2012 Outlook: Dual-Eligible Market Beckons MA, Medicaid Plans, but New Initiatives Pose Questions

Reprinted from MEDICARE ADVANTAGE NEWS, biweekly news and business strategies about Medicare Advantage plans, product design, marketing, enrollment, market expansions, CMS audits, and countless federal initiatives in MA and Medicaid managed care.

By James Gutman, Managing Editor
January 5, 2012 Volume 18 Issue 1

If there is one key market segment that Medicare plans — and Medicaid ones — will focus on in 2012, it is Medicare-Medicaid dual eligibles.

After years of discussion, it looks as though both the federal government and states will accelerate dramatically implementation of programs to improve quality and reduce costs in care for duals, and the result will be big opportunities for plans. Those opportunities are likely to manifest themselves in requests for proposals (RFPs) or other forms of procurements from at least three big states — California, Massachusetts and Michigan — this year (see table, p. 3).

But there are lots of unanswered questions as the duals’ move to managed care unfolds: How mandatory will enrollment in plans be for duals? Which type of plan will get the majority of the enrolling duals? And how secure is the funding for these initiatives?

The overall U.S. duals population now is about 9.2 million and accounts for more than $300 billion in annual health care spending. Fewer than 1 million of the beneficiaries are in private health plans, according to several estimates.

Duals’ costs are higher on the Medicaid side, observers suggest, because that is the side paying for long-term care. Therefore, “the real opportunity is keeping duals out of nursing homes,” securities analyst Carl McDonald of Citigroup Global Markets said in a Dec. 19 conference call on opportunities for health plans related to duals.

With this in mind, the year-old CMS Medicare-Medicaid Coordination Office last July unveiled two large-scale demonstration programs to help states improve quality of care and share in cost savings for duals. And partly as a result of that initiative, to which 38 states responded with letters of intent to participate, several states are developing initiatives and getting “bids” from health plans in 2012 to manage care for duals starting either late this year or in 2013. Moreover, a couple of states that already have managed care programs for duals are looking to expand those efforts in 2012.

Specific initiatives include the following:

• Massachusetts has Senior Care Options, a fully integrated program that now enrolls about 17,000 duals through four managed care plans — Commonwealth Care Alliance Senior Care Options, NaviCare, Senior Whole Health and UnitedHealth Group’s Evercare. Last March, the state issued a request for information (RFI) to serve duals aged 22 to 64 that drew responses from 50 organizations, including providers. The state’s timetable, according to McDonald, is to issue an RFP this month and award in fall contracts that ultimately will cover all 115,000 of its full duals.

• New York, which has 709,000 duals and two current programs for them, plans to expand its initiatives in not-yet-determined ways via contracting to be completed by October, McDonald noted.

• Michigan, which has 220,000 duals, put out an RFI last September and plans to issue an RFP within the next six months, McDonald said. He added that the state intends to combine the Medicare and Medicaid funding streams and capitate health plans and/or “accountable care organizations” in an arrangement that involves risk sharing with Michigan initially but full risk later. The program, like the approach the CMS duals office has supported, would have mandatory enrollment of duals but with a right to “opt out.”

• California, home to 1.1 million duals, has proposed a four-county pilot program that initially would enroll 150,000 duals, with implementation starting at the end of this year. McDonald pointed out that the state hopes to avoid a formal RFP process and instead allow any plans meeting yet-to-be-designated minimum standards in its Medi-Cal program to participate. The state put out a “request for solutions” Dec. 22 and intends to pick demonstration sites this spring and summer. While enrollment would be mandatory, the duals would have the right to opt out and go back into a fee-for-service (FFS) program.

• Ohio, separate from the CMS initiatives, released an RFI in October for a managed care program for 113,000 duals now residing in nursing homes, McDonald recalled. The state seeks to waive “actuarial soundness” criteria for payments, he explained, since it is unknown what impact care management will have on costs, and instead adjust payments quarterly.

