Disabled Dual-Eligible Beneficiaries: Integration of Medicare and Medicaid Benefits May Not Lead to Expected Medicare Savings
Released: 2014-09-29T00:00:00


Highlights: section_title: Why GAO Did This Study
paragraphs: In 2009, the Medicare and Medicaid programs spent an estimated $103 billion on disabled dual-eligible beneficiaries—those individuals who are disabled, under age 65, and qualify for both Medicare and Medicaid benefits. Recently, Congress and CMS have emphasized benefit integration for all dual-eligible beneficiaries—both disabled and aged—including beginning a financial alignment demonstration, which CMS expects will improve care and reduce program spending.

GAO was asked to provide insights for potentially improving the care provided to disabled dual-eligible beneficiaries while reducing spending. GAO examined (1) spending, utilization, and health status patterns for the portion of this population with the highest spending, (2) the extent to which integrated D-SNPs provided high quality of care for this population while controlling Medicare spending, and (3) D-SNPs' and traditional MA plans' performance in serving this population based on quality and resource use measures.

To do this work, GAO analyzed Medicare and Medicaid 2009 claims and summary data—the most recent data available. GAO identified D-SNPs that met standards of quality and integration and compared their 2013 costs to expected Medicare FFS spending. GAO used 2011 data—the most recent data available when GAO began its analysis—from the Health Care Effectiveness Data and Information Set to evaluate D-SNPs' and traditional MA plans' performance.

section_title: What GAO Found
paragraphs: Overall spending for high-expenditure disabled dual-eligible beneficiaries—those in the top 20 percent of spending in their respective states—was driven largely by Medicaid spending, and the service use and health status often differed widely between those with high Medicare expenditures and high Medicaid expenditures. For these beneficiaries, Medicaid expenditures accounted for nearly two-thirds of overall spending. Also, states with high Medicaid spending often had lower Medicare spending but nearly always had greater overall spending for these beneficiaries. Furthermore, service use and health status often differed widely between high-Medicare-expenditure and high-Medicaid-expenditure disabled dual-eligible beneficiaries. Those with high Medicare expenditures were considerably more likely than those with high Medicaid expenditures to have multiple health conditions and use inpatient services but far less likely to use long-term services and supports.

Dual-eligible special needs plans (D-SNP)—Medicare Advantage (MA) private plans designed to target the needs of dual-eligible beneficiaries—that fully integrated Medicare and Medicaid benefits often met criteria for high quality but had limited experience serving disabled dual-eligible beneficiaries or demonstrating Medicare savings. D-SNPs that the Centers for Medicare & Medicaid Services (CMS)—the agency that administers Medicare and oversees Medicaid—designated as Fully Integrated Dual-Eligible (FIDE) SNPs were far more likely to meet high quality criteria compared with other D-SNPs. However, relatively few FIDE-SNPs with high quality served disabled dual-eligible beneficiaries or reported lower costs for Medicare services than expected Medicare fee-for-service (FFS) spending in the same areas. Additionally, FIDE-SNPs that demonstrated the potential for Medicare savings often operated in service areas where D-SNPs with less integration of Medicaid benefits demonstrated more potential for Medicare savings (i.e., lower relative costs for Medicare services).

Moderately better health outcomes for disabled dual-eligible beneficiaries in D-SNPs relative to those in traditional MA plans did not translate into lower levels of costly Medicare services (that is, inpatient stays, readmissions, and emergency room visits). These results were also similar whether dual-eligible beneficiaries were at risk for high Medicare spending (those with six or more chronic health conditions), aged (those age 65 and over), or aged and enrolled in FIDE-SNPs.

These results suggest that CMS's expectations regarding the extent to which integration of benefits will produce savings through lower use of costly Medicare services may be optimistic. While operating specialized plans and integrating benefits could lead to improved care, GAO's results suggest that these conditions may not reduce dual-eligible beneficiaries' Medicare spending compared with Medicare spending in settings without integrated benefits.

CMS reviewed a draft of the report and provided technical comments, which GAO incorporated as appropriate.

section_title: Letter
paragraphs: Dual-eligible beneficiaries—those qualifying for both Medicare and  Medicaid benefits—accounted for under one-fifth of each program’s  population but over one-third of each program’s spending in 2009. Dual- eligible beneficiaries are often in poorer health and require more care  compared with other Medicare and Medicaid beneficiaries. In 2009,  nearly 4 million dual-eligible beneficiaries (40 percent) were under age 65  and qualified for Medicare because they were disabled. Compared with  aged (65 and over) dual-eligible beneficiaries, disabled dual-eligible  beneficiaries have a higher incidence of mental illness and are less likely  to live in an institution. In 2009, the Medicare and Medicaid programs  spent an estimated $103 billion combined on all disabled dual-eligible  beneficiaries.

