Can Combined Care Help the Most Vulnerable (and Expensive) Patients?

In an attempt to cut costs and improve care, some states are merging coverage for patients who qualify for both Medicaid and Medicare. It’s a bold experiment that’s off to a rocky start.
by | November 2015
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Dennis Heaphy has been a quadriplegic for more than 30 years. But life has recently improved for the 53-year-old Boston resident. That’s because Heaphy was among the first enrollees in an ambitious experiment in Massachusetts that seeks to better coordinate health services for “dual eligibles,” those residents who qualify for both Medicare and Medicaid coverage. After signing up for the program in 2013, Heaphy received a care assessment, resulting in a new bed, a new mattress and a wheelchair that now enables him to take his rat terrier, Vinnie, outside for daily walks. Heaphy also gets massages and acupuncture, which help with his breathing. In November 2014, he had surgery to remove a bone infection, which under previous insurance plans would have required him to recuperate in a nursing facility. Under the demonstration insurance plan, however, health aides visited him daily while he recovered from the surgery in his own home. “My health plan had the flexibility to put its dollars toward keeping me at home, rather than in a skilled nursing facility,” says Heaphy, who is also a health policy analyst for a disability advocates group. “My care is good.”

The experiment in Massachusetts is part of a broad attempt going on right now in a dozen states to change how they provide care to elderly and disabled adults while working to reduce the ballooning costs of services. Under the Affordable Care Act (ACA), states since 2011 have had the option of adopting one of several experimental managed care models under what’s called the “Financial Alignment Initiative.” Managed by the Centers for Medicare and Medicaid Services (CMS), the initiative aims to reduce costs and better coordinate care for the nation’s 10.7 million dual eligibles.

It’s a patient population that’s among the most expensive to treat. In 2009, dual eligibles represented 19 percent of those enrolled in Medicare but accounted for 34 percent of costs, according to CMS. About 14 percent of Medicaid enrollees were dual eligible, but they represented 35 percent of costs. Some 60 percent of dual eligibles have chronic conditions like diabetes and high blood pressure; 40 percent have been diagnosed with a mental illness; and 22 percent live in an institutional setting, such as a nursing home.

The intertwined thicket of Medicare and Medicaid services can seem hopelessly confusing. Medicare, the federal insurance program for people 65 and older or disabled, pays for prescription drugs, hospital services and short-term nursing home stays. Medicaid, the federal health program for low-income individuals, pays for nursing home care after 90 days, home-based care services, limited transportation to doctors’ appointments, dental care, and Medicare premiums and co-pays. The uncoordinated coverage can lead to dual-eligible patients’ being volleyed back and forth. Nursing home patients with chronic conditions, for example, may be sent to the hospital frequently because Medicare will foot the bill for hospital stays. (As much as 40 percent of repeat hospitalizations of nursing home residents could have been prevented if they had been treated properly in the nursing home, according to a 2010 report from the Medicare Payment Advisory Commission.) Care for this group of patients is already extremely expensive, and the disjointed nature of the two programs has meant billions in unnecessary medical bills for taxpayers.

The current ACA experiment represents the biggest effort so far to change the way dual eligibles are cared for and compensated. It’s a sweeping initiative that comes at a crucial time when states are trying to move the needle on health-care spending. But rollout of the demonstrations has been rocky, characterized by false starts, coverage gaps and higher-than-expected costs. Still, governments are hoping that this may finally be the right way to cut costs and improve care for some of the nation’s most vulnerable citizens.

States and the federal government have been trying to get a handle on dual-eligible care for decades. One of the earliest models, the Program of All-Inclusive Care for the Elderly, known as PACE, was launched in 1990. In the program, about 30,000 dual eligibles who are 55 and older get social support and health care at an adult day-care center. The program has successfully reduced hospitalizations of its members by about 30 percent. But PACE has proved difficult to replicate on a large scale because it relies on multiple providers servicing a day-care center, which is expensive and complicated to run.

Some states have also launched their own efforts to link coverage for their Medicaid and Medicare patients. Tennessee, for example, in 2010 created the CHOICES program to help seniors and younger adults with a disability on Medicaid to stay in their homes if they needed skilled nursing care. The initiative was integrated into Tennessee’s statewide managed Medicaid program, and it was considered a model. But the state has since tightened eligibility requirements, reducing the number of beneficiaries who have access to the program.

The current ACA dual-eligible demonstration is the largest joint federal and state effort to be tried nationally. Since 2013, 12 states -- California, Colorado, Illinois, Massachusetts, Michigan, Minnesota, New York, Ohio, South Carolina, Texas, Virginia and Washington -- have all adopted a demonstration model and are now caring for about 450,000 dual eligibles. Rhode Island will become the 13th state early next year. Unlike previous efforts, such as PACE, which used day-care centers as a focal point for delivering services, the new ACA initiative is focused on providing care wherever a person lives. That means a beneficiary may get care at a community center, in her home or through her physician. CMS also imposed specific consumer protection measures for states to follow, such as requiring the hiring of an ombudsman to oversee dual eligibles.

The pilot programs differ from place to place. In nine of the participating states, the federal and state governments pay insurers a set fee to manage care for enrolled patients. Colorado and Washington are experimenting with a managed fee-for-service model and will be reimbursed a portion of savings from the federal government. In Minnesota, the state and federal governments are working together to achieve further savings from an existing state-managed care model. The different state models all share the same basic idea: provide dual eligibles with a single insurance plan that covers all their medical needs.

But the short history of these latest efforts has been anything but smooth.

