Spe­cial re­port: How to tame the ris­ing costs of dual-el­i­gi­bles

Feds, states fo­cus on ways to im­prove care and rein in spend­ing for high-cost pa­tients el­i­gi­ble for both Med­i­caid and Medi­care

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An ini­tia­tive to jump-start care co­or­di­na­tion among Med­i­caid’s costli­est pop­u­la­tion may rely on a mar­quee fed­eral in­te­grated-care pro­gram al­ready op­er­a­tional in many states. But that pos­si­bil­ity con­cerns some health pol­icy ex­perts.

The CMS has be­gun to weigh state ap­pli­ca­tions for a pro­gram au­tho­rized by the Pa­tient Pro­tec­tion and Af­ford­able Care Act to ag­gres­sively move up to 2 mil­lion ben­e­fi­cia­ries du­ally el­i­gi­ble for Medi­care and Med­i­caid away from fee-for-ser­vice care.

There is a lot rid­ing on what’s known as the Fi­nan­cial Align­ment Ini­tia­tive be­cause the 9 mil­lion so-called dual-el­i­gi­bles have driven much of the cost in­creases in Med­i­caid. These ben­e­fi­cia­ries con­sti­tute 15% of the Med­i­caid pop­u­la­tion but ac­count for 39% of the pro­gram’s to­tal spend­ing, ac­cord­ing to the CMS. Their num­bers have been in­creas­ing, from 7.2 mil­lion ben­e­fi­cia­ries in 2000 to 8.9 mil­lion in 2007, ac­cord­ing to lat­est avail­able sta­tis­tics, which also show their cost to Med­i­caid in­creased over the same pe­riod from about $50 bil­lion to $124.7 bil­lion.

The pres­sure to gain con­trol of Med­i­caid pro­gram spend­ing, which has con­sumed an ev­er­larger share of state bud­gets, in­creased dur­ing the re­cent eco­nomic down­turn. Nearly a quar­ter of the U.S. pop­u­la­tion, or 77.5 mil­lion peo­ple, were en­rolled in Med­i­caid or the Chil­dren’s Health In­sur­ance Plan at some point in 2011, ac­cord­ing to the March 2012 re­port of the Med­i­caid and CHIP Pay­ment and Ac­cess Com­mis­sion.

The grow­ing en­roll­ments drove state Med­i­caid ex­pen­di­tures to the point where they now nearly match the $130 bil­lion states spent on higher ed­u­ca­tion in fis­cal 2010, ac­cord­ing to the Cen­ter on Bud­get and Pol­icy Pri­or­i­ties. Med­i­caid spend­ing has since in­creased to the sec­ond­largest bud­get cat­e­gory in state bud­gets, ac­cord­ing to Na­tional Con­fer­ence of State Leg­is­la­tures, trail­ing only K-12 ed­u­ca­tion.

To help ad­dress the Med­i­caid cost chal­lenge, at least 25 states are ex­pected to sub­mit plans to the CMS’ Cen­ter for Medi­care and Med­i­caid In­no­va­tion for the three-year pi­lot pro­gram to test ways to im­prove the qual­ity and lower the costs of dual-el­i­gi­ble care, ac­cord­ing to an agency of­fi­cial (See chart, p. 29). Those states are ex­pected to ap­ply for ap­proval of ei­ther a cap­i­tated model or a man­aged fee-for-ser­vice model within the Fi­nan­cial Align­ment Ini­tia­tive.

The pro­gram was orig­i­nally slated to launch in Jan­uary 2013, but that has been pushed back to Jan­uary 2014 af­ter “many” state pro­grams re­quested the de­lay, ac­cord­ing to a CMS of­fi­cial. How­ever, the agency will ad­here to the orig­i­nal deadlines for demon­stra­tion pro­posal de­vel­op­ment and re­view to oc­cur within this year.

“It’s a re­ally chal­leng­ing pop­u­la­tion: the frailest, most med­i­cally com­plex group in our health­care sys­tem,” says David Grabowski, a pro­fes­sor of health­care pol­icy at Har­vard Med­i­cal School. The CMS ini­tia­tive “is a set of pro­grams try­ing to im­prove their qual­ity and gen­er­ate some sav­ings.”

