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.
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.
States with Dual Eligible Special Needs Plans
Source: Medicaid and CHIP Payment and Access Commission
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.
States with Programs of All-Inclusive Care for the Elderly
States with PACE/ number of programs
No PACE program
Source: Medicaid and CHIP Payment and Access Commission
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.
State integration strategies to improve outcomes for dually eligible beneficiaries have shown some promising results as well as mixed outcomes indicating a need to further develop and enhance integration models.
Many of the cost and quality evaluations need more analysis and may not fully capture positive outcomes. To provide more information, states could consider quality measures related to health disparity information, including race and ethnicity data, to better understand disparities. Additionally, states could include quality-of-life outcomes or develop measures specific to certain populations or settings. For example, to better measure outcomes for individuals needing long-term services and supports, Ohio tracked efforts to serve more individuals in community-based settings rather than institutions. Through the FAI demonstration, Ohio was successful in shifting more individuals to community-based settings, and early results indicated Medicaid savings of approximately $30 million per year.
Challenges accessing community-based services, as noted above in South Carolina’s FAI demonstration, have led to difficulties in fully integrating services. State policymakers have options for increasing access to community-based services, which support personal choice and prove to be more cost-effective than institutional care. For example, policymakers can eliminate or raise enrollment limits in home and community-based services waivers and use models that fully integrate managed long-term care plans with D-SNPs.
Currently these integrated programs have fairly limited reach, with only 1 million dually eligible beneficiaries enrolled in integrated models. To increase or maintain enrollment in integrated programs, states can require D-SNPs to request approval from CMS to automatically enroll dually eligible beneficiaries. Using auto-enrollment, Tennessee has maintained enrollment levels, and Ohio enrolled 70% of dually eligible beneficiaries in an integrated model. States may also require MLTSS plans and other Medicaid managed care organizations to contract with D-SNPs to fully integrate and streamline enrollment.
Integrated models are not available in all areas of the country, limiting participation in these programs. Working with federal partners, states can choose to seek additional federal support to increase access to integrated services. For example, states could request that CMS modify regulations to allow states to share in D-SNP Medicare savings or modify PACE regulations to streamline applications for new and expanding PACE sites. States could also work with the federal government to develop grant opportunities for opening new PACE sites, funding additional staff for health plans and Medicaid agencies, or other administrative improvements.