Will new initiatives be enough to solve dual eligibles problem?

Dual eligibles account for 15% to 20% of Medicaid enrollment and almost 40% of Medicaid spending, notes Leslie Hendrickson, PhD, principal of Hendrickson Development, an East Windsor, NJ-based consulting group that helps to develop and strengthen long-term care programs, and former assistant commissioner in the New Jersey Department of Health and Social Services.

"These are the people who have low income, chronic medical problems, and are aged or have disabilities. They are the most costly subset of people in the country for Medicaid and Medicare to take care of," says Dr. Hendrickson.

Expensive subgroup

Total expenditures for Colorado Medicaid's dual eligibles exceeded $1.1 billion in 2010, reports Judy Zerzan, MD, MPH, the Department of Health Care Policy and Financing's chief medical officer. "About 13% of our currently enrolled Medicaid clients are dual eligibles," she adds.

Fifteen states have received grants from the Centers for Medicare & Medicaid Services (CMS) to find strategies to improve efficiency and lower costs for people receiving both Medicare and Medicaid. Colorado will receive $995,914 over 18 months to develop a plan to assist approximately 80,000 Coloradans who are covered by Medicare and Medicaid, says Dr. Zerzan.

While most of Colorado's dual eligibles age 60 and under report few physical and cognitive limitations, says Dr. Zerzan, about 14.4% account for 50% of the total expenditures for dual-eligibles. Geographically, 82% of dual eligibles reside in the metropolitan areas of the state, she adds.

"Wide spending variation exists from county to county," says Dr. Zerzan. "There is evidence that per capita expenses for dual eligibles in some rural counties are almost double that of dual eligibles in metropolitan areas."

In Colorado, 85% of Medicaid clients, including all dual eligibles, are served through a fee-for-service model, says Dr. Zerzan. There is little coordination of care, she explains, and no effective mechanism for a client's multiple providers to communicate regularly and ensure that the client's needs are being met.

"These issues point to a great need for improved consistency and accountability of the care delivery system across the state," says Dr. Zerzan.

Care management, care coordination, utilization control, and medical planning are needed to reduce expenditures and bring them under some control, says Dr. Hendrickson. In 2008 and 2009, costs for dual eligibles were roughly $36,000 per person, at a national cost of over $300 billion dollars, he adds.

"It's a very expensive subgroup. It's also the subgroup that is extraordinarily difficult to manage, because it's hard to get Medicaid and Medicare to talk to one another," says Dr. Hendrickson.

The U. S. Department of Health and Human Services' Medicare-Medicaid Coordination Office launched an Alignment Initiative in May 2011, which will give states access to data about Medicare prescription drugs and hospital visits, to improve coordination of care. "It is too early to tell what the new office will accomplish," says Dr. Hendrickson.

Over time, one tangible indicator of success will be the speeding up of access to Medicare data by state programs, he says. "As a state agency, it's still a pull and tussle to figure out how to get Medicare data streamed to you, to better manage these dual eligibles," says Dr. Hendrickson.

Combined administrative systems

According to Dr. Hendrickson, discussions about being either in favor of or opposed to the Patient Protection and Affordable Care Act (PPACA) are missing an obvious point. "We have two massive, parallel health care systems in the country run by the federal government, and the two programs literally don't talk to each other," he says.

Only as part of the PPACA did CMS establish the Medicare-Medicaid Coordination Office to facilitate communication between the two programs, adds Dr. Hendrickson. "The issue is that this is an incredibly wasteful and inefficient system," he says. "For example, why should each state have a separate claims payment system for Medicaid?"

There is no reason why data processing systems for Medicaid couldn't be done on a regional basis as Medicare does, argues Dr. Hendrickson. "Consolidating these backroom operations across states would save an enormous amount of money," he says.

State administrative operations such as claims payments, provider training, fraud detection, and mailing notices to beneficiaries could be federalized with a considerable savings to people, says Dr. Hendrickson.

The upcoming Medicaid expansion only makes it more evident that the administrative systems should be combined, adds Dr. Hendrickson. "We would all be better off if there was one administrative system that encompassed both Medicaid and Medicare," he says.

Dr. Hendrickson notes that Section 1202 of the PPACA requires state Medicaid programs to pay doctors what Medicare would pay them for 2013 and 2014, and that Medicaid will be expanded to people with higher income limits. "It would make more economic sense to implement these large medical insurance changes in a centralized way, rather than having every state figure out a different way to implement the same requirement," he says.

On the other hand, after talking to both congressional and CMS staff, Dr. Hendrickson has concluded that the approach of having states manage Medicare isn't going to work.

"There is substantial skepticism by these parties that the states would put into place safeguards for Medicare beneficiaries, give them freedom of choice, and manage them the way CMS would," he says.

For this reason, says Dr. Hendrickson, "I don't see Medicare as a national uniformly administered program devolving onto the states."

Costs are uncontrolled

Until the problem of dual eligibles is addressed in a systematic way, says Dr. Hendrickson, a sizable percentage of Medicaid costs will be uncontrolled. "Whether it's the well-meaning efforts to cut spending in Congress, or grassroots efforts railing against Obamacare, neither of those conceptual approaches deals with how you build integrated long-term living programs that use cost savings to fund case management and drive quality improvement," he says.

Accountable Care Organizations (ACOs) typically focus on acute care services and attempt to minimize hospital costs, notes Dr. Hendrickson, which is a savings to Medicare. "So if you are a state Medicaid program and set up an ACO and medical homes and do a really good job of reducing utilization in hospitals, the major beneficiary is the Medicare program," he says.

Medicare has no incentive to reduce nursing home utilization, since it focuses on reducing hospital utilization, says Dr. Hendrickson, thus putting more people into nursing homes faster.

Reduced hospital utilization results in savings for Medicare, Dr. Hendrickson explains, while Medicaid saves by reducing nursing home and higher-cost home and community-based services.

"Neither of the two programs has any vested interest in helping the other program save money," says Dr. Hendrickson. "Yet, they share in common the group of beneficiaries that create a significant portion of their costs."

Contact Dr. Hendrickson at (609) 213-0685 or leslie.c.hendrickson@gmail.com