But there are few well-es­tab­lished suc­cess­ful ef­forts on which to model such new ap­proaches, ac­cord­ing to health pol­icy ex­perts. The long­est-stand­ing fed­eral model to bet­ter in­te­grate the care of the dual-el­i­gi­ble pop­u­la­tion is the Pro­gram of All-in­clu­sive Care for the El­derly, known as PACE.

The PACE pro­gram was per­ma­nently es­tab­lished by the Bal­anced Bud­get Act of 1997 as a part of the Medi­care pro­gram and an op­tion for state Med­i­caid pro­grams to merge pay­ments for ben­e­fi­cia­ries el­i­gi­ble for both pro­grams. The pro­gram of cap­i­tated pay­ments is gen­er­ally limited to dual-el­i­gi­bles who are at least 55 years old and re­quire nurs­ing home level of care. Their care usu­ally is pro­vided through PACE cen­ters, adult day-care fa­cil­i­ties where teams of health­care providers are based.

“That’s prob­a­bly the clos­est thing to an in­te­grated pro­gram that ex­ists now,” says Mary­beth Musumeci, a se­nior health pol­icy an­a­lyst at the Kaiser Fam­ily Foun­da­tion.

The care model has spread to 85 pro­grams in 29 states, which serve about 25,000 ben­e­fi­cia­ries, ac­cord­ing to the Na­tional PACE As­so­ci­a­tion. Each PACE pro­gram has an av­er­age of 260 en­rollees and about 90% of PACE par­tic­i­pants are dual-el­i­gi­bles.

The pro­gram’s statu­tory lim­i­ta­tions to dualel­i­gi­bles who qual­ify for nurs­ing-home care has limited its scope, but those stric­tures have also fo­cused it on one of the costli­est groups within the dual-el­i­gi­ble cat­e­gory, re­search in­di­cates. An anal­y­sis by the Kaiser Com­mis­sion on Med­i­caid

and the Unin­sured is­sued last month found that 74% of the ap­prox­i­mately 900,000 dual-el­i­gi­bles who in­cur the high­est Med­i­caid costs are re­ceiv­ing long-term care, such as nurs­ing-home ser­vices. And these costli­est Med­i­caid ben­e­fi­cia­ries are more likely than lower-cost dual-el­i­gi­bles to be “over age 80, white, non-his­panic and less likely to be mar­ried,” ac­cord­ing to the re­port.

PACE has paid off, ac­cord­ing to some sup­port­ers. For in­stance, the Ok­la­homa PACE pro­gram, which was launched in 2008 and in­cludes only 100 ben­e­fi­cia­ries in one lo­ca­tion, saves the state about $1 mil­lion an­nu­ally, says Ash­ley Her­ron, PACE co­or­di­na­tor for the Ok­la­homa Health Care Au­thor­ity. Those sav­ings are based on what the state es­ti­mates the ben­e­fi­cia­ries would cost its Med­i­caid pro­gram if they were in nurs­ing homes.

How­ever, re­searchers who have ex­am­ined many of the PACE pro­grams have found mixed re­sults. The two ma­jor eval­u­a­tions of the pro­gram con­ducted for the Cms—one in 2000 and one in 2008—both found the pro­gram’s en­rollees con­sis­tently have some im­prove­ments in their health sta­tus, in­clud­ing men­tal and gen­eral phys­i­cal health sta­tus, Grabowski notes. The 2000 study by Apt As­so­ciates and the 2008 study by Math­e­mat­ica Pol­icy Re­search found ben­e­fi­cia­ries were hap­pier with the pro­gram’s care co­or­di­na­tion than they were be­fore when try­ing to nav­i­gate be­tween Medi­care and Med­i­caid on their own.

Those find­ings echo the ex­pe­ri­ences that PACE par­tic­i­pants re­ported in re­cent fo­cus groups or­ga­nized by the AARP Public Pol­icy In­sti­tute. The study that re­sulted from the feed­back of those ben­e­fi­cia­ries con­cluded that PACE par­tic­i­pants were par­tic­u­larly happy with its care co­or­di­na­tion and op­por­tu­ni­ties for so­cial in­ter­ac­tions pro­vided by the PACE cen­ters.

