligible beneficiaries in the demonstration could be treated differently from other Medicare beneficiaries, particularly with regard to beneficiary choice, protections, and oversight.

States are using so-called “passive” enrollment for the demonstrations, notifying beneficiaries about their pending enrollment in a demonstration health plan but allowing them to opt out at any time (effective monthly) before or after enrollment. Beneficiaries may be passively enrolled in a plan that does not include all of their providers in its network. Therefore, in order to avoid service disruptions for beneficiaries in the demonstrations, it is particularly important that health plans’ provider networks match the needs and service patterns of the population. (Appendix A summarizes differences across the programs in more detail.)

The balance between risks and rewards to consumers and other stakeholders depends on the adequacy of the requirements in the managed care contracts that define the health plan’s responsibilities, the experience and quality of the health plans implementing them, and the effectiveness of shared oversight by the federal government and states. This brief does not examine the capacity of states and the federal government to oversee the demonstrations. However, capacity for demonstration oversight depends on a number of factors, including past experience with similar programs. State background is particularly important because the design of the financial alignment demonstration was structured to encourage states to design and tailor the demonstration to the needs of the state, and states have considerable responsibility (jointly with CMS) for both implementation and overseeing the way they work.¹⁴

How Managed Care Contracts were Developed For The Demonstrations

The managed care models being implemented by states evolved through a multi-step process of negotiation, first between states and the federal government, and later between the federal government, states, and health plans. During the first half of 2012, states submitted proposals to CMS, and many also tentatively selected health plans at around the same time. CMS then negotiated individual memoranda of understanding (MOUs) with states, the first of which was signed with Massachusetts in August 2012. Based on the MOU, the federal government and the state then developed a three-way contract between CMS, the state Medicaid agency, and participating health plans, laying out  details of terms, requirements, and payment rates. The nature of this process influenced the final composition of participating health plans.

The development of these contracts and implementation of the demonstrations required harmonizing Medicare and Medicaid timelines and requirements in areas such as plan selection, provider network adequacy, quality oversight, and appeals processes. Reconciling these requirements contributed to delays and some attrition of participating states and health plans when agreement could not be reached on key terms. Additionally, the initiative generated national controversy about its scale and speed, and consumer advocacy groups and others expressed concern over various aspects of it, both nationally and in individual states.¹⁵ The delays allowed for time to address various complexities in demonstration development, but also caused uncertainty among providers, beneficiaries, and stakeholders about what would roll out and when.

In health plan interviews in 2012, plan executives expressed concerns over how well disparate requirements across the programs would be reconciled, and some noted that, although states were negotiating with the federal government, the plans had relatively little information available on key parameters, such as rates.¹⁶  Because many critical details important to health plans (such as payment rates and requirements) were not known at the start, some health plans that initially were selected later withdrew in the course of negotiations on the three-way contract.

Although all participating health plans were required to meet both Medicare and Medicaid requirements, the demonstration allows state Medicaid programs to “passively enroll” dually eligible beneficiaries into health plans that cover their Medicare benefits as long as beneficiaries can opt out at any time. Plans under a Medicare enrollment or marketing sanction are not eligible for any demonstration enrollment, and CMS rules prohibit companies with low past performance in Medicare Advantage from receiving passive enrollment in their demonstration health plans.¹⁷

Report

The State Context of the Demonstrations

Within the 10 states implementing health plan-based demonstrations, there are diverse levels and types of previous experience with relevant managed care and care coordination efforts (such as D-SNPs, capitated MMC for various populations, Medicaid managed long-term services and supports [MLTSS], and other Medicare/Medicaid integration efforts). States’ prior work in these areas can help in assessing state capacity to implement and oversee the demonstration, providing insight into why and how the state is implementing its demonstration, and what experience the health plans, beneficiaries, and providers in the state have regarding relevant capitated programs.

Focus of State Demonstrations

Table 1 summarizes selected characteristics and the current state of health plan-based demonstrations in 10 states — the nine state demonstrations that had three-way contracts for capitated financial alignment demonstrations by December 2014, and one state with an administrative alignment demonstration.¹ All of the state demonstrations are focused on adults dually eligible for Medicare and Medicaid (only a very small percentage of dually eligible beneficiaries are children), but some limit eligibility by age or other conditions. Regarding age, Massachusetts’s demonstration includes only dually eligible beneficiaries under age 65 (the state already had an integrated program for dually eligible adults ages 65 and older), whereas both Minnesota’s and South Carolina’s demonstrations include only the elderly (65+). New York and Texas restrict eligibility to a subset of enrollees with specific LTSS requirements or use patterns, which mirror eligibility requirements in their existing related state MLTSS programs (Managed Long Term Care for New York and STAR+PLUS for Texas). Minnesota’s demonstration is unique, in that it aligns specific administrative functions within its existing program for dually eligible beneficiaries ages 65 and older, without financial alignment.

State demonstrations vary in their scope, reflecting in part the differences in the size and diversity of states and existing managed care programs. Whereas only two demonstrations are fully statewide (South Carolina and Minnesota), some other states include large numbers of counties that they tend to group into regions to facilitate management (Illinois, Michigan, Ohio, Virginia). In contrast, California, New York, and Texas are very large and diverse states that have chosen to focus their demonstrations on particular regions (seven counties mainly in southern California, seven counties in and around New York City, and six largely urban counties in Texas). Due to the urban focus of various states, the demonstrations cover many large population centers (such as Los Angeles, Chicago, Boston, Detroit, New York City, Houston, Dallas, and San Antonio). Given that both Medicare Advantage and MMC have higher penetration rates in urban areas,² it is not surprising that many demonstrations melding the two programs also focus on key urban areas, which also are the areas where beneficiaries, including those dually eligible for Medicare and Medicaid, are more likely to live.

