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When it Comes to Medicare-Medicaid Integration, States Have the Ball. Can They Make the Shot?

Integrated care models align financial incentives and may help people better navigate their care, but no such model exists in nearly one-third of states and is limited in other states. Barriers must be addressed to improve state implementation.

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Navigating one health insurance program is hard enough for most people — imagine navigating multiple programs, all while managing health conditions and functional limitations. For the vast majority of the 12.2 million people who are dually eligible for Medicare and Medicaid, many whom have complex care needs, this is their reality. 

Fragmentation not only complicates their care experience and creates inefficiencies, it also contributes to higher government spending. Dual-eligible individuals account for more than 30 percent of spending across Medicare and Medicaid despite only making up about 15 percent of the population in each program.

Solutions do exist. 

There are multiple models that allow Medicare and Medicaid to feel more like one program to consumers. These integrated” models also bring the program dollars together, helping to better align financial incentives between Medicare and Medicaid providers and plans. Despite this promise, in nearly one-third of states, no integrated model exists. Even in the two-thirds of states where models are available, integrated options are often not offered statewide. Additionally, models vary significantly in the degree to which they make getting care through Medicare and Medicaid feel like being served by one program. 

States face several important barriers to embracing and implementing integrated models. These barriers must be addressed if policymakers want to improve the health care experience and care delivery for low-income older adults and people with disabilities. 

States Face Systematic Barriers to Supporting Integrated Care

Developing and overseeing integrated care models can be overwhelming. States have several models to select from and multiple design decisions that they must make under each model — generally, the more integrated the approach the state wants to pursue the more challenging. 

Making these decisions takes significant time and resources, which many states do not have. Medicare expertise, for example, is critical to the development of an integrated model but is often lacking within state government given that Medicare is a federal program. Technical capacity to undertake data integration and analysis is another key investment that states must make to establish successful integrated models.

Furthermore, states are not mandated to make these models available, and doing so is often inaccurately perceived as a high-cost endeavor with little potential for state savings. States are responsible for a significant share of the cost of providing long-term care services and supports to dual-eligible individuals through their Medicaid programs. The federal Medicare program covers costs for acute care services, such as hospital stays, emergency department visits, and post-acute care. The theory is: more investments in long-term care reduce acute care spending — thus, the more a state spends, the more the federal government saves.

Choices States Face 

Despite the challenges, many states have undertaken at least some effort to make an integrated model available, even if it is on a limited basis. 

Those states interested in truly making the two programs feel like one have three options to choose from: Fully-Integrated Dual-Eligible Special Needs Plans (FIDE-SNPs), Financial Alignment Initiative (FAI), and Program of All-Inclusive Care for the Elderly (PACE). Each of these models has different factors that contribute to its likelihood to be selected by a state and to the state’s ability to make the model broadly available to its dual-eligible population, including whether the model (1) is permanent or offered through a demonstration (which can be terminated at the federal government’s discretion), (2) can be offered statewide; and (3) offers the possibility to share in any savings generated to the Medicare program to address the perceived concern that integrated programs produce savings for the federal government on state dimes. 

Beyond model selection, states also determine who can enroll in each model and which long-term care services and supports are available within it. While all dual-eligible individuals have relatively low incomes and assets, they make up a heterogeneous population, which is often broken into two broad groups: those under the age of 65 with a disability, and those over the age of 65 with long-term care needs. In most circumstances, states only make an integrated model available to a subset of dual-eligible individuals, either limiting the model by geography, age, or disability status. 

As it relates to services, Medicaid’s coverage of long-term care generally favors institutional care over care offered in the home or community. This institutional bias” is not only inconsistent with peoples’ preferences but leads to higher spending. States can request from the federal government the ability to offer more services in the home and community (through programs known as waivers) in an effort to rebalance. Many states have taken this step and in turn, make these services available under their integrated model. 

Fourteen states take it a step further, addressing the institutional bias by also rewarding health plans, for example — the entities that most often offer the integrated models — with bonus payments for keeping people in the community and out of nursing homes, as appropriate and consistent with peoples’ wishes. 

Increasing Availability

We have a long way to go to increase the availability of integrated models. Only 10 percent of individuals eligible for the full range of Medicare and Medicaid services are enrolled in fully integrated models. Lack of availability is reflected in low enrollment. Of the 36 states currently offering some sort of fully integrated option, 16 exclusively operate PACE programs, which have an extremely limited reach — fewer than 50,000 people are enrolled in this model nationwide. 

If we want all dual-eligible individuals to have access to an integrated model, something is going to have to change. One approach is to mandate that states make an integrated model universally available. Another option is to provide more significant carrots to encourage more states to undertake these efforts. Under either circumstance, states will need support to successfully offer integrated options. In the March Medicaid and Chip Payment Access Committee (MACPAC) meeting, Chair Melanie Bella noted the importance of offering technical assistance to states interested in integrating care but emphasized that without appropriate capacity, states may be unable to apply the best practices learned through technical assistance support.

As we think about the future of integrated models, it’s important to keep the challenges that states face in mind. We need to make it as easy as possible for them to implement an integrated model, make it universally available, and ensure it offers services that help keep people in the community. This means providing both providing education and funding so that states can access the resources they need to successfully implement and sustain integrated models over the long term.