Using Shared Savings to Foster Coordinated Care for Dual Eligibles

Dual eligibility is among the factors that has policymakers pushing new federal policy initiatives that integrate and coordinate care to meet the complex needs of a vulnerable population. There are 9.2 million people who are eligible for both Medicare and Medicaid. They’re eligible for both programs because they are younger than 65, disabled, and poor or because they are 65 or older and are poor or have exhausted their nonhousing assets paying for health care.

Dually eligible program participants make up about 20% of Medicare beneficiaries and about 17% of Medicaid beneficiaries and account for 29% and 39% of Medicare and Medicaid spending, respectively. The goal is for costs to fall and the quality of care to improve.

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From a clinical perspective, dually eligible beneficiaries are more likely than others to have multiple chronic conditions or a severe disorder or to have functional limitations and cognitive impairments. It is very complicated to organize support for this population due to their strong dependence on income support, social supports, housing assistance, and long-term care that are administered and paid for by different state and local government agencies.

Requiring support from the state-run Medicaid program and the federal Medicare problem is extremely challenging due to the provisions that each program employs such as payment rules and regulation that often conflict, resulting in high-cost, low-quality care.

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However, the fragmentation in organization and financing of care for dually eligible people is a problem that can be remedied. Many policymakers believe that greater coordination of care that uses a strong care-management system under a unified budget can result in both savings and improved care. The Affordable Care Act established the Federal Coordinated Health Care Office within the Centers for Medicare and Medicaid Services. The Bowles-Simpson Commission projected that between 2015 and 2020, we could amass $13 billion in savings by moving dually eligible people into managed-care plans. Others have proposed enrolling dual eligibles in state-designed care coordination entities (CCEs). This move was projected to save $126 billion over 10 years, according to the most optimistic estimate. Twenty-six states are pursuing demonstration projects aimed at better coordinating care for dual eligibles.

Most state Medicaid programs pay for most or all of a dually eligible beneficiary’s premiums and cost-sharing obligations, as a result it has been challenging to attract these beneficiaries away from uncoordinated, fee-for-service arrangements. To harness the transition, nearly all states are implementing so-called passive-enrollment methods to expand participation in coordinated-care arrangements.

Passive enrollment involves automatic enrollment of eligible beneficiaries into a CCE with the ability to opt out. Passive-enrollment techniques have gained considerable ground because they have been successful in increasing rates in employer-sponsored 401(k) retirement plans. The use of passive enrollment into CCEs would likely produce higher rates of enrollment, enabling states to establish CCEs for a major mass of enrollees.

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The benefits may be less apparent for beneficiaries who are dually eligible. A lot of these people are likely to have established a set of relationships with providers so that their care is effectively managed within the fee-for-service system. Because coordinated care under a set global payment or variants of that approach can create incentives to restrict services, there are risks of undertreatment. As a result, some beneficiaries may experience the transition to coordinated care as a loss to them.

Coordinated care for dually eligible people is built on a financing structure known as shared savings, where three of the parties involved — the federal and state governments and the CCE — share any financial gains from coordinating care. Including patients in shared savings could be motivation to engage with a CCE.

A share of the expected savings could be set aside into an account for each dually eligible person enrolled in a CCE. The funds in the account could be directed by the patient and used to purchase supplemental services and supports like transportation, home modifications, and personal assistance with activities of daily living.

This approach would enable beneficiaries to extend the benefits of Medicare and Medicaid in a personally tailored fashion without increasing their total costs. Experimental research indicates that this approach may also result in greater enrollment in CCEs than an opt-in system would. Beneficiaries would be presented with an explicit choice, without a no-action default, in which the CCE option would entail sharing in savings.

It is important to advance program designs that have the potential to improve are and save money, it needs to be done in a way that promotes self-determination and the exercise of real options.

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