Health Plan Background and Experience

Whereas the states and CMS structure the policies, procedures, and monitoring of the Initiative, much of the day-to-day work ultimately depends on health plan actions and competency (for example, via provider network development and the manner in which they promote quality and coordinate care). Because the demonstration health plans are melding the detailed requirements of both Medicare and Medicaid, and addressing the complex needs of dually eligible beneficiaries, their past experience is important, both in considering their regulatory experience and their familiarity with serving dually eligible beneficiaries.

Our analysis of health plans focuses on those in the five states that had enrolled beneficiaries in capitated financial alignment demonstrations by December 2014 (California, Illinois, Massachusetts, Ohio, and Virginia). A total of 29 health plans from 24 firms are participating in the demonstrations in those states; details on their prior experience and the quality ratings of plans operated by the same organizations are discussed in this section. Although additional states are opening enrollment in 2015, their health plans are not included here in detail, as the set of participating health plans may evolve during the launch of the demonstration (as it has in some other states). Brief information on health plans in these states also is provided in this section. Health plans in Minnesota’s administrative alignment demonstration also are not reviewed here in detail, as this demonstration adds only some administrative alignment functions to existing integrated contractors (which all had existing FIDE SNP and Medicaid contracts).

Experience of Participating Health Plans in Demonstration States Operational in 2014

Table 5 summarizes the key characteristics of the 29 health plans participating in the demonstration, including the prior experience they or their affiliated companies (those under the same parent company) have had in serving Medicare, Medicaid, or dual eligible enrollees within the state, as well as Medicare or Medicaid enrollees out of state. A few of the organizations operating demonstration health plans (Centene, Humana, Molina, and Anthem) have plans in more than one of these five states. These four companies accounted for 9 of the 29 plans in the demonstration. Ten of the health plans were local and had no Medicare or Medicaid enrollment out of state. The landscape of health plans varies by state, with Massachusetts and California including many local plans – all of which also have familiarity with dually eligible beneficiaries in MMC – and Illinois, Ohio, and Virginia including mainly national, for-profit plans.

Table 5: Selected Organizational Characteristics and Prior Experience of Capitated Demonstration Health Plans, by State
			Prior Medicare Advantage (MA) Enrollment in State (2014)a			Prior Medicaid Managed Care (MMC) Enrollment in State		Out-of-State Experience
State	Demonstration Health Plan (Parent Organization, when Different)a	Tax Statusa	Non-SNP MA Enrollment	Dual SNP Enrollment	Other SNP Enrollmentd	Enrollment (2012)b	Dual Eligibles in Medicaid Health Plan (2011)c	MA	MMC
CA	Anthem Blue Cross, including CareMore	For Profit	72,951	1,141	20,289	448,492	Yes	Yes	Yes
	CalOptima (Orange County Health Authority)e, f	Nonprofit	0	16,014	0	376,053	Yes	No	No
	Care1st Health Plan	For Profit	22,584	13,545	0	28,625	Yes	Yes	Yes
	Community Health Group	Nonprofit	0	1,216	0	122,225	Yes	No	No
	Health Net	For Profit	116,471	33,284	3,972	719,907	Yes	Yes	Yes
	Health Plan of San Mateo	Nonprofit	0	8,747	0	59,983	Yes	No	No
	IEHP DualChoice (Inland Empire Health Plan)	Nonprofit	0	11,559	0	501,503	Yes	No	No
	L.A. Care (Local Initiative Health Authority for L.A. County)	Nonprofit	0	6,994	0	997,719	Yes	No	No
	Molina Healthcare of California	For Profit	0	8,498	0	201,440	Yes	Yes	Yes
	Santa Clara Family Health Plan (Santa Clara County Health Authority)	Nonprofit	0	0	0	116,644	Yes	No	No
IL	Aetna Better Health	For Profit	42,144	0	0	18,000g	No	Yes	Yes
	BlueCross BlueShield of Illinois (Health Care Service Corp.)	Nonprofit	5,801	0	0	0g	—	Yes	Yes
	Cigna-HealthSpring CarePlan of Illinois	For Profit	12,223	3,385	0	0g	—	Yes	Yes
	Health Alliance Connect	For Profit	12,570	0	0	0g	—	Yes	No
	Humana Health Plan, Inc.	For Profit	84,077	21	280	0g	—	Yes	Yes
	IlliniCare Health (Centene)	For Profit	0	0	0	17,800g	No	Yes	Yes
	Meridian Complete (Caidan Enterprises)	For Profit	86	81	0	7,300g	No	Yes	Yes
	Molina Healthcare of Illinois	For Profit	0	0	0	0g	—	Yes	Yes
MA	Commonwealth Care Alliance, Inc.	Nonprofit	0	5,357	0	4,236	Yes	No	No
	Fallon Total Care or Fallon Healthf	Nonprofit	13,192	3,685	0	14,212	Yes	No	No
	Tufts Health Plan — Network Health	Nonprofit	105,215	199	0	124,174	Yes	No	No
OH	Aetna Better Health	For Profit	156,428	0	0	0	—	Yes	Yes
	Buckeye Health Plan (Centene)	For Profit	0	1,284	0	168,143	No	Yes	Yes
	CareSource	Nonprofit	0	1,076	0	920,940	No	No	Yes
	Molina Healthcare of Ohio	For Profit	0	517	0	262,932	No	Yes	Yes
	UnitedHealthcare Community Plan	For Profit	75,267	8,306	4,256	122,630	No	Yes	Yes
VA	Anthem HealthKeepers	For Profit	4,167	0	584	220,835	No	Yes	Yes
	Humana Health Plan, Inc.	For Profit	120,184	1,529	777	0	—	Yes	Yes
	Virginia Premier CompleteCare (Virginia Commonwealth U. Health System Authority)	Nonprofit	0	0	0	151,566	No	No	No
SOURCES: a Analysis of CMS Medicare Advantage enrollment and Landscape files, 2014. b CMS. “2012 Medicaid Managed Care Enrollment Report.” http://www.medicaid.gov/medicaid-chip-program-information/by-topics/data-and-systems/medicaid-managed-care/downloads/2012-medicaid-managed-care-enrollment-report.pdf c CMS. “2011 Medicaid Managed Care Enrollment Report.” http://www.medicaid.gov/medicaid-CHIP-Program-Information/By-Topics/Data-and-Systems/Downloads/2011-Medicaid-MC-Enrollment-Report.pdf NOTES: Table includes states with active enrollment in capitated financial alignment demonstrations as of December 2014. All health plan enrollment noted reflects that of in-state health plans operated by the same parent organization as the demonstration health plan. Previous Medicaid MMC enrollment reflects MCO and HIO enrollment only. Numbers in bold reflect the three largest health plans statewide in a given state’s product line (Medicare Advantage, D-SNP, other SNP, or MMC). d “Other SNP” experience reflects chronic condition SNP enrollment. The exceptions: part of Anthem’s (CA) enrollment and all of UnitedHealthcare’s (OH) enrollment is in institutional SNPs. e CalOptima’s D-SNP plan was sanctioned by CMS in January 2014 and CalOptima thus was not eligible for demonstration enrollment. As of November 2014, CalOptima’s D-SNP was again open for enrollment, though enrollment in its demonstration plan will begin no sooner than July 2015. http://www.calduals.org/2014/11/14/alameda-orange-county-updates / f Two health plans also have PACE plans with small numbers of enrollees – Fallon (MA) and CalOptima (CA). g In 2012, Aetna Better Health and IlliniCare were the only contractors for Illinois’s Integrated Care Program (ICP) (for elderly, blind, and disabled Medicaid-only enrollees). In its 2013 and 2014 expansion of ICP, Illinois also contracted with all of the financial alignment demonstration health plans as Medicaid-only plans for ICP. As of October 2014, each of the Illinois demonstration plans also had a few thousand Medicaid enrollees each in ICP. Illinois “Enrollment for Integrated Care Program (ICP).” http://www2.illinois.gov/hfs/PublicInvolvement/cc/Pages/ICPEnrollment.aspx)

