Medicare and Medicaid:

Implementing State Demonstrations for Dual Eligibles Has Proven Challenging

HEHS-00-94: Published: Aug 18, 2000. Publicly Released: Sep 18, 2000.

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William J. Scanlon
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Pursuant to a congressional request, GAO reviewed states' initiatives to enroll dual eligibles (beneficiaries who qualify for both Medicare and Medicaid benefits) into one managed care plan, focusing on: (1) the status and key features of state initiatives focusing on: (1) the status and key features of state initiatives to integrate care for dual-eligible beneficiaries; and (2) factors that have contributed to the length of the waiver negotiation process and implementation time frames.

GAO noted that: (1) two states are enrolling a small number of dual eligibles in limited geographic areas into integrated care programs, and two additional states plan to implement programs by 2001; (2) officials in these four states view their initial efforts as stepping stones and plan to make their programs more widely available; (3) since the 1995 approval of an integrated care program in Minnesota, the states of Wisconsin and New York also have received federal approval to integrate Medicaid and Medicare services for dual eligibles; (4) states are emphasizing service delivery in beneficiaries' homes and targeting different segments of the dual-eligible population compared with the Program for All-Inclusive Care for the Elderly , which enrolls only frail individuals; (5) all plans in states with approved programs are nonprofit, including the three participating health maintenance organizations in Minnesota; (6) important factors associated with states' decisions about pursuing integrated care programs for dual eligibles are the complexity of planning and implementing a demonstration and the extended time frames needed to do so; (7) states have criticized the length of the process required to gain federal approval for their initiatives; (8) in states with approved programs, the federal waiver review process ranged from over 1 year to over 3 years; (9) though some delays were associated with the Health Care Financing Administration's (HCFA) 1997 reorganization and the heavy new demands on the agency as a result of 1997 legislation, HCFA has taken action to try to speed up the review process; (10) difficulty in reaching agreement on an appropriate Medicare payment methodology for integrated care programs was an important factor that delayed the approval of state waiver applications; (11) the challenge has been to agree on payment rates that adequately compensate health plans for differences in frailty among dual eligibles while meeting the Office of Management and Budget's requirement that Medicare demonstrations not increase federal Medicare expenditures; (12) Medicare's move toward a new diagnosis-based risk-adjustment methodology raises concerns for state demonstrations because research has shown that the methodology tends to underestimate the costs of frail beneficiaries; and (13) this situation underscores the importance of learning from these four state demonstrations so that their experience may inform similar initiatives that other states may be considering.

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