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
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.