Integrating Payment and Delivery: State-Federal Initiatives
Financial Alignment Initiative
The Financial Alignment Initiative (FAI) demonstration offered by CMS is one strategy states have used to improve outcomes for dually eligible beneficiaries. The FAI model seeks to test various financing alignment strategies for reducing unnecessary emergency room visits, hospitalizations and long-term stays in nursing facilities and post-acute care facilities with the overall goal of fully integrating services and funding streams. There are 11 states currently participating in the FAI demonstration using capitated managed care models, fee-for-service models or some combination.
Most Medicaid beneficiaries are enrolled in some type of managed care organization. States are increasingly using managed care models to better coordinate services for dually eligible beneficiaries. Nine of the 11 states currently participating in the FAI use capitated managed care models with participation of 38 health plans, referred to as Medicare-Medicaid Plans (MMPs). This capitated model provides a per member, per month reimbursement and includes a three-way contract between CMS, states and the MMPs, with funding provided by both Medicare and Medicaid.
- California: Implemented in 2014, California’s FAI demonstration uses a capitated model of service delivery to provide comprehensive, coordinated care for dually eligible beneficiaries. The primary goal of the demonstration is to fully integrate three California Medicaid programs serving older adults and people with disabilities: the In-Home Supportive Services program, the Multipurpose Senior Services Program and the Community-Based Adult Services program. Another key goal is to improve coordination of medical care, LTSS and behavioral health services. The demonstration was authorized in 2012 with the passage of SB 1008.
Initial CMS evaluation results indicated there were no significant increases or decreases in Medicare spending partially due to low levels of enrollment (Medicaid costs were not included in the analysis). A second CMS evaluation in 2021 found increased costs to Medicare, however the analysis may not fully account for all factors impacting Medicare costs, plus low enrollment numbers could also have limited potential savings and efficiencies.
While cost savings were not realized in 2021, the evaluation identified improvements in care coordination, with an increased number of beneficiaries indicating there was coordination between their various providers. Other survey findings indicated beneficiaries with complex needs had more involvement with care coordinators, and those with fewer needs indicated receiving check-in calls or knew where to direct questions.
- South Carolina: South Carolina’s FAI demonstration goals are to fully integrate medical, behavioral health and LTSS and to develop a person-centered care model. A January 2022 CMS evaluation reported improved care coordination due to a majority of beneficiaries receiving sufficient information from their MMP, and their primary care providers being better informed of services provided by specialists. Additionally, a 2017 evaluation found that South Carolina was above the demonstration national average in providing comprehensive health assessments and developing individualized care plans.
These improvements to care coordination likely played a role in decreasing the probability of inpatient hospitalizations and post-acute skilled nursing facility admissions while increasing monthly primary care visits. Evaluation results indicated increases in long-term nursing facility stays, due in part to challenges in accessing home- and community-based services. Cost analysis found increases in Medicaid spending and no indication of significant increases or decreases in Medicare spending.
Dual Eligible Special Needs Plans
Dual eligible special needs plans (D-SNPs) are specialized Medicare Advantage plans (a Medicare-approved plan offered by a private company) that integrate Medicare and Medicaid services and provide care coordination across the programs. D-SNPs are capitated managed care plans using many of the same integration strategies as the FAI MMPs. Many of the states not participating in FAI use D-SNPs to facilitate integration. Unlike FAI, D-SNPs are permanently authorized by federal statute, and some states, including Virginia, New York and California, have transitioned or plan to transition enrollees from FAI MMPs to D-SNPs.
As of February 2022, D-SNPs were operating in 45 states and the District of Columbia with about 3.8 million dually eligible enrollees. Other types of special needs plans include:
Experts suggest states can require D-SNPs to cover Medicare cost-sharing normally paid by the state and to require D-SNPs to submit service claim information to provide better alignment and simplify administration at the provider level. D-SNPs are required to submit encounter data separately for Medicare and Medicaid, which is currently a barrier to full financial alignment.
D-SNPs must also have a model of care approved by the National Committee for Quality Assurance outlining the health plan’s approach to care coordination and delivery of services for dually eligible beneficiaries. For care coordination standards, D-SNPs, like MMPs described above, must provide comprehensive health assessments and develop and implement a care plan with an interdisciplinary team. However, states must choose to enact separate requirements to integrate Medicaid and long-term services and supports, as the model of care requirements only apply to Medicare.
- Tennessee: Since 2013, Tennessee has provided integrated services for dually eligible individuals through D-SNPs affiliated with MLTSS plans. Tennessee requires all Medicaid MLTSS plans to contract with D-SNPs. There is no similar requirement for D-SNPs, resulting in some D-SNPs not contracting with an MLTSS plan. When a dually eligible beneficiary is enrolled in two unaffiliated health plans, Tennessee requires data sharing and care coordination activities between the D-SNP and MTLSS plan. The health plans indicated developing data sharing systems was costly and complicated, but implementation led to improved care coordination.
CMS allows for auto-enrollment in Medicare Advantage plans in limited circumstances. Tennessee uses the auto-enrollment process to maintain enrollment levels with a low disenrollment rate to improve care coordination and support financial sustainability for D-SNPs and affiliated MTLSS plans.
Program of All-inclusive Care for the Elderly
The Program of All-inclusive Care for the Elderly (PACE) provides comprehensive medical and social services to older adults. Dually eligible beneficiaries make up the majority of PACE participants. PACE includes dental and hospital care, social services, prescription drugs, transportation and other assistance. PACE organizations use interdisciplinary teams to provide person-centered planning and service delivery. The teams include primary care physicians, home care providers, nurses, dietitians and other professionals. There are currently PACE programs in 30 states serving over 50,000 individuals.
PACE uses a capitated reimbursement model with fully integrated financing and is provider-based rather than insurer-based, like MMPs and D-SNPs. PACE organizations provide fully integrated services offering all Medicare and Medicaid benefits, including LTSS. Evidence indicates outcomes from PACE have been largely positive, with good beneficiary satisfaction and reduction in institutional care, resulting in cost savings to both Medicare and Medicaid.
States looking to expand or implement PACE programs have a variety of strategies to consider. Establishing new PACE sites can take a considerable amount of time and resources, with most sites taking over a year to fully open. States can work with existing PACE sites to reduce the up-front costs and implementation time of expanding services into new areas.
States can also add benefits beyond federal requirements and target services to specific locations of the state. For example, Louisiana selected PACE organizations to improve services for individuals with serious mental illness, and Maryland chose organizations to specifically improve access in rural areas. Other recent state activity to support PACE programs includes Pennsylvania’s HB 754 (2019), which increased income eligibility levels for individuals participating in the prescription assistance program, and Colorado’s SB 22-203 (2022) to improve state-level oversight of PACE organizations.