Such con­sid­er­a­tions are as im­por­tant as analy­ses of the dol­lars in­volved and the tech­ni­cal as­pects of re­struc­tur­ing the care dual-el­i­gi­bles, Su­san Rein­hard, an AARP se­nior vice pres­i­dent and di­rec­tor of its Public Pol­icy In­sti­tute, said at a De­cem­ber 2011 brief­ing by the Al­liance for Health Re­form, a non­par­ti­san health pol­icy group.

“Changes to the way care is or­ga­nized for these peo­ple who are du­ally el­i­gi­ble could have pro­found ef­fects on their lives and frankly the lives of the fam­i­lies that sur­round them and sup­port them in many dif­fer­ent ways,” she says.

It is the fis­cal analy­ses of the PACE pro­grams that have been the pro­grams’ “not-so-good news,” Grabowski says.

For ex­am­ple, the anal­y­sis by Apt found some sav­ings to Medi­care from the PACE pro­gram, but they were dwarfed by the pro­gram’s in­creased costs for Med­i­caid. Over­all, the to­tal cap­i­tated pay­ment for PACE en­rollees was 9.7% more in the one year stud­ied than the pro­jected fee-for-ser­vice cost of those pa­tients to both Medi­care and Med­i­caid.

The 2008 study found sim­i­lar costs to Medi­care un­der its stan­dard fee-for-ser­vice pro­gram and the PACE pro­gram but Med­i­caid costs rose un­der PACE.

“It’s of­ten been sold as this sort of win-win of low­er­ing costs and im­prov­ing qual­ity, and at least to date, it hasn’t re­al­ized that full po­ten­tial,” Grabowski says. “It has im­proved qual­ity of care and out­comes but at a higher cost.”

The cen­tral ques­tion that the CMS and state Med­i­caid of­fi­cials need to an­swer when con­sid­er­ing spread­ing PACE, ac­cord­ing to Grabowski and other re­searchers, is whether the in­crease in qual­ity war­rants the growth in spend­ing.

The pro­gram’s slow growth demon­strates that states al­ready have as­sessed the pro­gram’s value and cost equa­tion and found it is an un­wor­thy ve­hi­cle to treat the broader pop­u­la­tion of costly dual-el­i­gi­bles, says Judy Feder, pro­fes­sor of public pol­icy at Ge­orge­town Univer­sity in Washington. That limited state uti­liza­tion of PACE is a les­son the CMS is un­likely to miss when it is con­sid­er­ing state pro­pos­als for the dual-el­i­gi­ble pi­lot pro­grams planned for the fu­ture.

“It is a par­tic­u­lar model of care—not solely but largely day­care-based—for the frailest of the dual-el­i­gi­bles,” Feder says. Con­versely, the CMS’ com­ing pi­lot projects to over­haul care for dualel­i­gi­bles in­tend “to reach far more broadly.”

Such short­com­ings may oc­cur in the case of ex­act copies of ex­ist­ing PACE pro­grams, say some pro­gram sup­port­ers, but vari­a­tions of the model that re­tain core el­e­ments are more likely to pro­vide im­proved health out­comes at re­duced costs.

For in­stance, sev­eral states are con­sid­er­ing vari­a­tions known as a “vir­tual PACE pro­gram” or “PACE with­out walls,” which would pro­vide “that model of in­te­grated care but to do it with­out ty­ing peo­ple to that one-stop phys­i­cal lo­ca­tion,” Kaiser’s Musumeci says.

Such changes would move closer to ap­prox­i­mat­ing med­i­cal homes or health homes, both of which as­sign high-cost dual-el­i­gi­bles with mul­ti­ple health con­di­tions to one physi­cian or clin­i­cal team that co­or­di­nates all of their care—with the goal of im­prov­ing their health sta­tus. It also would re­tain the health team ap­proach that pro­duced pos­i­tive health out­comes in stud­ies, while elim­i­nat­ing the in­fra­struc­ture cost of main­tain­ing PACE cen­ters.