Dual-eligible beneficiaries typically receive their Medicare and Medicaid  benefits through each program separately. For Medicare benefits,  beneficiaries may opt to enroll in Medicare’s traditional fee-for-service  (FFS) program or in a private Medicare Advantage (MA) plan (Medicare  Part C), which is administered by a Managed Care Organization (MCO),  under contract with the Centers for Medicare & Medicaid Services (CMS),  the agency in the Department of Health and Human Services that  administers the Medicare program and oversees state Medicaid  programs. In addition, dual-eligible beneficiaries may choose a type of  MA plan called a dual-eligible special needs plan (D-SNP), which is  designed to target the needs of this population. For Medicaid benefits,  beneficiaries generally enroll in their state’s Medicaid FFS program or a  Medicaid managed care plan administered by an MCO under contract  with the state.

Because the Medicare and Medicaid programs are separately responsible  for covering certain services for dual-eligible beneficiaries, there may not  be an incentive for one program to help control costs in the other  program. For example, CMS and others have noted that because state  Medicaid programs do not pay for most of the costs of acute  hospitalizations for dual-eligible beneficiaries, there is little incentive for states to ensure that nursing facilities provide a level of care that will  avoid unnecessary hospitalizations. In contrast, an incentive may exist for  providers to shift beneficiaries from one type of service to another to  increase their payments. For example, nursing facilities can benefit  financially if their residents are hospitalized for 3 days or more and then  returned because nursing facility care, which is typically reimbursed by  Medicaid, generally is reimbursed at a higher rate by Medicare for a  limited period of time following a hospital stay. These types of program  misalignments can result in unnecessary hospitalizations, which can  reduce quality of care and increase Medicare costs.

Recently, Congress and CMS have placed greater emphasis on the  coordination and integration of Medicare and Medicaid benefits for dual- eligible beneficiaries. For example, the Medicare Improvements for  Patients and Providers Act of 2008 required D-SNPs to contract with state  Medicaid agencies to provide Medicaid benefits. Patient Protection and Affordable Care Act (PPACA) established a type of  D-SNP, referred to as a Fully Integrated Dual Eligible (FIDE) SNP,  which—unlike other D-SNPs—is designed to integrate program benefits  for dual-eligible beneficiaries through a single managed care  organization, although payment is generally provided separately by each   In addition, highly integrated D-SNPs—including FIDE-SNPs— program.that meet certain performance and quality-based standards may seek  CMS approval to offer benefits beyond what other MA plans may offer if  such benefits would help bridge the gap between Medicare and Medicaid  covered services.

Only about one-third of the 2012 contracts contained any provisions for benefit  integration, and only about one-fifth provided for active care coordination between   D-SNPs and Medicaid agencies, which indicates that most care coordination was done  exclusively by D-SNPs, without any involvement of state Medicaid agencies. See GAO,  Medicare Special Needs Plans: CMS Should Improve Information Available about Dual- Eligible Plans’ Performance, GAO-12-864 (Washington, D.C.: Sept. 13, 2012). offices, awarded contracts of up to $1 million to 15 states to design new  models of care that integrate the two programs’ benefits. Later in 2011,  CMS announced a financial alignment demonstration that is intended to  further integrate the programs’ services. CMS expects that the  demonstration will decrease incentives for cost shifting and increase care  coordination, resulting in improved care for beneficiaries and savings to  Medicare and Medicaid.

You asked us to examine the characteristics, spending, and service use  of disabled dual-eligible beneficiaries to help provide insights for  potentially increasing quality while reducing Medicare and Medicaid  spending. We examined  1.  Medicare and Medicaid spending patterns for high-expenditure  2.  service use and health status of high-Medicare-expenditure and high- Medicaid-expenditure disabled dual-eligible beneficiaries;  3.  the extent to which integrated D-SNPs have provided high quality of  care for disabled dual-eligible beneficiaries while controlling Medicare  spending; and  4.  D-SNPs’ and traditional MA plans’ performance in serving disabled  dual-eligible beneficiaries based on quality and resource use  measures.

To examine spending patterns for high-expenditure disabled dual-eligible  beneficiaries, we analyzed 2009 data, the most recent available, from the  Medicare-Medicaid Linked Enrollee Analytic Data Source (MMLEADS) to  determine which beneficiaries had the highest Medicare, highest  Medicaid, and highest combined program spending. We excluded from  our analysis disabled dual-eligible beneficiaries who were not eligible for  full Medicaid benefits; were under age 21; qualified for Medicare due to  end-stage renal disease (ESRD); lived outside the 50 United States and  Washington, D.C.; did not have full Medicare coverage (Parts A and B)  for all eligible months; or were enrolled in MA for any part of the year. We  also excluded individuals who lived in Maine or Arizona because we did  not have complete data for these states. We defined high-expenditure  beneficiaries as those in the top quintile (top 20 percent) of total program  spending in their state. We used spending by state because of the  variation in states’ Medicaid benefits. We analyzed MMLEADS and 2009  Medicare Master Beneficiary Summary File (MBSF) data to examine the  distribution of Medicare and Medicaid spending for high-expenditure  beneficiaries compared with other beneficiaries. We examined the  distribution of Medicare spending for all covered services (e.g., inpatient  hospital stays, outpatient hospital services, physician and other related  services, prescription drugs, post-acute care, and durable medical  equipment) and the distribution of Medicaid spending for users of different  types of long-term services and supports (LTSS) (e.g., services provided  in nursing facilities, intermediate care facilities, or in the community). We  also analyzed the patterns of program spending across states for high- expenditure beneficiaries.

