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Integrating Medicare and Medicaid: State Experience with Dual Eligible Medicare Advantage Special Needs Plans

The dually eligible population—nearly 9 million older adults and younger people with disabilities who are covered by both Medicaid and Medicare—accounts for a disproportionate share of spending in both programs: up to 46 percent of all Medicaid spending and 24 percent of Medicare spending (compared with 18 percent and 16 percent as a share of enrollment in each program, respectively). Dual eligibles often face significant fragmentation in their health care coverage.

Medicare Advantage Special Needs Plans (SNPs) were authorized by the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 to encourage health plans to develop programs to better serve targeted Medicare subpopulations, including dual eligibles. Dual eligible SNPs were intended to provide an option for integrating Medicare and Medicaid services for this vulnerable, high-cost population and to bring long-running demonstrations, including both integration demonstrations and demonstrations about care management in nursing homes, under a single program. By August 2009, almost 944,587 dual eligibles were enrolled in a Medicare dual eligible SNP. However, the majority of SNP plans were providing only Medicare services to dually eligible enrollees; fewer than 20 percent of state Medicaid programs had contracted with an SNP to provide some level of integration across the two programs.

The AARP Public Policy Institute contracted with Health Management Associates (HMA) to explore the experience of state Medicaid programs that have contracted with dual eligible SNPs. HMA conducted in-depth telephone interviews in late 2008 and early 2009 with state Medicaid officials in three states—Minnesota, New Mexico, and New York—that currently contract with dual eligible SNPs to promote integration of Medicare and Medicaid services. Each of these states offers at least one SNP product that includes Medicaid long-term care as part of the benefit package. Telephone interviews were also conducted with officials in Alabama and Washington to explore relevant experience in these states with contracting with Medicare SNPs for Medicaid dual eligibles.

All case study states expressed a strong commitment to pursuing integration of health care services for dually eligible beneficiaries, and all reported that they have seen, or expect to see, improvements in access for beneficiaries, beneficial care management services for populations with significant health needs, and more cost-effective use of long-term care services. States also identified significant barriers to offering an integrated product through contracting with a Medicare SNP. These include administrative start-up costs, when significant state savings may take years to fully realize, and the challenge of gaining community and provider acceptance for the underlying premise of managed long-term care services for the Medicaid population. Additional barriers include lengthy negotiations with the Centers for Medicare and Medicaid Services to obtain federal authority, a lack of clarity regarding how states can obtain necessary authority to implement integrated strategies, and competing regulations governing managed care in the two programs that serve to frustrate effective integration. Finally, states described the difficulties of identifying effective strategies for encouraging beneficiaries to make what is still two separate enrollment decisions through two separate enrollment processes to obtain the full benefits of integration of services and care management. (41 pages)