A big question as these kinds of initiatives unfold is what kind of health plans will benefit the most. “The key answer is everybody wins,” replied McDonald. That said, he added, Medicaid-based plans figure to get the biggest proportional benefit. “Medicare-focused plans,” according to McDonald, “will not be shut out” but won’t benefit as much because “they’re bigger already and not as well positioned.”

Joe Moser, director of government affairs for Medicaid Health Plans of America (MHPA), makes a similar point, telling MAN that the CMS duals office’s efforts to date have focused on state-based efforts that furnish big new opportunities for Medicaid plans. Dual-eligible Medicare Advantage (MA) Special Needs Plans (SNPs), he acknowledges, already have some capabilities to combine funding streams and do get paid on the Medicaid side. But he asserts that they would need to improve products to be more appealing for the new initiatives.

Of state efforts now underway, he says, Ohio’s is especially “encouraging” since the response to its RFI was “weighted toward Medicaid plans.” And Moser says the upcoming Massachusetts RFP may be for just “non-senior duals,” which also would be favorable for Medicaid plans.

While MHPA has been “impressed” by the duals office’s grants, he continues, it doesn’t think the overall federal duals effort “has been aggressive enough.” He explains that “we’re not positive mandatory [enrollment] with opt out will work,” especially since it apparently would require the state to submit a waiver request that CMS would aim to “expedite.” The resulting delay means the new programs “wouldn’t happen easily,” especially since it isn’t clear what “expedite” means, he contends.

MHPA therefore, according to Moser, would like to see Congress adopt pure mandatory enrollment in managed care for duals, which also would mean that the duals office’s programs won’t be as necessary — an advantage given funding uncertainties surrounding the reform law.

Tim Engelhardt, director, models and demonstrations for the CMS duals office, declines to discuss funding aspects, but he says the office is continuing to receive proposals (some using capitation and some FFS) for its existing initiatives. It expects to decide on many of them by summer, and hopes to start implementation by the end of 2012, he says. Moreover, the office will have a new demonstration project with the CMS Center for Medicare and Medicaid Innovation to reduce preventable hospitalizations in long-term care facilities, he tells MAN. His office has found that about 45% of hospital admissions for duals in nursing facilities may have been avoidable.

While he won’t critique individual state approaches to duals, Engelhardt does say, “Our endgame is to go ahead where we have infrastructure to do so,” and “every state needs to think of people living in nursing facilities.” In states using capitation for payment, he adds, the duals office will need to be sure the plans selected for duals projects are “qualified” to do them. But if that suggests doubts about California’s approach, Engelhardt also praises the state’s “tremendous participatory” outreach to get stakeholders involved in formulating strategies.

The way states are approaching projects for duals — including preferring to partner with organizations they’re familiar with — does make it harder for MA sponsors than for Medicaid plans, Gary Jacobs, senior vice president, corporate development for MA firm Universal American Corp., tells MAN. But duals have characteristics of populations served by each of those kinds of plans, Jacobs stresses, and he would like to see more recognition than is evident so far that MA plans have had success with them.

He says the CMS duals office should “convey that,” terming this a “sensitive issue” in 2012 as the government’s duals policy evolves. “We want parity in getting to the table for MA plans,” Jacobs adds.

There are obstacles, though, for MA plans wanting to get involved in dual-integration programs, notes consultant Stephen Wood, senior vice president of Optum¬Insight. More than 50% of duals are eligible because of disabilities, including mental-health problems, he says, and MA plans may not be used to managing those kinds of issues.

Greg Scott, a principal in Deloitte Consulting LLP, makes somewhat similar points. SNPs have good opportunities in the new dual programs, which his firm is spending a lot of time on, but it is largely working with Medicaid rather than Medicare plans, he tells MAN. The duals initiatives are “an incredible opportunity, but not for the faint of heart. You have to manage,” he says.

Note: TBD = to be determined; ACO = accountable care organization; PACE = Program of All-inclusive Care for the Elderly.

Source: CMS data and Carl McDonald, Citi Investment Research and Analysis, Dec. 19, 2011