To examine service use and health status of high-Medicare-expenditure  and high-Medicaid-expenditure disabled dual-eligible beneficiaries, we  used 2009 data from MMLEADS and Medicare carrier claims to  determine the proportion of high-expenditure beneficiaries in each  program who used certain services. We excluded from this analysis the same beneficiaries we excluded from our analysis of spending patterns.  For Medicaid services, we focused on the use of different types of LTSS.  For Medicare services, we focused on the use of three costly acute  services—inpatient stays, readmissions, and emergency room visits—and  two other categories of services—primary care and mental health. We  also determined the proportion of high-expenditure beneficiaries in each  program who had chronic and mental health conditions (as defined by  CMS’s Chronic Conditions Data Warehouse).

To calculate D-SNPs’ performance on quality, we used quantile normalization to  compare plan performance against 13 measures related to either effectiveness of care or  readmissions in the SNP Healthcare Effectiveness Data and Information Set (HEDIS)  Public Use Files for performance in 2012—the most recent data available. Each of the  measures contained data for at least 75 percent of the D-SNPs in the Public Use Files.  We calculated a quality score by using the weighted average performance of D-SNPs that  reported data for all 13 measures (74 percent of D-SNPs with any data for these  measures). We weighted measures according to CMS’s star rating methodology, which  recognizes 3 of the 13 measures as outcome-based and assigns those measures a  weight of 3 to signify relative importance. All D-SNPs categorized as high quality  performed better than the national average on at least 2 of the 3 outcome measures and  the majority of any measures for which the D-SNP reported data. We ensured these   D-SNPs were not in a contract under sanction by CMS. Our high-quality threshold aligned  similarly with performance of 4 stars and above in CMS’s star ratings. The lowest  performing D-SNP in a one-plan contract that received at least 4 stars on CMS’s 2014  Part C and overall ratings (which are mainly based on performance during 2012) received  a quality score at the 82nd percentile. Furthermore, among D-SNPs in contracts with a  star rating, 31 of the 35 D-SNPs that met our criteria for high quality also received an  overall rating of 4 stars or higher. None of the D-SNPs that met our criteria for high quality  received a rating below 3.5 stars. had at least 2 years of experience in serving this population. We  analyzed the 2013 contract year risk-adjusted bids of D-SNPs relative to  the expected Medicare FFS spending for those services in the same  service area. We used each plan’s projected county enrollments and  CMS’s projected county-level risk-adjusted FFS spending to compute a  weighted average of FFS spending in its service area. We compared  high-quality FIDE-SNPs that bid below or close to Medicare FFS  spending with D-SNPs that projected at least 95 percent of their  enrollment in the same service area. Because CMS approves benefits  flexibility for D-SNPs that meet standards for integration and quality, we  also separately examined the quality and relative bids of D-SNPs that  were approved for benefits flexibility in 2013. For additional context, we  used the quality and bids relative to Medicare FFS spending of highly  integrated D-SNPs that CMS approved for flexible benefits to help guide a  selection of four FIDE-SNPs with high quality of care and four other highly  integrated D-SNPs to interview about their models of care.

To examine D-SNPs’ and traditional MA plans’ performance for disabled  dual-eligible beneficiaries on quality and resource use measures, we  analyzed data from the 2011 MBSF and 2011 Healthcare Effectiveness  Data and Information Set (HEDIS) Patient Level Files. Specifically, we  evaluated performance on 23 process measures and 7 health outcome  measures, as well as resource use measures for three costly acute  Medicare-covered services: inpatient stays, readmissions, and  emergency room visits. We excluded beneficiaries who were not eligible  for full Medicaid benefits; were under age 18; qualified for Medicare due  to ESRD; lived outside the 50 United States and Washington, D.C.; did  not have full Medicare coverage (Part A and Part B) for the entire year;  were not enrolled in MA for the entire year; or for whom data were  missing or inconsistent. As some of D-SNPs’ care coordination  approaches may be targeted to the sickest beneficiaries, we evaluated  performance for all disabled dual-eligible beneficiaries as well as just for  those with six or more chronic conditions (as defined by CMS’s  Hierarchical Condition Categories). To provide additional context, we  also evaluated performance for aged dual-eligible beneficiaries, including  how D-SNPs’ performance varied by FIDE designation.

To assess the reliability of the data we used in our analyses, we reviewed  related documentation, interviewed knowledgeable officials from CMS  and its contractors, and performed appropriate electronic data checks.  This allowed us to determine that the data were suitable for our purposes.

We conducted this performance audit from April 2013 to August 2014 in  accordance with generally accepted government auditing standards.

Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.
subsections: section_title: Background
subsections: section_title: Medicare and Medicaid Coverage for Disabled Dual-Eligible Beneficiaries
paragraphs: Beneficiaries under age 65 may qualify for Medicare coverage on the  basis of disability (such as a physical disability, developmental disability,  or disabling mental health condition). Disabled individuals typically enroll  in the federal Social Security Disability Insurance program and then have  a 24-month waiting period before Medicare benefits begin. During the  waiting period, low-income individuals who qualify for the Supplemental  Security Income program (SSI) in their state can also qualify for Medicaid  coverage. SSI is a means-tested income assistance program that  provides cash benefits to individuals who meet certain disability criteria  and have low levels of income and assets. After the Medicare waiting  period ends, beneficiaries become dually enrolled in both programs.  Medicare becomes the primary payer for most services, but Medicaid  continues to cover benefits not offered by Medicare.