Of the two states with previous enrollment of dually eligible beneficiaries in capitated MMC:

• California is including 10 health plans in its demonstration, with a heavy base of local nonprofit plans, along with some for-profit plans with strong ties to the state. As discussed above, California allowed only its existing Medicaid plans in the demonstration counties to participate; thus, all plans have significant Medicaid enrollment. It is important to note that California previously did not generally include LTSS under its health plans (except in the COHS plans);¹ the Medicaid plans’ experience with dually eligible beneficiaries thus was mostly with the minimal other services covered by Medicaid for dually eligible beneficiaries. California is phasing in MLTSS under its Medicaid health plans concurrent with the demonstration. All health plans except for one (Santa Clara Family Health Plan) also have D-SNP enrollment; three also have general Medicare Advantage product lines.
• Massachusetts’s demonstration includes three local nonprofit plans that all participate in its integrated Senior Care Options (SCO) program. These plans have experience with Medicare/Medicaid integration, though the care needs of those in the demonstration (dually eligible beneficiaries who are under 65 and disabled) differ from the needs of those in SCO (elderly dually eligible beneficiaries). Though Massachusetts initially selected three additional health plans (which do not participate in SCO and are for-profit) for its demonstration, these plans withdrew, mainly citing concerns about the demonstration’s payment rates. This development left the three nonprofit health plans that have more specialized experience with dually eligible beneficiaries.² One participating firm also has a large Medicare Advantage line.

Of the three states with no previous enrollment of dually eligible beneficiaries in capitated MMC:

• Illinois’s demonstration includes eight health plans. Most plans in Illinois did not have in-state Medicaid enrollment when they first contracted for the demonstration. In general, the state had very low risk-based MMC penetration. Health plans related to two of the demonstration plans (Aetna and IlliniCare/Centene) were the contractors for the state Medicaid’s ICP, which began in 2011 for Medicaid-only beneficiaries who are elderly or disabled. However, as Illinois moved rapidly toward risk-based MMC and the recently expanded ICP, it contracted with all of its demonstration health plans for this expansion, which began slightly before the demonstration. These plans thus are developing in-state Medicaid experience at the same time as they begin the demonstration. Six of the health plans have at least some in-state Medicare experience, including two plans that are among the largest Medicare plans in the state.
• Ohio is including five health plans in its demonstration; four of these have a large Medicaid presence in the state as well as D-SNPs. An additional health plan related to one of the state’s largest Medicare plans (Aetna) also is participating, though it does not have any in-state Medicaid enrollment.
• Virginia’s demonstration includes three health plans, two of which are related to Medicaid plans that are among the largest in the state. One of the plans (Anthem) has a small number of Medicare enrollees in the state, while the other (Virginia Premier) is a local Medicaid plan with no Medicare experience. The third plan (Humana) operates one of Virginia’s largest in-state Medicare plans, though has no previous in-state Medicaid enrollment.

Almost all of the organizations operating health plans across these states have at least some in-state Medicare Advantage enrollment, though not necessarily enrollment in D-SNPs. The few organizations with no in-state Medicare experience are either local, state Medicaid-focused plans (Santa Clara Family Health Plan in California and Virginia Premier in Virginia) or national health plans with Medicare experience in other states (IlliniCare/Centene and Molina in Illinois). About one-third of the organizations have in-state enrollment in both regular Medicare Advantage and D-SNPs. The type of Medicare plans of organizations operating health plans varies by state in some cases; almost all of California’s plans have D-SNPs, whereas plans in Illinois primarily had regular Medicare Advantage. (As shown in Table 3, Illinois has very limited D-SNP enrollment.) A handful of organizations also have some enrollees in other SNP types (for people with chronic conditions or requiring an institutional level of care).

