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Wed Jan 2, 2013, 08:47 PM

Using Shared Savings to Foster Coordinated Care for Dual Eligibles (New Eng Jour Med)

Using Shared Savings to Foster Coordinated Care for Dual Eligibles

Richard G. Frank, Ph.D.
January 2, 2013

There are 9.2 million people who are eligible for both Medicare and Medicaid. They're eligible for both programs either because they are younger than 65 years of age, disabled, and poor or because they are 65 or older and are poor or have exhausted their nonhousing assets paying for health care. These dually eligible program participants make up about 20% of Medicare beneficiaries and about 17% of Medicaid beneficiaries and account for 29% and 39% of Medicare and Medicaid spending, respectively.1 New federal policy initiatives are promoting organizations that integrate and coordinate care to meet the complex needs of this vulnerable population. The hope is that if beneficiaries are encouraged to enter into such arrangements, costs will fall and quality of care will improve.

From a clinical perspective, dually eligible beneficiaries are more likely than others to have multiple chronic conditions or a severe mental disorder or to have functional limitations and cognitive impairments. Organizing care and support for this population is complicated because they frequently rely on income support, social supports, housing assistance, and long-term care that are administered and paid for by different state and local government agencies.

Financing health care for dually eligible people is also challenging because they require support from the state-run Medicaid program and the federal Medicare program. These two programs have provisions, payment rules, and regulations that often align poorly with one another, which results in high-cost, low-quality care. For example, a nursing home that cares for a long-stay Medicaid patient is economically advantaged when it transfers one of its residents to an acute care hospital for treatment of, say, a urinary tract infection. When this happens, the nursing home avoids devoting resources to treatment of the infection, it receives a payment from Medicaid to hold the bed for the hospitalized resident, and it gets paid a higher per diem rate by Medicare than it would from Medicaid for a period after the patient returns because he or she qualifies for Medicare-financed post-acute care.

The fragmentation in organization and financing of care for dually eligible people is seen by federal and state policymakers as a problem that can be remedied. Many policymakers believe that greater coordination of care for the dually eligible population that uses a strong care-management system under a unified budget can lead to both savings and improved care. To address this issue, the Affordable Care Act established the Federal Coordinated Health Care Office within the Centers for Medicare and Medicaid Services. The Bowles–Simpson Commission projected that between 2015 and 2020, we could save $13 billion by moving dually eligible people into managed-care plans. Others have proposed enrolling dual eligibles in state-designed care coordination entities (CCEs). Such a move was projected to save $126 billion over 10 years, according to the most optimistic estimate.2 Twenty-six states are pursuing demonstration projects aimed at better coordinating care for dual eligibles.

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