Medicare coverage for dual-eligible beneficiaries includes  hospitalizations, physician services, prescription drugs, skilled nursing  facility care, home health visits, and hospice care. Under Medicaid, states  are required to cover certain items and services for dual-eligible  beneficiaries, including nursing facility services and home health  services. Although states are required to cover certain populations and  services, they have the option to expand coverage beyond these  mandatory levels, and accordingly state Medicaid programs vary in  scope.

section_title: Characteristics of Disabled Dual-Eligible Beneficiaries Compared with Aged Dual-Eligible Beneficiaries
paragraphs: Compared with aged dual-eligible beneficiaries, disabled dual-eligible  beneficiaries in 2009 were more likely to be male and African-American,  and they tended to have a much higher incidence of mental illness.  However, they had a far lower incidence of three or more chronic  conditions and were less likely to be institutionalized.

In terms of relative spending, disabled dual-eligible beneficiaries had  lower per capita Medicare spending but higher per capita Medicaid  spending in 2009. However, among beneficiaries who did not use LTSS,  per capita Medicare and Medicaid spending were both slightly higher for  disabled dual-eligible beneficiaries. Disabled dual-eligible beneficiaries  were less likely to live in an institution than aged dual eligible  beneficiaries; however, among those that did, Medicaid spending was  significantly higher than for aged dual-eligible beneficiaries in  institutions. See table 1.

section_title: Special Needs Plans
paragraphs: In addition to requiring SNPs to meet all the requirements of other MA  plans, CMS requires SNPs to provide specialized services targeted to the  needs of their unique beneficiaries, including beneficiaries with certain  severe and disabling chronic conditions, beneficiaries who live in  institutions, or beneficiaries dually enrolled in both the Medicare and  Medicaid programs. SNPs that provide specialized services, such as case  management, for dual-eligible beneficiaries are referred to as D-SNPs.

CMS pays D-SNPs the same way that it pays other MA plans, that is, a  monthly amount determined by the plan bid—the plan’s estimated cost of  providing Medicare Part A and Part B benefits—in relation to a  benchmark, which is the maximum amount the Medicare program will pay  MA plans in a given locality. CMS then adjusts the monthly payments to  MA plans on the basis of beneficiaries’ risk scores. For MA plans that bid  below the benchmark, CMS provides a rebate that is modified by an  overall assessment of quality at the contract level using a 5-star rating  scale based on measures of clinical quality and patients’ reported care  experience for Medicare Part C and Part D.

CMS designates certain D-SNPs as FIDE-SNPs, which is a designation  for plans that integrate Medicare and Medicaid program benefits for dual- eligible beneficiaries through a single MCO. All FIDE-SNPs are financially  at risk for enrollees’ nursing facility services for at least 6 months of the  year. In 2013, CMS designated 35 FIDE-SNPs that enrolled about 98,000  beneficiaries across seven states.

Beginning in contract year 2013, CMS may give certain D-SNPs that  meet a high standard of integration and specified performance and  quality-based standards the flexibility to offer supplemental benefits  beyond those that CMS currently allows for other MA plans if the agency  determines these benefits would better integrate care. This benefits flexibility is designed to assist dual-eligible beneficiaries who are at risk of  institutionalization to remain in the community and may prevent health  status decline and reduce the quantity and cost of health care services.  As part of the qualifying criteria that CMS currently applies to benefits  flexibility, the agency requires D-SNPs either to be in a contract with a 3  star (or higher) overall rating for the previous contract year or, if the   D-SNP is part of a contract that does not have sufficient enrollment to  generate a star rating, to score 75 percent or above on five of seven  specific SNP plan-level HEDIS measures. For 2013, CMS approved 21  highly integrated D-SNPs for benefits flexibility that enrolled about 75,000  beneficiaries.

section_title: CMS Financial Alignment Demonstration
paragraphs: In 2011, CMS announced a financial alignment demonstration that is  intended to align Medicare and Medicaid services and funding to reduce  costs and improve the quality of care for dual-eligible beneficiaries. As of  June 2014, 12 states have been approved to participate in the  demonstration and 4 states have active proposals pending.demonstration is authorized for at least 3 years.

Most states participating in the financial alignment demonstration plan to  use a capitated model. Under the capitated model, CMS and states  provide a single capitated payment to health plans to provide all Medicare  and Medicaid benefits to enrolled dual-eligible beneficiaries. Payment  rates to health plans will be reduced up front each year based on a  predetermined combined Medicare and Medicaid savings estimate by  CMS. In general, CMS and states expect the savings percentages to  increase during the second and third years of the demonstration.  Furthermore, to encourage quality of care improvements, CMS and states  will withhold a portion of the payments—starting at 1 percent in the first  year and up to 3 percent in the third year—that participating health plans  can earn back by meeting a certain threshold of performance on quality  measures.