Almost all organizations also have significant in-state Medicaid experience that predated the demonstrations. The main exception is in Illinois – most organizations operating health plans in Illinois did not have such experience when they first contracted with the state. Only two other organizations across the other states had no in-state Medicaid enrollment, though those plans have large in-state Medicare Advantage market shares (Humana has 63% in Virginia and Aetna has 20% in Ohio);³ instead, they are building on significant local experience in Medicare.

Experience of Participating Health Plans in Demonstration States Beginning in 2015

Table 6 displays high-level information on the previous in-state experience of organizations operating health plans expected to be in the demonstration states that begin enrollment in 2015. As discussed above, these health plans are not discussed here in detail, as the specific participating health plans may still change.

In general, these states are contracting with national for-profit plans with the exception of New York, which is including many local nonprofit, provider-based health plans already in its MLTC program. New York and Texas both are building on existing in-state health plans for their demonstrations, but these plans’ backgrounds vary widely. All Texas plans have previous in-state Medicare (including D-SNP) and Medicaid enrollment. However, New York’s plans all have Medicaid experience (some of them only in MLTSS), but about one-third have no prior Medicare experience. Though New York’s plans have specialized experience in MLTSS, and some have it in integrated care (via Medicaid Advantage Plus), the lack of Medicare experience indicates that some will have a steep learning curve in that area. As for other 2015 states, health plans in Michigan and South Carolina have a range of backgrounds, with some lacking previous in-state Medicare and/or Medicaid enrollment (especially in South Carolina).

Table 6: Prior Experience of Capitated Demonstration Health Plans in Demonstration States Planned to Begin Operations in 2015, by State
State	Health Plansa	Health Plans’ Prior In-State Experienceb
Michigan	AmeriHealth, CoventryCares, Fidelis SecureCare, Meridian Health Plan, Midwest Health Plan, Molina, Upper Peninsula Health Plan	Five have Medicare and Medicaid experience, one has only Medicare, and one has neither.
New York	Based on Managed Long Term Care plans:Aetna Better Health of New York, AgeWell, AlphaCare, Amerigroup, Archcare Community Life, Centerlight Healthcare, Centers Plan for Healthy Living, Elderplan, Elderserve Health, Fidelis Care of NY (NYS Catholic Health Plan), GuildNet, Managed Health (HealthFirst), Health Insurance Plan of Greater New York (HIP), Independence Care Systems, Integra, MetroPlus, Montefiore HMO, North Shore-LIJ Health System, Senior Whole Health, VillageCareMAX, VNS Choice, Wellcare	All have MLTC experience, and some have other Medicaid experience (including eight that also have Medicaid Advantage Plus plans – see Table 4).Fifteen plans also have Medicare experience and seven plans do not.
South Carolina	Absolute Total Care (Centene), Advicare, Molina, Select Health of South Carolina (AmeriHealth)	One has only Medicaid experience, one has only Medicare, and two have neither.
Texas	Based on STAR+PLUS health plans:Amerigroup, Cigna-Healthspring, Molina, Superior (Centene), UnitedHealthcare	All have prior Medicare and Medicaid plans.
SOURCES: a Musumeci M, “Financial and Administrative Alignment Demonstrations for Dual Eligible Beneficiaries Compared: States with Memoranda of Understanding Approved by CMS,” Washington DC: Henry J. Kaiser Family Foundation, July 2014. Update on New York: “FIDA Plans by Region.” https://www.health.ny.gov/health_care/medicaid/redesign/mrt_101.htm b Analysis of CMS Medicare Advantage enrollment and Landscape files, 2014; CMS. 2012 Medicaid Managed Care Enrollment Report. http://www.medicaid.gov/medicaid-chip-program-information/by-topics/data-and-systems/medicaid-managed-care/downloads/2012-medicaid-managed-care-enrollment-report.pdf; state and health plan websites. NOTES: Minnesota’s administrative demonstration, which modified existing contracts with FIDE SNPs in Minnesota Senior Health Options, includes Blue Plus, HealthPartners, Itasca Medical Care, Medica Health Plans, Metropolitan Health Plan, PrimeWest Health, South Country Health Alliance, and UCare Minnesota.

Available Information on Quality Ratings of Participating Health Plans

Given the complex needs of the dual eligible population, it is important to understand what is known about the quality of care provided by health plans participating in the demonstration. Quality ratings of the existing related Medicare and Medicaid plans can give insight into the infrastructure and culture that health plans bring to the demonstrations.

Table 7 summarizes data on available quality ratings for the existing in-state Medicare and Medicaid health plans related to demonstration plans, including both the Medicare Advantage star rating for the plan (general Medicare and D-SNP, when available) and Medicaid plan rankings by the National Committee on Quality Assurance (NCQA). The quality scores range from 1 to 5, with 5 being the highest. Medicare Advantage plans with 4 stars or more qualify for additional bonus payments, and NCQA highlights scores of 4 or 5 as being better across three performance categories.⁴ Medicare Advantage star ratings are assessed at the contract level, not the health plan level. Thus, unless a company offers only SNPs under its contract, the quality scores will reflect the overall performance of all health plans under a contract, not necessarily the performance of the D-SNP. For this reason, and because the metrics may not account for enrollee characteristics in D-SNPs, many believe that star ratings may unfairly disadvantage D-SNPs.⁵ It is also important to note that while LTSS are a key part of the demonstrations, the quality measures that states use for LTSS vary greatly and there is no standardized set of measures that allows for comparison in this brief.⁶

The data show considerable diversity in scores, both across plans and states. Across the states, Massachusetts’ demonstration plans have consistently high quality scores, with two of the three plans scoring at the top of the ratings in Medicare and Medicaid, and the third, a specialized plan, scoring highly for its D-SNP offering. In contrast, and not surprising given its limited MMC experience, Illinois plans (with one exception) have no available Medicaid quality ratings. Only four of its contracted plans have Medicare quality ratings for in-state plans, including two with a rating for D-SNPs. (The ratings for these plans vary from 3.5 to 4.5.)

