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

Letter

Background

Medicare and Medicaid Coverage for Disabled Dual-Eligible Beneficiaries

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.

Characteristics of Disabled Dual-Eligible Beneficiaries Compared with Aged Dual-Eligible Beneficiaries

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.

Special Needs Plans

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.

CMS Financial Alignment Demonstration

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.

Overall Spending for High-Expenditure Disabled Dual-Eligible Beneficiaries Driven Largely by Medicaid Spending

Medicaid Spending— Particularly for Users of Community-based LTSS— Accounted for Nearly Two- Thirds of Overall Spending for High-Expenditure Beneficiaries

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.

States with High Medicaid Spending Often Had Lower Medicare Spending but Greater Overall Spending for High- Expenditure Beneficiaries

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.

Service Use and Characteristics Differed Widely between High- Medicare-Expenditure and High-Medicaid- Expenditure Disabled Dual-Eligible Beneficiaries

Beneficiaries with High Medicare Expenditures Were More Likely to Use Inpatient Services; Beneficiaries with High Medicaid Expenditures Were More Likely to Use LTSS

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.)

Beneficiaries with High Medicare Expenditures Were Far More Likely than Those with High Medicaid Expenditures to Have Multiple Health Conditions

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.

Fully Integrated D-SNPs Often Provided High Quality Care, but Had Limited Experience Serving Disabled Dual-Eligible Beneficiaries or Demonstrating Medicare Savings

Fully Integrated D-SNPs Often Met Criteria for High Quality, but Relatively Few of Those Plans Served Disabled Dual-Eligible Beneficiaries

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.

Relatively Few High Quality FIDE-SNPs Showed Potential for Medicare Savings, Regardless of Whether They Served Disabled Dual-Eligible Beneficiaries

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).

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

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.)

Concluding Observations

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.

Agency Comments

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.

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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.

Appendix I: Disabled Dual-Eligible Beneficiaries’ Service Use and Health Conditions by Expenditure Level, 2009

Any long-term services and supports (LTSS)

Appendix II: GAO Contact and Staff Acknowledgments

GAO Contact

Staff Acknowledgments

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.