CMS expects that the capitated model will result in savings (1) to  Medicare by reducing hospital admissions, emergency room visits, and  skilled nursing care, and (2) to Medicaid by avoiding costly long-term  nursing home care. At the same time, CMS expects that there may be  increased use of primary care services, outpatient services, behavioral  health services, and community-based LTSS, due to a greater emphasis  on care coordination and maintaining beneficiaries in the community.  Although CMS projects that approximately 61 to 75 percent of savings will  come from reductions in costly Medicare-covered services, the agency  requires that—as part of a more integrated approach—both the Medicare  and Medicaid programs adjust their payment rates to plans based on  aggregate savings percentages.

In Massachusetts’s demonstration, only disabled dual-eligible  beneficiaries between the ages of 21 and 64 are eligible for enrollment.  Voluntary enrollment for the program began on October 1, 2013, and  passive enrollment—whereby individuals are automatically enrolled in the  program but can opt out—began January 1, 2014. Since 2004,  Massachusetts has separately participated in a financial alignment  program for dual-eligible beneficiaries age 65 and older known as Senior  Care Options. This program provides all of the services covered by  Medicare and MassHealth—the Massachusetts Medicaid program—and  is funded by a combined capitated payment from both programs.

section_title: Overall Spending for High-Expenditure Disabled Dual-Eligible Beneficiaries Driven Largely by Medicaid Spending
subsections: section_title: Medicaid Spending— Particularly for Users of Community-based LTSS— Accounted for Nearly Two- Thirds of Overall Spending for High-Expenditure Beneficiaries
paragraphs: High Medicaid spending for disabled dual-eligible beneficiaries drove high  combined (Medicare and Medicaid) program spending for these  beneficiaries. Beneficiaries ranked within the top 20 percent—or top  quintile—of spending in their respective states accounted for more than  60 percent of national combined program spending for disabled dual- eligible beneficiaries. Furthermore, for these high-expenditure  beneficiaries, nearly two-thirds (63 percent) of combined program  spending was Medicaid spending and slightly over one-third (37 percent)  was Medicare spending. (See fig. 1.)

High-expenditure beneficiaries in the top combined spending quintile  were also more likely to be in the top Medicaid spending quintile in their  states than in the top Medicare spending quintile. Specifically, 72 percent  of high-expenditure beneficiaries were in the top Medicaid spending  quintile, while 54 percent of these beneficiaries were in the top Medicare  spending quintile. Only 26 percent of high-expenditure beneficiaries were  in both the top Medicare and the top Medicaid spending quintiles in their  states. (See fig. 2.)

Just over half (52 percent) of Medicaid spending for high-expenditure  disabled dual-eligible beneficiaries was for those who used community- based LTSS, while for low-expenditure beneficiaries (those in the bottom  combined spending quintile), community-based LTSS users accounted  for only 4 percent of Medicaid spending. Inpatient stays accounted for  the largest share (39 percent) of Medicare spending for high-expenditure  beneficiaries but accounted for less than 1 percent of Medicare spending  for low-expenditure beneficiaries.

section_title: States with High Medicaid Spending Often Had Lower Medicare Spending but Greater Overall Spending for High- Expenditure Beneficiaries
paragraphs: Because Medicaid benefits differ across states, per capita Medicaid  spending for high-expenditure disabled dual-eligible beneficiaries varied  more across states than per capita Medicare spending did. Per capita  Medicaid spending for these beneficiaries ranged from about $27,000 in  Michigan to about $188,000 in New York, while per capita Medicare  spending ranged from about $18,000 in North Dakota to about $49,000 in  Florida. Largely because of the variation in Medicaid spending, combined  program spending ranged from about $68,000 in Alabama to about  $220,000 in New York.

Although states with greater per capita Medicaid spending for high- expenditure beneficiaries often had less per capita Medicare spending,  they were usually among the states with the greatest per capita combined   (See fig. 3.) For example, 5 of the 10 states with the greatest  spending.per capita Medicaid spending had per capita Medicare spending that was  less than the average across states. Nevertheless, all 10 states were  among those with the greatest per capita combined spending. In fact, 17  of the 20 states with the greatest per capita Medicaid spending were also  among those with the greatest per capita combined spending.

Because the majority of spending for high-expenditure disabled dual- eligible beneficiaries was for beneficiaries who used community-based  LTSS, and because CMS expects to see an increase in the use of these  services under the financial alignment demonstration, we repeated this  analysis for only beneficiaries who used community-based LTSS and  found similar results. States that had greater per capita Medicaid  spending for high-expenditure beneficiaries who used community-based  LTSS tended to have less per capita Medicare spending but greater per  capita combined spending for these beneficiaries. (See fig. 4.) In  particular, 8 of the 10 states with the greatest per capita Medicaid  spending for community-based LTSS users had per capita Medicare  spending that was less than the average across states. Nevertheless, 9 of  the 10 states with the greatest per capita Medicaid spending were among  the 10 states with the greatest per capita combined spending.