In Ohio and Virginia, all of the plans have ratings, but often just for one program (generally because they do not have a plan to be rated). Ohio’s five plans include three with MMC ratings, one of which also has a Medicare rating for D-SNPs, and two with only general Medicare Advantage ratings. Though there is variation by plan and element, these ratings tend to be about average (3 or 3.5), with plans worse on some dimensions (Centene’s Buckeye plan rated 2 on Medicaid prevention, CareSource’s 2.5 on D-SNP) and higher on others (CareSource with a 4 for consumer satisfaction and Molina with a 4 for treatment). In Virginia, two of the three plan ratings were average on two dimensions, but had a 4 for quality of treatment. The third, a Humana plan, did not have a Medicaid plan in the state and had average Medicare ratings (3.5).

Among these states, California stands out because of the relatively large number of plans with low MMC ratings from NCQA. Of the 10 participating plans, 8 had reported scores. Almost all have the lowest rating for consumer satisfaction (1); a few have below average ratings (1 or 2) for prevention or treatment. The D-SNP of the best performing Medicaid plan (CalOptima, a COHS health plan in Orange County) was sanctioned by CMS in January 2014 due to “widespread and systemic failures” that impacted its D-SNP enrollees’ access to care; for this reason, demonstration enrollment in that county has been delayed until at least July 2015.⁷ However, the D-SNP scores for California plans are better (mostly 3 and 3.5) than their Medicaid scores.

Table 7: Quality Ratings of In-State Health Plans Related to Demonstration Health Plans, by State
		Medicarea, c		Medicaid – NCQAb, d
State	Demonstration Health Plan Name	Medicare Advantage Stars	D-SNP Stars	Overall Score	Consumer Satisfaction	Prevention	Treatment	National Rank
CA	Anthem Blue Cross, including CareMore	4	4	75	1	3	3	106
	CalOptima (Orange County Health Authority)	N/A	3.5	82	1	5	4	29
	Care1st Health Plan	3.5	3.5	76	1	2	3	102
	Community Health Group	N/A	3.5	74	2	2	2	110
	Health Net	4	4	70	1	2	2	119
	Health Plan of San Mateo	N/A	3.5	NR
	IEHP DualChoice (Inland Empire Health Plan)	N/A	3	73	1	3	2	112
	L.A. Care (Local Initiative Health Authority for L.A. County)	N/A	3	76	3	3	3	99
	Molina Healthcare of California	N/A	3	77	1	3	3	95
	Santa Clara Family Health Plan (Santa Clara County Health Authority)	N/A	N/A	NR
IL	Aetna Better Health	4	N/A	NR
	BlueCross BlueShield of Illinois (Health Care Service Corp.)	NR	N/A	N/A
	Cigna-HealthSpring CarePlan of Illinois	3.5	3.5	N/A
	Health Alliance Connect	4.5	N/A	N/A
	Humana Health Plan, Inc.	4	4	N/A
	IlliniCare Health (Centene)	N/A	N/A	NR
	Meridian Complete (Caidan Enterprises)	NR	NR	85	4	5	5	10
	Molina Healthcare of Illinois	N/A	N/A	N/A
MA	Commonwealth Care Alliance, Inc.	N/A	4.5	NR
	Fallon Total Care or Fallon Health	4.5	4.5	87	5	5	5	2
	Tufts Health Plan – Network Health	4.5	4.5	87	5	5	5	1
OH	Aetna Better Health	3.5	N/A	N/A
	Buckeye Health Plan (Centene)	N/A	NR	77	3	2	3	98
	CareSource	N/A	2.5	79	4	3	3	66
	Molina Healthcare of Ohio	N/A	NR	79	3	3	4	82
	UnitedHealthcare Community Plan	3.5	3.5	78	3	3	3	90
VA	Anthem HealthKeepers	3.5	N/A	79	3	3	4	73
	Humana Health Plan, Inc.	3.5	3.5	N/A
	Virginia Premier CompleteCare (Virginia Commonwealth U. Health System Authority)	N/A	N/A	79	3	3	4	62
Key: 1 – 2 (Worse); 3 (Average); 4 – 5 (Better) SOURCES: a 2014 Medicare Star Ratings Data. b National Committee on Quality Assurance (NCQA). “Health Insurance Plan Rankings 2014–2015.” http://healthplanrankings.ncqa.org/2014/ NOTES: Includes states with active enrollment in capitated financial alignment demonstrations as of December 2014. All health plan experience noted reflects that of in-state health plans operated by the same parent organization as the demonstration health plan. c Medicare Advantage stars: out of 5 stars; 5 = excellent; 4 = above average, 3 = average, 2 = below average, 1 = poor. N/A = organization has no in-state health plan. NR = not rated. For any organization with multiple plan ratings in a state (preferred provider organization (PPO) vs. health maintenance organization (HMO)), HMO ratings are shown, due to HMO similarity to the demonstration health plan product line. In cases in which an organization has more than one star-rated HMO in a state (Anthem in CA and Humana in IL), the rating for the larger plan is shown. For more information on the star rating system, see http://www.cms.gov/Medicare/Provider-Enrollment-and-Certification/CertificationandComplianc/FSQRS.html d NCQA: 2014—2015. N/A = parent company has no in-state health plan. NR = not ranked. The overall score is out of 100, and the ranking is out of 136 nationally ranked plans. All ranked plans (and IlliniCare) also are NCQA accredited. More information on rankings is available at NCQA, Health Insurance Plan Rankings: Ranking Resources. http://www.ncqa.org/ReportCards/HealthPlans/HealthInsurancePlanRankings.aspx L.A. Care (CA) and CareSource (OH) Medicare plans received a Medicare Low Performing Icon for 2014. CalOptima’s D-SNP was sanctioned by CMS in January 2014.

