States contracting with SNPs for Medicaid benefits

Under terms of the 2003 Medicare Prescription Drug, Improvement, and Modernization Act, Medicare Advantage plans can specialize in serving Medicare beneficiaries who are dually enrolled in state Medicaid programs, are residents of nursing facilities or similar institutions, or who have severe or disabling chronic conditions. Plans that take on these roles are known as special needs plans (SNP).

Several states have taken advantage of Medicare's SNP option to negotiate contracts with the plans to include Medicaid benefits for dually eligible individuals enrolled in such plans. In 2005, according to a Center for Health Care Strategies report, at least 42 SNPs in 13 states were providing Medicaid managed care to dual-eligible enrollees.

Report author James Verdier of Mathematica Policy Research tells State Health Watch such arrangements are worth doing if a state is providing Medicaid long-term care in a managed care setting or plans to do so in the future. "The ability to coordinate long-term care in Medicare and Medicaid is the key," he says.

According to Mr. Verdier, when state officials look at the services and funding streams from both programs together, rather than in their separate silos, they are better able to identify opportunities for better integrating care. "Integrating care for dual-eligible beneficiaries can significantly improve beneficiary care and can also be a major asset for public purchasers like Medicaid and Medicare and for SNPs," he says. "Integration can be achieved by focusing on acute care benefits that both Medicare and Medicaid support, or more comprehensively by also including Medicaid's long-term care benefits. With a comprehensive integrated benefit package, purchasers and plans can focus on more effective ways to integrate care and on designing service delivery systems that help beneficiaries get the right care in the right setting, rather than worrying about who pays how much for which piece of care."

States wanting to contract with SNPs to cover Medicaid services have a number of options, he says. A threshold question is whether there are SNPs in the state that are interested in contracting with Medicaid and are qualified to provide the services for which the Medicaid program wants to contract. SNPs that cover exclusively dual-eligibles are most likely to be interested, he says, while institutional and chronic condition SNPs, which also cover those who are not dually eligible, may be less interested because of the potential extra complexity of having different benefit packages for dual and nondual enrollees.

Assuming there are interested plans, Mr. Verdier says, states can contract with SNPs and other Medicare Advantage plans to cover a variety of Medicaid services. He lists options in order of contracting complexity apt to be involved, with the least complex and comprehensive Medicaid coverage listed first:

1. Medicare premiums and beneficiary cost-sharing that Medicaid is required or chooses to pay for dual-eligibles and others enrolled in Medicare Savings Programs;

2. prescription drugs excluded by the Medicaid Modernization Act from Part D but still covered by Medicaid;

3. acute care services not covered or only partially covered by Medicare, such as vision, dental, hearing, durable medical equipment, transportation, and care coordination;

4. behavioral health services not covered or partially covered by Medicare;

5. comprehensive case management and personal care services;

6. Medicaid long-term care services not covered by Medicare such as nursing facility, home health, and home- and community-based services.

Apart from the issue of which services to include, Mr. Verdier says, there are issues relating to the different types of Medicare and Medicaid contracting that are feasible and the Medicare and Medicaid rules that apply.

As states enter into more detailed discussions with SNPs on potential contracting for Medicaid services, several specific payment rate and contracting issues that relate to areas of overlap between Medicare and Medicaid may be relevant to consider, Mr. Verdier says. Those areas include:

1. Medicare cost-sharing. Medicaid is not required to make Medicare cost-sharing payments directly to plans, and the cost-sharing payments Medicaid makes either to plans or providers may be limited by the amounts Medicaid would pay for the service, even if Medicare payments are higher. Thus, many states may be able to offer significant benefits to SNPs by agreeing to pay these cost-sharing amounts directly to the plan in the form of upfront capitated payments, which could lead to administrative efficiencies for states, plans, and providers.

2. Drugs excluded by statute from Part D coverage. The excluded drugs that Medicaid still covers are usually lower-cost generics and are most valuable to beneficiaries as part of a broader care package. Mr. Verdier says Medicaid programs could achieve administrative efficiencies and improve beneficiary care if they contracted with SNPs to cover these drugs as an additional no-cost benefit, or with an appropriate upfront capitated payment to cover any additional cost.