section_title: Service Use and Characteristics Differed Widely between High- Medicare-Expenditure and High-Medicaid- Expenditure Disabled Dual-Eligible Beneficiaries
subsections: section_title: Beneficiaries with High Medicare Expenditures Were More Likely to Use Inpatient Services; Beneficiaries with High Medicaid Expenditures Were More Likely to Use LTSS
paragraphs: The services most commonly used by disabled dual-eligible beneficiaries  in the top Medicare-spending quintile and those in the top Medicaid- spending quintile often differed widely. As expected—because Medicare  is the primary payer for acute hospital stays—beneficiaries with high  Medicare expenditures were highly likely to use inpatient services.  However, a relatively low percentage of beneficiaries with high Medicaid  expenditures used these services. In contrast, beneficiaries with high  Medicaid expenditures were much more likely than beneficiaries with high  Medicare expenditures to use LTSS—particularly community-based  LTSS. (See fig. 5.) Beneficiaries with high Medicaid expenditures were  also more likely to use community-based LTSS and less likely to use  inpatient services than most beneficiaries with lower Medicaid  expenditures.

Despite differences in service use, high-Medicare-expenditure and high- Medicaid-expenditure disabled dual-eligible beneficiaries had similar  utilization levels of Medicare-covered primary care and mental health  services. Nearly 80 percent of beneficiaries in each group received at  least one primary care service, and approximately 40 percent of  beneficiaries in each group received at least one mental health service.  Both groups also were more likely to receive primary care or mental  health services than beneficiaries with lower expenditures in their  respective programs.  (See app. I for more information on the use of selected Medicare and  Medicaid services by disabled dual-eligible beneficiary expenditure  levels.)

section_title: Beneficiaries with High Medicare Expenditures Were Far More Likely than Those with High Medicaid Expenditures to Have Multiple Health Conditions
paragraphs: Disabled dual-eligible beneficiaries with high Medicare expenditures were  considerably more likely than beneficiaries with high Medicaid  expenditures to have multiple chronic or mental health conditions. About  35 percent of beneficiaries with high Medicare expenditures had six or  more chronic conditions, compared with 14 percent of beneficiaries with  high Medicaid expenditures. In addition, 25 percent of beneficiaries with  high Medicare expenditures had three or more mental health conditions,  compared with 13 percent of beneficiaries with high Medicaid  expenditures.

The presence of multiple health conditions may drive the use of costly  Medicare services among beneficiaries with high Medicare expenditures.  As the number of chronic and mental health conditions increased among  these beneficiaries, the average number of emergency room visits,  inpatient stays, and readmissions also increased. The increase in the  average number of emergency room visits was particularly dramatic as  the number of mental health conditions increased. (See fig. 6.)  Furthermore, as the number of chronic conditions increased, the  percentage of beneficiaries with high Medicare expenditures who had at  least one inpatient admission increased substantially, although as the  number of mental health conditions increased, the percentage was  relatively stable.

section_title: Fully Integrated D-SNPs Often Provided High Quality Care, but Had Limited Experience Serving Disabled Dual-Eligible Beneficiaries or Demonstrating Medicare Savings
subsections: section_title: Fully Integrated D-SNPs Often Met Criteria for High Quality, but Relatively Few of Those Plans Served Disabled Dual-Eligible Beneficiaries
paragraphs: FIDE-SNPs in 2013 were far more likely than other D-SNPs to meet  criteria for high quality. Among those that reported sufficient data to  receive a quality score, 14 (56 percent) of the 25 FIDE-SNPs met criteria  for high quality but only 24 (14 percent) of all other 169 D-SNPs met  these criteria. While FIDE-SNPs often received an overall quality score  within the top two quintiles, 7 FIDE-SNPs (28 percent) scored below this  mark, including 6 FIDE-SNPs that scored below the 40th percentile and 3  FIDE-SNPs that scored below the 25th percentile. The 14 high quality  FIDE-SNPs operated across four states under programs through which all  D-SNPs fully integrated Medicare and Medicaid benefits. In contrast, all  6 FIDE-SNPs that operated outside of these four states received a quality  score below the 60th percentile.

While 207 (64 percent) of the 323 D-SNPs in 2013 served disabled dual- eligible beneficiaries, only 13 (37 percent) of the 35 FIDE-SNPs  served this population (see fig. 7). The proportion of disabled dual- eligible beneficiaries in each of these 13 FIDE-SNPs ranged from   12 percent to nearly all of plan enrollment. These 13 D-SNPs operated  across four states. Among the 22 FIDE-SNPs that did not serve disabled  beneficiaries, most operated in state fully integrated programs that  excluded this population from enrollment in those plans. Furthermore,  only 2 FIDE-SNPs met criteria for high quality and served disabled  beneficiaries.