One big problem has been getting people enrolled in the plans. In California, for example, about 46 percent of dual eligibles opted out of joining the demonstration, while in Virginia just 44 percent enrolled. In New York, 8,303 people have enrolled in a plan, out of a potential 124,000 patients. Part of the enrollment challenge has been communication. Health insurance plans automatically enrolled dual-eligible individuals in the new coordinated plans, but also gave them the option to opt out and return to their old plan. People were confused by the change and concerned they might be losing coverage, says Tim Engelhardt, director of CMS’ Federal Coordinated Health Care Office. In some cases, he says, doctors and providers of long-term care services even advised patients to opt out of the new plans. “We had pockets of resistance from providers, and this population [of beneficiaries] is intrinsically difficult to engage,” Engelhardt says. “There is a high prevalence of mental health issues, low levels of literacy, high levels of dementia and high levels of transience.” Finding and communicating with these patients is especially hard.

Many patients who did enroll in the new plans experienced problems as well. In California, Massachusetts and Ohio, enrollees reported delays in care and difficulty in getting prescriptions filled. Some patients lost their home health aides because the state plans initially failed to reimburse those workers for their time on the clock. Glitches in Virginia’s system meant that some nursing homes didn’t get paid for a short period of time. And states have lagged on patient assessments: One of the promises of the new plans was that every new beneficiary would receive an initial medical assessment and then an individualized care plan through a care coordinator. So far, more than 200,000 -- roughly half -- have received them, as states have instead spent time building a network of providers.

Perhaps most troublesome is that there have been signs that the demonstrations are costing more than they’re saving. In Massachusetts, the three insurance plans participating in the demonstration lost a combined $54 million in the first 18 months of the program, according to the state; this August, one of those plans withdrew from the program. And in California, high initial costs led Gov. Jerry Brown, as part of his annual budget review this past January, to threaten to pull the plug on the program if savings aren’t projected in the 2016-2017 budget.

California Gov. Jerry Brown has said he will terminate his state's dual-eligible experiment if it doesn't begin showing cost savings by next fiscal year. (Flickr/Charlie Kaijo)

“Frankly, there have been some growing pains, as there has been with any demonstration project of this nature,” says K.J. Hertz, senior legislative representative for AARP. Still, AARP remains supportive of the government’s efforts, especially because there are signs that enrollment has stabilized, and more beneficiaries are getting the coordinated care they need. “What will be important to see is [the demonstration] delivering better care where people want to receive it, not just saving money.”

Despite the initial setbacks, advocates of the effort say it’s important to keep things in perspective. “I think the demonstrations are going well,” says Matt Salo, executive director of the National Association of Medicaid Directors. “The whole process may have been slower than people hoped, but bringing together two half-trillion-dollar-a-year programs [like Medicare and Medicaid] is complicated. And it shouldn’t surprise anyone how difficult it can be.”

For now, it’s unclear whether any of the current experimental models are viable, because CMS has yet to publish any data. The agency plans to publish some findings in the first half of 2016, and it has also given states the option to extend their demonstrations by another two years.

As Rhode Island prepares to launch its dual-eligible experiment next year, officials say they hope to avoid some of the startup challenges that plagued other states. “We have been able to learn from other states,” says Rhode Island Health and Human Services Secretary Elizabeth Roberts. “This is a great opportunity to help Rhode Islanders with the most complex medical needs.”

Rhode Island Health and Human Services Secretary Elizabeth Roberts says her state has learned from others' mistakes and will be better prepared when it launches its dual-eligible experiment early next year. (AP)

The state has been working with a health insurer, Neighborhood Health Plan of Rhode Island, to negotiate a fee structure that adequately covers the infrastructure costs of reaching and enrolling dual eligibles, providing them with care coordinators and ongoing services. Neighborhood Health already has experience with Medicaid long-term services, because Rhode Island shifted all of those beneficiaries to a Neighborhood Health managed care plan in 2013. Through that process, the state has already developed many of the relationships with long-term care service providers it needs to make coordinated care work. Further, the information technology networks have already been built with providers, so Roberts doesn’t anticipate IT issues after enrollment has begun.

Rhode Island is also working closely with consumer advocate organizations to develop a strategy for reaching out to patients and explaining to them the benefits of enrolling in the demonstration. And those groups are helping anticipate potential problems that may arise, based on consumers’ experiences in other states.

But everyone will be watching closely. “The idea of integrating Medicare and Medicaid into a single benefit program makes a lot of sense,” says Virginia Burke, president and CEO of the Rhode Island Health Care Association, which represents the state’s skilled nursing homes. But, she adds, “I have a lot of trepidation given what has happened in other states.”

*Robert Greenwood, VP of Public Affairs for PACE, responded to this article saying it misstates the way the PACE program is set up. His response follows:

We appreciate this article, but your description of PACE resulted in a few misleading characterizations of the model.  You state that in PACE, a day center is the focal point of care delivery, while the new financial alignment demonstrations deliver care in individual homes and in other community settings.  While the PACE center can play an important role in delivery of care and services for many PACE enrollees, from the beginning the PACE interdisciplinary team has used the flexibility provided by the model to provide care and services in the home, support family caregivers, and provide access to other providers in the community.  As an all-inclusive model, PACE is obligated to provide all needed care and services which often extend beyond what the PACE interdisciplinary team can directly provide.

In addition, many PACE organizations have used their experience to innovate the model by receiving PACE-waivers from CMS to incorporate community physicians and alternative care delivery sites such as senior seniors or congregate housing settings. 

Bara Vaida | Contributor