Conclusion

Appendix

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.
SOURCES: 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.

Endnotes

Introduction

1. Young K, Garfield R, Musumeci M, Clemans-Cope L, and Lawton E, “Medicaid’s Role for Dual-Eligible Beneficiaries.” Washington, DC: Henry J. Kaiser Family Foundation, August 2013. http://www.kff.org/medicaid/issue-brief/medicaids-role-for-dual-eligible-beneficiaries/; Jacobson G, Neuman P, and Damico A, “Medicare’s Role for Dual Eligible Beneficiaries.” Washington, DC: Henry J. Kaiser Family Foundation, April 2012. http://www.kff.org/medicare/issue-brief/medicares-role-for-dual-eligible-beneficiaries/

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2. Ibid., and also Neuman P, Lyons B, Rentas J, and Rowland D, “Dx for a Careful Approach to Moving Dual-Eligible Beneficiaries into Managed Care Plans.” Health Affairs, 31, no.6 (2012):1186—1194.

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3. Before Medicare was expanded through Part D (Prescription Drugs) in 2006 as a result of the Medicare Modernization Act of 2003, Medicaid also provided primary coverage for most prescription drugs.

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4. For more information on Medicare and Medicaid options for dually eligible beneficiaries, see Medicaid and CHIP Payment and Access Commission, “Chapter 3: The Role of Medicare and Medicaid for a Diverse Dual Eligible Population” in Report to Congress, Washington DC: March 2013. http://www.macpac.gov/reports

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5. Gold M, Jacobson G, and Garfield R, “There Is Little Experience and Limited Data to Support Policy Making on Integrated Care for Dual Eligibles.” Health Affairs, 31, no.6 (2012):1176—1185.

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6. For additional detail on MMC options historically, see Medicaid and CHIP Payment Advisory Commission, “Report to Congress: The Evolution of Managed Care in Medicaid.” Washington DC: June 2011. http://www.macpac.gov/reports

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7. For more information on Medicare and Medicaid options for dually eligible beneficiaries, see Medicaid and CHIP Payment and Access Commission, “Chapter 3: The Role of Medicare and Medicaid for a Diverse Dual Eligible Population” in Report to Congress, Washington DC: March 2013. http://www.macpac.gov/reports

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8. Historically, health plans participating in Medicare managed care programs had to have a strong commercial presence in the market (the so called “50/50 rule,” initially designed as a quality enhancement feature). Although this requirement has been absent for some time, participants still tend to include firms with substantial commercial enrollment, particularly in group accounts. Medicaid health plans, in contrast, are more likely to specialize in the Medicaid line of business. Typically they have had experience in working with states and negotiating contracts with providers familiar with the usually lower payment rates offered by Medicaid versus Medicare as well as the special challenges of caring for those enrolled in Medicaid. Safety net and other so called “essential providers” tend to be more prominent in Medicaid health plan networks. Even though such differences are eroding over time as more commercial health plans enter the Medicaid market, Medicaid health plans still remain a separate “line of business” in such companies; whereas there may be more cross-fertilization across the different lines of business,  historically this has been limited.

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9. “About the Office of Medicare and Medicaid Coordination.” http://www.cms.gov/Medicare-Medicaid-Coordination/Medicare-and-Medicaid-Coordination/Medicare-Medicaid-Coordination-Office/index.html

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10. For additional details on the rationale for this program, see https://www.cms.gov/Medicare-Medicaid-Coordination/Medicare-and-Medicaid-Coordination/Medicare-Medicaid-Coordination-Office/FinancialAlignmentInitiative/FinancialModelstoSupportStatesEffortsinCareCoordination.html

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11. CMS, State Medicaid Director Letter #11-008. “Re: Financial Models to Support State Efforts to Integrate Care for Medicare-Medicaid Enrollees.” July 2011.  http://downloads.cms.gov/cmsgov/archived-downloads/SMDL/downloads/financial_models_supporting_integrated_care_smd.pdf

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12. For example, see Kaiser Commission on Medicaid and the Uninsured, “Financial Alignment Models for Dual Eligibles: An Update.” November 2011. https://www.kff.org/health-reform/issue-brief/financial-alignment-models-for-dual-eligibles-an/; Kaiser Commission on Medicaid and the Uninsured. “An Update on CMS’s Capitated Financial Alignment Demonstration Model for Medicare-Medicaid Enrollees.” April 2012. https://www.kff.org/medicaid/issue-brief/an-update-on-cmss-capitated-financial-alignment/

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13. National Association of States United on Aging and Disability (NASUAD), “State Medicaid Integration Tracker.” January 1, 2015. http://www.nasuad.org/initiatives/tracking-state-activity/state-medicaid-integration-tracker

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14. Alternatively, the demonstration could have been based around Medicare Advantage requirements, perhaps building on existing programs for Special Needs Plans serving dually eligible beneficiaries. Both options require that Medicare and Medicaid requirements be aligned. However, the state-based focus gives more attention to state interests in long-term care, which accounts for most state spending for dually eligible beneficiaries.