While 11 of the 21 highly integrated D-SNPs that CMS approved for 2013  benefits flexibility were high quality FIDE-SNPs, CMS’s quality  requirements did not prevent some D-SNPs with relatively low quality  from being approved for benefits flexibility. Although CMS approved 18 of  the 21 D-SNPs for benefits flexibility through their contract star rating,  only D-SNPs without a star rating are assessed for quality at the plan  level. Just 3 of the 18 D-SNPs approved through their contract star rating  would have met CMS’s plan-level quality requirements. Furthermore, 3  of the 18 D-SNPs approved for benefits flexibility through their star rating  performed below the median quality score, including the only two D-SNPs  approved with an overall star rating of 3.0.

section_title: Relatively Few High Quality FIDE-SNPs Showed Potential for Medicare Savings, Regardless of Whether They Served Disabled Dual-Eligible Beneficiaries
paragraphs: Only 8 of the 35 FIDE-SNPs—and 3 of the 14 with high quality—bid  below Medicare FFS spending in 2013, an indication that these plans can  provide standard Medicare Part A and B benefits at a lower cost than  what Medicare would have likely spent for these beneficiaries in FFS.  Also, only 3 FIDE-SNPs that served disabled dual-eligible beneficiaries  bid below Medicare FFS spending, and none of these met criteria for high  quality.Medicare FFS spending, only 2 bid within 3 percentage points of FFS  spending. On average (weighted by July 2013 enrollment), the 35 FIDE- SNPs bid 6 percent above FFS spending, and the 14 high quality FIDE-  Among the 11 high quality FIDE-SNPs that bid at or above  SNPs bid 3 percent above FFS spending.FIDE designation bid 4 percent below FFS spending.

In contrast, D-SNPs without a  Prior GAO research found that MA plans in service areas with high  Medicare FFS spending were more likely to bid below Medicare FFS  spending than MA plans in service areas with low FFS spending; FIDE- SNPs in 2013 generally followed that pattern. that bid below FFS spending, five operated in the 70th percentile or  higher of MA service area FFS spending, two operated between the 60th  and 70th percentiles, and only one operated below the median. In  addition, among the 10 FIDE-SNPs that bid below FFS spending or had  high quality and bid within 3 percentage points above FFS spending, 5  operated in the same service area as D-SNPs that were not fully  integrated. In each of these 5 cases, total bids as a percentage of FFS  spending were lower for D-SNPs with less integration of Medicare and  Medicaid benefits. Furthermore, FIDE-SNPs were not notably more likely  to bid below FFS spending based on CMS approval for benefits  flexibility, not-for-profit status, relatively smaller projected profit margin,  or plan enrollment size above 1,000.

See GAO, Medicare Advantage: Comparison of Plan Bids to Fee-for-Service Spending  by Plan and Market Characteristics, GAO-11-247R (Washington, D.C.: Feb. 4, 2011).

section_title: Moderately Better Health Outcomes for Disabled Dual-Eligible Beneficiaries in D-SNPs Relative to Those in Traditional MA Plans Did Not Translate into Lower Levels of Costly Medicare Services
paragraphs: D-SNPs’ performance for disabled dual-eligible beneficiaries relative to  traditional MA plans’ was similar on average for process measures, but  was moderately better on health outcome measures. On average,   D-SNPs’ relative performance on 23 process measures (including  screening for certain diseases and annual monitoring for patients on  certain prescriptions) was 1 percentage point higher both for all  beneficiaries and for those with six or more chronic conditions. While   D-SNPs performed better on approximately two-thirds of the process  measures,from 6 percentage points lower to 9 percentage points higher for all  beneficiaries, and by an even wider range for those with six or more  chronic conditions. In contrast, on average, D-SNPs’ performance on  seven health outcome measures (including maintaining healthy  cholesterol, blood pressure, and blood sugar levels) was 5 percentage  points higher for all beneficiaries and 7 percentage points higher for those  with six or more chronic conditions. D-SNPs’ relative performance was  consistently better on each health outcome measure—ranging from 3 to   6 percentage points higher for all beneficiaries and 2 to 16 percentage  points higher for those with six or more chronic conditions. (See table 2.)

section_title: Concluding Observations
paragraphs: These results suggest that CMS’s expectations regarding the extent to  which integration of benefits will produce savings through lower use of  costly Medicare services may be optimistic. Whether CMS and  participating states will be able to improve quality without increasing  overall program spending for disabled dual-eligible beneficiaries is  uncertain.

While increasing the use of community-based LTSS may improve the  quality of care for disabled dual-eligible beneficiaries who utilize those  services, community-based LTSS users drove high combined  program spending for disabled dual-eligible beneficiaries. Likewise,  states with the highest per capita Medicaid spending for disabled  dual-eligible beneficiaries were usually among the states with the  highest overall program spending. In addition, the wide differences in  health characteristics between disabled dual-eligible beneficiaries with  the highest Medicare spending and those with the highest Medicaid  spending may indicate the potential challenge of providing additional  services without disproportionately impacting the costs of each  program. Although most disabled dual-eligible beneficiaries with the  highest Medicaid spending used community-based LTSS to assist  them with activities of daily living, these beneficiaries generally did not  have the numerous chronic conditions associated with those who had  the highest Medicare spending.

Furthermore, if the models of care in the financial alignment  demonstrations or other integrated models build on fully integrated   D-SNP models, these efforts may improve the care provided to dual- eligible beneficiaries but may not produce significant Medicare  savings for dual-eligible beneficiaries. D-SNPs that fully integrated  Medicare and Medicaid benefits were far more likely than other   D-SNPs to meet criteria for high quality but usually operated under  fully integrated state programs that excluded disabled dual-eligible  beneficiaries from enrollment. Regardless of whether they served  disabled beneficiaries, high quality fully integrated D-SNPs did not  usually demonstrate the potential for Medicare savings. In addition,  many fully integrated D-SNPs that demonstrated the potential for  Medicare savings operated in service areas where D-SNPs with less  integration of benefits demonstrated more potential for Medicare  savings.