In its orig­i­nal pro­posal to the CMS last sum­mer, Ok­la­homa planned to ex­pand an un­mod­i­fied ver­sion of its PACE pro­gram from one lo­ca­tion in Tahlequah to mul­ti­ple sites statewide, but

months of dis­cus­sions with the agency and the Na­tional PACE As­so­ci­a­tion led to mod­i­fi­ca­tions in the plan, says Her­ron, the state co­or­di­na­tor. Among other changes, the amended pro­posal would lower the min­i­mum age for dual-el­i­gi­ble par­tic­i­pants to 45, re­quire at least two chronic con­di­tions and ex­pand the types of fa­cil­i­ties they could use, in­clud­ing com­mu­nity cen­ters.

“With a Pace-like ad­min­is­tra­tion, you will get bet­ter care co­or­di­na­tion and an all-in­clu­sive ben­e­fit plan; you can al­most as­sume that your sav­ings are go­ing to be what we’re get­ting for our cur­rent PACE site plus some more,” Her­ron says.

Those mod­i­fi­ca­tions echo many of the ad­min­is­tra­tive changes that the na­tional as­so­ci­a­tion is urg­ing the CMS to make to the long­stand­ing pro­gram that aim to ex­pand its base of po­ten­tial en­rollees and ease im­ple­men­ta­tion for the states, ac­cord­ing to var­i­ous PACE of­fi­cials.

Shawn Bloom, pres­i­dent and CEO of the Na­tional PACE As­so­ci­a­tion, says the group has re­cently asked the CMS to clar­ify which of those changes it could im­ple­ment ad­min­is­tra­tively or through the rule-mak­ing process and which would re­quire leg­isla­tive changes.

The re­sult of that dis­cus­sion was model leg- isla­tive lan­guage that the group aims to find a mem­ber of Congress to in­tro­duce. The leg­isla­tive changes—which all would still ap­ply to var­i­ous types of dual el­i­gi­bles—in­clude low­er­ing the el­i­gi­bil­ity age to 18; ex­pand­ing en­roll­ment to peo­ple with chronic ill­ness who do not yet re­quire nurs­ing home level of care; and al­low­ing PACE or­ga­ni­za­tions to pro­vide care in more types of set­tings.

Even with­out such changes, the pro­gram’s sup­port­ers ex­pect it to have a sig­nif­i­cant role in the com­ing pi­lot pro­grams for the dual-el­i­gi­ble pa­tients.

Bloom ex­pects dif­fer­ent states to pro­pose care and pay­ment mod­els that bet­ter fit cer­tain seg­ments of the dual-el­i­gi­ble pop­u­la­tion, which ranges from low-in­come el­derly to par­a­lyzed teens.

“There’s prob­a­bly room for a va­ri­ety of dif­fer­ent op­tions,” Bloom says. “There’s not a one­size-fits-all so­lu­tion.”

The pro­gram’s con­tin­ued sta­tus as the only fully in­te­grated provider ap­proach avail­able for dual-el­i­gi­ble ben­e­fi­cia­ries make it a bet­ter fit for the frailest among that pa­tient pop­u­la­tion, ac­cord­ing to its sup­port­ers.

“We be­lieve that the more frailty, the more lim­i­ta­tions, the more func­tional needs, and the more med­i­cal com­plex­ity an in­di­vid­ual may have, the more they need the hands of an in­te­grated provider on a daily if not an hourly ba­sis,” Bloom says.

Re­gard­less of what changes the CMS or Congress ap­proves or which vari­a­tions in the PACE model that states sub­mit, Bloom says the pro­gram must main­tain its in­te­grated provider com­po­nent be­cause that is what sets it apart from var­i­ous other ap­proaches to treat high-cost, high-need dual-el­i­gi­bles. In com­par­i­son, fully cap­i­tated in­sur­ance plans that in­te­grate fi­nanc­ing are try­ing to in­te­grate care with dis­parate groups of clin­i­cians cob­bled to­gether for each pa­tient.

“There are or­ga­ni­za­tions that may be com­pre­hen­sive, but they are con­tract­ing out 99% of their care,” Bloom says.

TAKE­AWAY: As Med­i­caid en­roll­ment and spend­ing have surged, state and fed­eral of­fi­cials are look­ing for ways to cut ex­penses and im­prove care for the costly and med­i­cally com­plex “dual-el­i­gi­bles.”

The dual-el­i­gi­ble pop­u­la­tion in­cludes some of the high­est-cost, most-frag­ile and med­i­cally com­plex pa­tients.

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