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15. Crowley J, Musumeci M, and Reaves E, “Development of the Financial Alignment Demonstrations for Dual Eligible Beneficiaries: Perspectives from National and State Disability Stakeholders.” Washington DC: Henry J. Kaiser Family Foundation, July 2013. https://www.kff.org/medicaid/issue-brief/development-of-the-financial-alignment-demonstrations-for-dual-eligible-beneficiaries-perspectives-from-national-and-state-disability-stakeholders/

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16. Gold M, Wang W, and Jacobson G, “Medicare Health Plans and Dually Eligible Beneficiaries: Industry Perspectives on the Current and Future Market.” Washington DC: Henry J. Kaiser Family Foundation, May 2013. https://www.kff.org/medicare/report/medicare-health-plans-and-dually-eligible-beneficiaries-industry-perspectives-on-the-current-and-future-market/

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17. This applies to demonstration plans under the same parent company as those with sanctions or low past performance. See CMS “Additional Guidance on the Medicare Plan Selection Process for Organizations Interested in Offering Capitated Financial Alignment Demonstration Plans in 2013.” March 2012. http://www.cms.gov/Medicare-Medicaid-Coordination/Medicare-and-Medicaid-Coordination/Medicare-Medicaid-Coordination-Office/FinancialAlignmentInitiative/Downloads/MarchGuidanceDocumentforFinancialAlignmentDemo.pdf

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Report

The State Context of the Demonstrations

1. Washington, which has had a managed fee-for-service financial alignment demonstration in most of the state since 2013, also had an MOU with CMS for a capitated financial alignment demonstration in two of its counties. After facing withdrawals by some of its health plans, the state decided in February 2015 not to proceed with a capitated demonstration (See: Washington State Healthcare Authority. “HealthPath Washington Capitated Model Cancelled,” February 2, 2015. http://www.hca.wa.gov/medicaid/Documents/HealthPathWALetter.pdf ). Regarding earlier issues related to Washington’s health plans, see “Regence Faulted for HealthPath Launch Delay,” Business Examiner, September 18, 2014. http://www.businessexaminer.com/blog/September-2014/Regence-faulted-for-HealthPath-launch-delay/

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2. For Medicare, see Gold M, Jacobson G, Damico A, and Neuman T, “Medicare Advantage 2014 Spotlight: Enrollment Market Update.” Washington DC: Henry J. Kaiser Family Foundation, May 2014. https://www.kff.org/medicare/issue-brief/medicare-advantage-2014-spotlight-enrollment-market-update/; for Medicaid, see Howell E, Palmer A, and Adams F, “Medicaid and CHIP Risk-Based Managed Care in 20 States: Experiences Over the Past Decade and Lessons for the Future,” The Urban Institute, July 2012. http://www.urban.org/UploadedPDF/412617-Medicaid-and-CHIP-Risk-Based-Managed-Care-in-20-States.pdf

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3. Gorn D, “What's Behind High Opt-Out Rate Among Dual Eligibles in L.A. County?” California Healthline, December 4, 2014. http://www.californiahealthline.org/insight/2014/whats-behind-high-optout-rate-among-duals-in-los-angeles-county

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4. Minnesota initially submitted a proposal for a capitated financial alignment demonstration. However, it decided not to pursue financial alignment, noting that the demonstration “would result in a significantly lower payment than Minnesota is now receiving for senior Medicare beneficiaries in current programs.” Minnesota Department of Human Services website, Update on Status of the Dual Demo, June 29, 2012. http://www.dhs.mn.gov/main/idcplg?IdcService=GET_DYNAMIC_CONVERSION&dID=141378

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5. Gold M, Jacobson G, and Garfield R, “There Is Little Experience and Limited Data to Support Policy Making on Integrated Care for Dual Eligibles.” Health Affairs, 31, no.6 (2012):1176–1185.

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6. The four demonstration states with operating FIDE SNPs represent four of the six states nationwide with such experience as of 2014. (The other two states are Arizona and Wisconsin.)

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7. Gold M, et al. 2012.

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8. Gold M, et al. 2012.

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9. See Exhibit 11 of MedPAC and MACPAC, “Data Book: Beneficiaries Dually Eligible for Medicare and Medicaid.” January 2015.

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10. Gold M and Casillas G, “What Do We Know about Health Care Access and Quality in Medicare Advantage Versus the Traditional Medicare Program?”  Washington DC: Kaiser Family Foundation, November 2014. http://files.kff.org/attachment/what-do-we-know-about-health-care-access-and-quality-in-medicare-advantage-versus-the-traditional-medicare-program-report

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11. Denominator includes full and partial dually eligible beneficiaries. Gold M, Jacobson G, Damico A, and Neuman T, “Medicare Advantage 2014 Spotlight: Enrollment Market Update.” Washington DC: Henry J. Kaiser Family Foundation, May 2014. https://www.kff.org/medicare/issue-brief/medicare-advantage-2014-spotlight-enrollment-market-update/

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12. CMS, “Guidance to States Using 1115 Demonstrations or 1915(b) Waivers for Managed Long Term Services and Supports Programs.” May 2013. http://www.medicaid.gov/Medicaid-CHIP-Program-Information/By-Topics/Delivery-Systems/Downloads/1115-and-1915b-MLTSS-guidance.pdf

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13. PACE is a fully integrated program that covers all Medicare services and a state’s Medicaid services. It is an option within Medicare in which state Medicaid programs can participate. To be eligible, a beneficiary must live in a PACE plan’s service area, be age 55 or older, require a nursing home level of care, and be able to live safely in the community.

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14. Saucier P, Kasten J, Burwell B, and Gold L, “The Growth of Managed Long-Term Services and Supports (MLTSS) Programs: A 2012 Update.” Truven Health Analytics. Prepared for CMS, 2012. http://www.medicaid.gov/medicaid-chip-program-information/by-topics/delivery-systems/downloads/mltssp_white_paper_combined.pdf

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15. Saucier P, et al. 2012.

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16. For additional information on SCAN, see its application to participate in San Bernadino County under the demonstration. http://www.dhcs.ca.gov/provgovpart/Documents/Duals/RFS%20Applications/SCAN%20San%20bernardino.pdf .

