High-cost Medicaid clients move out of fee-for- service into managed care

Elders and adults with severe disabilities have mostly remained under traditional fee-for-service Medicaid plans, but this is now changing, according to Thomas L. Johnson, BA, JD, president and CEO of Medicaid Health Plans of America, a Washington, DC-based trade association representing Medicaid health plans.

A number of states are now moving their most expensive Medicaid populations, including dual eligibles, into some type of coordinated care arrangement, says Mr. Johnson.

A new Alignment Initiative was announced in May 2011, to be led by the U.S. Department of Health and Human Services' (HHS) Medicare-Medicaid Coordination Office. With new access to data on how Medicaid populations use Medicare services, states can identify high-risk and high-cost individuals, determine their primary health risks, and provide comprehensive individual client profiles to tailor interventions, according to HHS.

"The alignment initiative by HHS will give those programs a lot of assistance in coordinating care for this population," says Mr. Johnson.

Many dual eligibles still receive fragmented care, explains Mr. Johnson, but integrated care coordination is a better approach for treating the low-income, elderly and disabled patients that make up the dually eligible.

The cost of dual eligibles is almost half of the cost of Medicaid, notes Mr. Johnson, even though the population tends to be under 20% of total enrollment. "Coordination for the dual eligible population is part of the solution to the ongoing struggle Medicaid programs are having with their costs," he says. "It is an alternative to reductions in eligibility or cuts in provider payments."

The clinical needs of the dual eligible population are a lot more challenging than the traditional Medicaid population, who are likely to have chronic conditions and mental health disorders, says Mr. Johnson.

"You're starting to see states actually including this population in the RFPs they are producing over the next few years, or issuing separate RFPs for their long-term care dual eligible population," says Mr. Johnson.

RFPs need to be tailored to the particular needs of the state, says Mr. Johnson, since the size and needs of the dual eligible population and the availability of certain types of providers may differ. There is an emphasis on making sure that families are involved with care planning, he says, and giving individuals freedom of choice on staying in an institution or at home.

"We are seeing that with the RFPs being issued," says Mr. Johnson. "States want to be sure that health plans have the capacity to deal with the special issues that this population brings."

Fee-for-service "exceedingly inefficient"

Many of the states extending capitated Medicaid managed care to the Aged/Blind/Disabled (ABD) and Supplemental Security Income (SSI) populations are also looking at managed care options for dual eligibles, reports James Verdier, a senior fellow in the Washington, DC office of Mathematica Policy Research, a nonpartisan research firm.

The main reason for this, says Mr. Verdier, is that this population accounts for the majority of costs in Medicaid programs. "The costs are not with your basically healthy moms and kids population. Most of that population has already been enrolled in managed care," he says.

Most of the ABD/SSI population gets care from the Medicaid fee-for-service system, says Mr. Verdier, "which is exceedingly inefficient and costly."

However, when Medicaid programs do switch this population to managed care organizations (MCOs), says Mr. Verdier, they won't see savings over the short term. In part, this is because many people have serious health care needs that weren't being met in the fee-for-service system, he explains.

"Either there was not appropriate access, or care was so poorly coordinated that they were in really bad shape," says Mr. Verdier. "When they come into the MCO, their unmet needs are costly in the short term."

Savings tend to occur after a year or two, says Mr. Verdier, due to reductions in inappropriate hospital and emergency room services, and more appropriate use of prescription drugs. "The question for health plans and states and everybody else, is when do the savings down the road start to become larger than the up-front costs? That probably doesn't happen any sooner than the end of year two," he says.

It could happen before that, says Mr. Verdier, or, if the plans are not very effective in improving care, it may not happen for a very long time or at all. "My view is generally that the fee-for-service system is so bad for most beneficiaries in these eligibility categories that almost any kind of reasonably good managed care has got to be better," he says. "The fee-for-service system sets a very low bar."

Contact Mr. Johnson at (202) 857-5720 or tjohnson@mhpa.org and Mr. Verdier at (202) 484-4520 or JVerdier@Mathematica-Mpr.com.