Our findings also suggest that even if there is moderate improvement in  the performance of health outcome measures, and if dual-eligible  beneficiaries are enrolled in plans specifically designed for them, instead  of enrolled in traditional MA plans, these conditions are not necessarily  sufficient to reduce disabled dual-eligible beneficiaries’ use of costly  Medicare services. Despite moderately better performance on health  outcome measures for both disabled and aged dual-eligible beneficiaries,  the fact that D-SNPs had similar levels of costly Medicare-covered  services (i.e., inpatient admissions, readmissions, and emergency room  visits) as traditional MA plans for this population has significant  implications for program costs. Furthermore, for dual-eligible beneficiaries  with six or more chronic conditions—a group that is at risk for high  Medicare spending—although D-SNPs had better relative performance  on health outcome measures, they still had similar, if not higher, levels of  costly Medicare-covered services.
subsections: section_title: Agency Comments
paragraphs: We provided a draft of this report to CMS for comment. CMS did not have  any general comments. The agency provided technical comments, which  we incorporated as appropriate.

As agreed with your office, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the Secretary of Health  and Human Services, interested congressional committees, and others.  The report also is available at no charge on GAO’s website at  http://www.gao.gov.

If you or your staffs have any questions regarding this report, please  contact me at (202) 512-7114 or cosgrovej@gao.gov. Contact points for  our Offices of Congressional Relations and Public Affairs may be found  on the last page of this report. GAO staff who made major contributions to  this report are listed in appendix II.

section_title: Appendix I: Disabled Dual-Eligible Beneficiaries’ Service Use and Health Conditions by Expenditure Level, 2009
paragraphs: Any long-term services and supports (LTSS)

section_title: Appendix II: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact

section_title: Staff Acknowledgments
paragraphs: In addition to the contact named above, individuals making key  contributions to this report include Catina Bradley, Assistant Director;  Phyllis Thorburn, Assistant Director; Alison Binkowski; Aubrey Naffis; and  Luis Serna III. Todd Anderson, Emily Johnston, Elizabeth T. Morrison,  and Hemi Tewarson also provided valuable assistance.


Question-summary annotations: questions: question: What drove spending for high-expenditure disabled duel-eligible beneficiaries?
answer: Overall spending for high-expenditure disabled dual-eligible beneficiaries—those in the top 20 percent of spending in their respective states—was driven largely by Medicaid spending, and the service use and health status often differed widely between those with high Medicare expenditures and high Medicaid expenditures.
child_questions: question: How did Medicare, Medicaid, and overall spending compare?
answer: For these beneficiaries, Medicaid expenditures accounted for nearly two-thirds of overall spending. Also, states with high Medicaid spending often had lower Medicare spending but nearly always had greater overall spending for these beneficiaries.

question: What characterized dual-eligibility beneficiaries?
answer: Furthermore, service use and health status often differed widely between high-Medicare-expenditure and high-Medicaid-expenditure disabled dual-eligible beneficiaries. Those with high Medicare expenditures were considerably more likely than those with high Medicaid expenditures to have multiple health conditions and use inpatient services but far less likely to use long-term services and supports.

questions: question: What is the status of dual-eligible special needs plans?
answer: Dual-eligible special needs plans (D-SNP)—Medicare Advantage (MA) private plans designed to target the needs of dual-eligible beneficiaries—that fully integrated Medicare and Medicaid benefits often met criteria for high quality but had limited experience serving disabled dual-eligible beneficiaries or demonstrating Medicare savings.

question: How did CMS's D-SNPs compare to other D-SNPs?
answer: D-SNPs that the Centers for Medicare & Medicaid Services (CMS)—the agency that administers Medicare and oversees Medicaid—designated as Fully Integrated Dual-Eligible (FIDE) SNPs were far more likely to meet high quality criteria compared with other D-SNPs.
child_questions: question: Even though FIDE-SNPs are of high quality, what problems do they have?
answer: However, relatively few FIDE-SNPs with high quality served disabled dual-eligible beneficiaries or reported lower costs for Medicare services than expected Medicare fee-for-service (FFS) spending in the same areas.

question: What else do FIDE-SNPs demonstrate in terms of savings and benefits?
answer: Additionally, FIDE-SNPs that demonstrated the potential for Medicare savings often operated in service areas where D-SNPs with less integration of Medicaid benefits demonstrated more potential for Medicare savings (i.e., lower relative costs for Medicare services).

questions: question: What did GAO analyze?
answer: To do this work, GAO analyzed Medicare and Medicaid 2009 claims and summary data—the most recent data available.
child_questions: question: What did GAO identify?
answer: GAO identified D-SNPs that met standards of quality and integration and compared their 2013 costs to expected Medicare FFS spending.

question: Why did GAO use 2011 data?
answer: GAO used 2011 data—the most recent data available when GAO began its analysis—from the Health Care Effectiveness Data and Information Set to evaluate D-SNPs' and traditional MA plans' performance.