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17. California Department of Health Care Services, “Enrollment Strategy for Los Angeles County into Cal Medi-Connect Updated.” February 18, 2014. http://www.calduals.org/wp-content/uploads/2014/02/REVISED-LA-Enrollment-Strategy-2.19.14-2.0.pdf  Additionally, note that Blue Shield of California proposed in December 2014 to acquire Care1st Health Plan. See “Blue Shield of California To Enter Medi-Cal/Medicaid with Acquisition of Care1st.” December 8, 2014. https://www.blueshieldca.com/bsca/about-blue-shield/newsroom/care1st-acquisition-agreement-120814.sp

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Health Plan Background and Experience

1. See pages 55—56 of California’s “Proposal to the Center for Medicare and Medicaid Innovation -- Coordinated Care Initiative: State Demonstration to Integrate Care for Dual Eligible Beneficiaries.” May 31, 2012. http://www.cms.gov/Medicare-Medicaid-Coordination/Medicare-and-Medicaid-Coordination/Medicare-Medicaid-Coordination-Office/FinancialAlignmentInitiative/Downloads/CAProposal.pdf

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2. Gutman J, “Three of Six Selected Plans Drop Out of Mass. Duals Demo After Pay Rates Finalized.” Medicare Advantage News, July 15, 2013. http://aishealth.com/archive/nman072513-01

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3. See appendices of Gold M, Jacobson G, Damico A, and Neuman T, “Medicare Advantage 2014 Spotlight: Enrollment Market Update.” Washington DC: Henry J. Kaiser Family Foundation, May 2014. https://www.kff.org/medicare/issue-brief/medicare-advantage-2014-spotlight-enrollment-market-update/

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4. 4 and 5 correspond to being in the top one-third or top 10 percent of all health plans evaluated by NCQA. Methodology available at NCQA, “Health Insurance Plan Rankings 2014—2015 Methodology Overview.” July 2014. http://www.ncqa.org/Portals/0/Health%20Plan%20Rankings/2014/HPR2014_RankingsMethodologyOverview_Final_Update_7.30.14%20(1).pdf

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5. CMS, “Request for Information – Data on Differences in Medicare Advantage (MA) and Part D Star Rating Quality Measurements for Dual-Eligible versus Non-Dual-Eligible Enrollees.” http://www.cms.gov/Medicare/Prescription-Drug-Coverage/PrescriptionDrugCovGenIn/Downloads/Request-for-Information-About-the-Impact-of-Dual-Eligibles-on-Plan-Performance.pdf; Weiss H, and Pescatello S, “Medicare Advantage: Stars System’s Disproportionate Impact on MA Plans Focusing on Low-Income Populations.” Health Affairs Blog, September 22, 2014. http://healthaffairs.org/blog/2014/09/22/medicare-advantage-stars-systems-disproportionate-impact-on-ma-plans-focusing-on-low-income-populations/

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6. Saucier P, et al. 2012.

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7. January 2014 sanction letter: CMS, “Notice of Immediate Imposition of Intermediate Sanctions (Suspension of Enrollment and Marketing) for Medicare Advantage-Prescription Drug Plan Contract Number: Orange County Health Authority (CalOptima) (H5433).” January 24, 2014. http://www.cms.gov/Medicare/Compliance-and-Audits/Part-C-and-Part-D-Compliance-and-Audits/Downloads/CalOptima-Sanction-01-24-14.pdf; Update at calduals.org, “Alameda and Orange County Updates.” November 14, 2014. http://www.calduals.org/2014/11/14/alameda-orange-county-updates/

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Appendix

1. These and other documents are available at the CMS Financial Alignment Initiative, Information and Guidance for Plans website, http://www.cms.gov/Medicare-Medicaid-Coordination/Medicare-and-Medicaid-Coordination/Medicare-Medicaid-Coordination-Office/FinancialAlignmentInitiative/InformationandGuidanceforPlans.html

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2. See CMS, “Additional Guidance on the Medicare Plan Selection Process for Organizations Interested in Offering Capitated Financial Alignment Demonstration Plans in 2013.” March 2012. http://www.cms.gov/Medicare-Medicaid-Coordination/Medicare-and-Medicaid-Coordination/Medicare-Medicaid-Coordination-Office/FinancialAlignmentInitiative/Downloads/MarchGuidanceDocumentforFinancialAlignmentDemo.pdf

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3. CMS, “Joint Rate-Setting Process for the Capitated Financial Alignment Model FAQs Updated August 9, 2013.” http://www.cms.gov/Medicare-Medicaid-Coordination/Medicare-and-Medicaid-Coordination/Medicare-Medicaid-Coordination-Office/Downloads/JointRateSettingProcess.pdf

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4. For additional details on state programs for appeals and beneficiary protection, see https://www.kff.org/medicaid/issue-brief/financial-alignment-demonstrations-for-dual-eligible-beneficiaries-compared/

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5. Details on the readiness reviews is available at http://www.cms.gov/Medicare-Medicaid-Coordination/Medicare-and-Medicaid-Coordination/Medicare-Medicaid-Coordination-Office/FinancialAlignmentInitiative/ReadinessReviews.html

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6. CMS, “Capitated Financial Alignment Demonstration Medicare-Medicaid Plan Annual Requirements and Timeline for CY 2015.” January 2014. http://www.cms.gov/Medicare-Medicaid-Coordination/Medicare-and-Medicaid-Coordination/Medicare-Medicaid-Coordination-Office/FinancialAlignmentInitiative/Downloads/2015_CurrentMMPAnnualRequirements.pdf

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7. Various documents containing CMS guidance for health plans are compiled on the CMS Financial Alignment Initiative, Information and Guidance for Plans website. http://www.cms.gov/Medicare-Medicaid-Coordination/Medicare-and-Medicaid-Coordination/Medicare-Medicaid-Coordination-Office/FinancialAlignmentInitiative/InformationandGuidanceforPlans.html

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