3. Sharing data on prescription drug utilization. States have an interest in obtaining information on prescription drug utilization by dual-eligibles for care coordination and quality monitoring, especially when Medicaid remains responsible for most of the cost of care for dual-eligibles, such as home- and community-based services and long-term nursing facility care. SNPs have an interest in obtaining information on prior drug use by new dual-eligible enrollees, which states are likely to have for disabled Medicaid beneficiaries younger than age 65 who are emerging from the two-year waiting period for Medicare coverage or Medicaid beneficiaries approaching age 65. Arrangements for sharing these kinds of data could be a topic for contracting discussions between states and SNPs, Mr. Verdier says.

4. Acute care services not covered by Medicare. Medicaid covers some acute care services that Medicare does not cover or covers less extensively, such as vision, dental, hearing, durable medical equipment, transportation, and care coordination. Mr. Verdier says these Medicaid benefits are generally not very costly and probably could be handled more efficiently for dual-eligibles if Medicaid contracted with Medicare SNPs for the services. They could be funded either as an additional no-cost benefit offered by the SNP, if there are savings under the Medicare Advantage capitation payment, or through additional capitation payments provided by Medicaid.

5. Mental health services. Medicaid coverage of mental health services is much broader than Medicare's. The report says about half of disabled dual-eligibles younger than age 65 have significant mental health problems and are heavy users of costly antipsychotic and antidepressant medications. They also are likely to be heavy users of Medicare-funded inpatient hospital and emergency department services. Including Medicaid mental health services in an SNP benefit package would provide a more integrated and comprehensive benefit package that could help reduce overall costs for dual-eligibles with mental health problems by providing a broader range of less costly services such as targeted case management, rehabilitation services, and community mental health center services, that could reduce use of costly inpatient hospital and emergency department services and improve care for beneficiaries over the longer term.

6. Comprehensive case management, personal care services, care coordination, and Medicare Advantage supplemental benefits. Medicaid coverage of care management and personal care services is substantially broader than Medicare's, so including all or some of these Medicaid benefits in the SNP benefit package would make more resources available to improve care coordination between Medicare and Medicaid, Mr. Verdier says.

7. Prescription drug use in nursing facilities. Because many SNPs and Medicare Advantage plans have little experience in managing prescription drug use in nursing facilities, Mr. Verdier suggests they could benefit by partnering with Medicaid to help manage the Part D benefit in nursing facilities, especially since Medicaid is responsible for non-drug nursing facility services for dual-eligibles after the short-term Medicare skilled nursing facility benefit ends. He says such data sharing and partnership could help lay the groundwork for inclusion of Medicaid-funded nursing facility services in the SNP benefit package.

8. Medicaid nursing facility, home health, and home- and community-based services. The broadest integration of Medicare and Medicaid benefits within SNPs, Mr. Verdier says, would be to include Medicaid nursing facility, home health, and home- and community-based services in the SNP benefit package. Doing that, he says, would achieve the ultimate goal of fully integrating Medicare and Medicaid acute and long-term care services in a single managed care benefit package. Because Medicare coverage of long-term care benefits is limited, adding Medicaid benefits would be a major enhancement. And because Medicare does not cover any nonmedical community services beyond a limited home health benefit, including Medicaid nursing facility, home health, and home- and community-based services in the SNP benefit package could open more opportunities for less costly community placements that could reduce Medicare nursing facility and inpatient hospital costs, and provide greater satisfaction for plan enrollees.

9. Use of Medicare savings resulting from inclusion of Medicaid services in the SNP benefit package. Mr. Verdier says there are likely to be savings to Medicare if Medicaid services are included in the SNP benefit package, especially from reducing inpatient hospital, emergency department, and skilled nursing facility utilization, and from more appropriate use of prescription drugs. Such potential savings and their uses should be an explicit topic of discussion between states and SNPs, he says. Some of the savings could be used to further enhance care coordination and other high-value services for dual-eligibles, and some could be used to reduce the capitated payments that Medicaid agencies might otherwise pay to SNPs for coverage of Medicaid services.

Mr. Verdier tells State Health Watch that five states—Florida, Minnesota, New Mexico, New York, and Washington—are in a Robert Wood Johnson Foundation-funded Integrated Care Program to help states develop an infrastructure for integrating health care services and contracting with SNPs. He says officials from these states are participating in a variety of opportunities to share their experiences and learn from each other. The Center for Health Care Strategies is helping the states facilitate exchange of information. The Center also has put out a checklist for states dealing with integrated care program design, rate setting, and risk adjustment.

More information is available from the Center for Health Care Strategies on-line at Contact Mr. Verdier at (202) 484-4520.