Reform-Based Initiatives on Dual Eligibles Take Shape, Offering Big Potential for Plans

Reprinted from AIS's HEALTH REFORM WEEK, the nation’s leading publication on the business implications of the massive changes for the health industry mandated by reform.
By James Gutman, Managing Editor
November 21, 2011 Volume 2 Issue 36
Despite — and perhaps even because of — budget problems, a host of large-scale federal and state initiatives growing out of the reform law are taking shape to better manage the care and costs of Medicare-Medicaid dual eligibles (DEs). The results could include huge new opportunities for both Medicare Advantage (MA) and Medicaid plans.
Aiding the plans’ interest is the willingness of the new Federal Coordinated Health Care Office in CMS to allow approaches that involve “passive” enrollment of DEs into MA plans, as long as the beneficiaries assigned have the opportunity to opt out. While there is resistance to this concept from some patient-advocacy organizations, others seem willing to accept it if there are good patient protections and additional services provided.
Moreover, the CMS duals office’s initiatives are helping to spur efforts by numerous states, led by Michigan and California, to ready their own giant requests for proposals (RFPs) on programs to manage DEs. The insurers know there are 9.2 million DEs in the nation, their medical costs total about $310 billion annually, and less than 1 million of them now are in managed care plans.
But there also are problems looming for these reform-linked efforts, even aside from the difficulties of managing an extremely poor and sick population. Although there already is reform-law money being spent for the duals office’s initiatives, and its efforts have some bipartisan support, the money comes from the reform-law-created CMS Center for Medicare and Medicaid Innovation, and CMMI’s future increasingly is under attack from congressional Republicans (see story, p. 3).
Probably the biggest reason for plan optimism about the DE market relates to the quick start the less-than-year-old CMS duals office has had in developing large-scale demonstration projects that states have embraced. And one big reason for this embrace is that the initiatives, unlike some others proposed previously, let states share significantly in the savings Medicare stands to get. The “misalignment” issue is one familiar to Melanie Bella, the director of the CMS duals office and a former Indiana Medicaid director, she tells HRW in an interview. As a result, her office proposed in July Medicare-Medicaid financial alignment models that include states sharing in savings, and 37 states have submitted nonbinding letters of intent to participate.
This new thrust, slated for implementation in 2012, builds on one the duals office already has begun involving states getting $1 million grants to develop integrated care programs for DEs. The duals office, according to Bella, has “design contracts” with 15 states to furnish specified integrated services for DEs.
The office’s demonstration initiative pursues the integration goal by offering states two models to choose from. One is a capitated model in which a state, CMS and a health plan enter into a three-way contract, and the plan gets a “prospective blended payment to provide comprehensive coordinated care.” While CMS wants the program to save money versus what now is spent on duals, Bella notes, the blended rate, which is paid to the plans rather than directly to the states, figures to help states concerned about a hike in their short-term costs as they establish integrated care for DEs. The second option is a “managed fee-for-service” model, under which a state and CMS enter into an agreement that enables states to share in savings resulting from initiatives to improve quality.
Programs Will Need Long-Term Care Services
The duals office, though, is demanding in what it seeks — integration “across the full range of primary, acute, behavioral health and long term supports and services.” Bella notes that this means, among other things, long-term care services in both institutional and community settings plus home health care.
As a carrot to sweeten participation, the duals office intends to allow states to “passively” enroll DEs into plans as long as the beneficiaries have clear rights to opt out and if there is at least one other plan option available.
Asked about advocacy organizations’ view of this, Bella acknowledges that “historically” they have expressed “concern” about passive enrollment. Lately, however, she asserts, her office’s discussions with such groups have focused more on what beneficiary protections will be involved since the groups recognize states are cutting back benefits (e.g., dental care) in the face of their budget woes, and the integrated programs offer a way to provide more services.
The duals office’s program, she adds, is designed to allow and is generating interest from a wide variety of organizations, including MA Special Needs Plans (SNPs), Medicaid plans and provider entities.
She maintains that the ongoing congressional debates about CMMI’s funding should not affect the duals office’s initiatives under way, saying that the demonstration programs involved “don’t require a lot of external funding” and that there is bipartisan support for them.
Richard Bringewatt, co-chair of the SNP Alliance trade group, agrees, pointing to the support evident — including from Sen. Orrin Hatch (R-Utah) — when Bella testified about the initiatives before congressional committees. But Bringewatt does express concerns about other funding-related issues, including the potential to “rip out [federal] funding for infrastructure” that is needed for the DE programs.
Moreover, says Valerie Wilbur, the alliance’s other co-chair, states “at some point will have to step up to the table” to help on financing themselves. States now, she notes, are waiting to hear how much savings CMS expects the DE programs to produce, and that’s a figure Bella hasn’t offered yet. Bella did tell the Senate Finance Committee in September it will take time before savings are realized. Wilbur herself tells HRW much of the savings will come as a result of including long-term and behavioral care in the services available to the DEs.
The lack of savings figures, though, doesn’t seem to be deterring state efforts to move ahead on DE programs. Michigan is hoping to issue its RFP in the first quarter of 2012, and Wilbur says California wants to send out a “request for solutions” in January or February. The earliest such programs seemingly could be implemented, she says, is the beginning of 2013, with marketing beginning in fall 2012. Both states are among the 15 getting duals-office grants.
What business entities will be the big winners from the initiatives on DEs? Wilbur says Medicaid managed care plans will “show a lot of growth,” especially since they already are involved in care for DEs and since states are more familiar with that than with Medicare.
But states will have to realize, contends Bringewatt, that the keys to cost savings are on the Medicare side. “We’re putting our money on a partnership” of the Medicare and Medicaid programs, he tells HRW.
‘De-institutionalization’ of DEs Is Seen as Key
There may be plenty of business to go around, suggests consultant John Gorman, CEO of Gorman Health Group, LLC. Speaking at a session of the Medicaid Health Plans of America annual meeting in Washington, D.C., Nov. 8, he noted that the annual cost of duals is about twice as high as the amount MA plans are paid. Moreover, health plans are the key for the needed “de-institutionalization” of DEs.
To illustrate the size of the business opportunities, Gorman said that Michigan intends to put all 220,000 of its DEs in managed care plans by the end of 2012 via an RFP that will involve $8 billion in revenues. And California, according to Gorman, intends to have 150,000 DEs in managed care by the end of 2012 and the rest by 2015 via an RFP that he values at $21 billion. He forecast that those and other state and federal moves mean that CMS Administrator Donald Berwick, M.D.’s goal of 1 million DEs in managed care by the end of 2012 will be blown “out of the water.”
SNPs will be the main “vehicle” for managed care for DEs, and they already account for 81% of SNP enrollees, he pointed out. New DE SNPs will be starting in 2012, Gorman added, and Blue Cross Blue Shield plans are looking at Medicaid much more than in the past, largely with DEs in mind. “There will be a street fight like we haven’t seen at the state level,” he predicted.