CMS’ dual eligible demo savings sources uncertain

May, 14 2013

By: Anthony Brino | Healthcare Payer News

The Centers for Medicare & Medicaid Services (CMS) is looking to more than a dozen dual eligible demonstrations to fulfill the quality improvement and cost saving aims of the Affordable Care Act, although in the five demonstrations approved so far, the exact sources of projected savings remain largely unclear, according to the Kaiser Family Foundation.

CMS has finalized memoranda of understanding with California, Illinois, Massachusetts and Ohio to test a capitated payment model for Medicare-Medicaid beneficiaries, as well as an MOU with Washington State to test a managed fee-for-service model.

Washington is also proposing to test a capitated payment model, which, along with proposals from 16 other states, is pending CMS approval. The agency plans to limit national enrollment in the three year demonstrations to 2 million patients — out of some 9 million dual eligibles — and so far the five state proposals approved include 843,000, about half of them in California and 200,000 in greater Los Angeles alone.

[See also: Q&A: Primary care models for dual eligibles]

While the federal government and the states are expecting cost-savings from the demonstrations, in addition to better care and less bureaucratic hurdles for patients, a Kaiser Family Foundation issue brief notes that the five MOUs don’t explain how the expected cost savings will be achieved, but largely assume savings from community and home-based care.

Illinois, which has one of the highest rates of potentially avoidable hospital admissions for dual eligible patients nationally and one of the highest proportions of spending on institutional services, is expected to yield a one percent savings in the first year of its demonstration, for about 135,800 patients participating, followed by three percent and five percent savings in years two and three.

The MOUs for Massachusetts and Ohio are expecting savings of one percent, two percent and three percent in years one, two and three. California, which will have about 456,000 patients participating, is expecting to see minimum savings of one percent, two percent and four percent over three years, and maximum savings of 1.5 percent, 3.5 percent and 5.5 percent — the highest in the approved demonstrations, Kaiser’s brief notes.

Washington, meanwhile, will test CMS’s managed fee-for-service model, and any savings will be determined retrospectively.

The demonstrations are focusing on slightly different patient populations. Massachusetts is targeting nonelderly patients with disabilities, Washington, high risk and high cost patients, and California, Illinois and Ohio, elderly and nonelderly in select regions.

Massachusetts is requiring participating health plans to contract with community-based organizations to provide independent living and long-term services and support coordinators. Ohio is requiring health plans to contract with Area Agencies on Aging for home and community-based services for enrollees over age 60.

California is requiring plans to establish MOUs with county behavioral health agencies for specialty mental health services and with county social services agencies to coordinate in home support. Washington’s demonstration will use home care coordination organizations to manage services among existing Medicare and Medicaid providers.

Testing the capitated financial alignment model in California, Illinois, Massachusetts and Ohio, health plans will receive capitated payments from CMS for Medicare services and the state for Medicaid services, with the baseline capitation for Medicare Parts A and B services determined through a blend of the Medicare Advantage benchmarks and the Medicare fee-for-service standardized county rates, weighted by whether patients expected to transition into the demonstration are enrolled in Medicare Advantage or traditional Medicare in the prior year.

Baseline capitation payments for Medicare prescription drug services will be based on the national average monthly bid amount, the average projected low-income cost sharing subsidy and the average projected federal reinsurance amounts. In Illinois and Massachusetts, baseline Medicaid capitation payments will be based on historic state spending, and in California and Ohio Medicaid payments will be based on managed care waiver capitation rates.

As the Kaiser Family Foundation notes, the projected savings from the demonstrations are assumed to come from increased care coordination and the use of home and community-based services, with decreases in the use of institutional settings, emergency room visits and avoidable hospitalizations. Those savings will be deducted up-front from the Medicare and Medicaid contributions to health plans in the capitated model and savings will be determined retrospectively in Washington’s managed FFS model.

The specific details of those savings aren’t specified in the three-way contracts between CMS, the state and the insurers, and still remain to be seen, Kaiser noted. But CMS is preparing to evaluate the demonstrations as a whole and on more granular levels.

The agency has contracted with RTI international, which will visit care sites, study changes in quality, healthcare utilization and costs, and calculate attributable savings, which are set to be reported quarterly after the demonstrations begin later this year and next.

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