Medicare HMO retrenchment hampers efforts to link Medicare, Medicaid for dual-eligibles

The will-of-the-wisp dream of integrating Medicaid and Medicare for the poor and elderly got a little more elusive this fall with the defection of several Medicare health maintenance organizations (HMOs) from markets across the country.

"There’s absolutely no question it’s a tough environment," said Mark Meiners, Ph.D., director of the Robert Wood Johnson Foundation Medicare/Medicaid Integration Program. In October, Virginia received a $300,000 grant to become the 12th foundation project to receive planning or assistance support.

Recent Medicare pullbacks among major HMOs had an impact on these programs’ ability to link community-based, nursing home, and acute care services for the poor, elderly, and disabled, he said. "The participants are trying to build on the managed care structure. To the extent there are cutbacks or reshuffling, all that affects the program. It doesn’t help integration, to say the least. When you don’t have both pieces under integration, it’s not as good as when you do."

Officials in integration projects seek to contract with Medicare HMOs to create a single organization that provides a full continuum of care for enrollees. Enrollees can’t be required to join a Medicare HMO, but there is hope that a Medicare HMO responsible for community-based, nursing home, and acute care can coordinate care most effectively for dual-eligible residents. Integration projects typically pay for Medicaid nursing home and community-based services through a single capitated amount.

In Florida, state officials were hoping to use a single provider for community-based services, nursing home services and acute care services for dual-eligibles, those who qualify for both Medicare and Medicaid. When United HealthCare withdrew its Medicare HMO from the Orlando market, state officials withdrew its stipulation that vendors in its so-called "nursing home diversion" project be Medicare HMOs.

"It was a nightmare," project director Lyn Bodiford said. "We spent a lot of time understanding what had happened. We determined that the Medicare managed care market was so volatile that we would not couple Medicare to the diversion project."

The HMO remains interested in Medicaid risk programs that integrate community and institutional care for the elderly, said Cathy Halverson, United’s vice president for Medicaid development. "We feel that’s the way to get started taking care of these people."

BBA caps rate increases

Like United, other HMO plans leaving the Medicare market attribute the move to caps in rate increases generated by the Balanced Budget Act (BBA) of 1997. Mr. Meiners, associate director of the Center on Aging at the University of Maryland Center on Aging, said the shake-up in the Medicare market highlights a long-standing struggle in the integration project, that of encouraging Medicare managed care in markets where its development has been spotty or nonexistent. "There need to be the right dollars on the table to have people step up," he said.

In Colorado, state officials hope to have an integrated program available to Mesa County’s 10,000 Medicaid recipients within the year. For about $2,200 per member per month (PMPM), the Colorado Integrated Care Project will deliver capitated community-based and nursing home care to Medicaid-only members and dual-eligibles who clinically qualify for nursing home services but who may also live in the community. For dual-eligibles who are disabled but ineligible for nursing home care, the PMPM is about $33.

The contractor in Colorado’s project is Rocky Mountain HMO, a managed care organization that enjoys 42% penetration among Mesa County’s Medicare market, 80% among its Medicaid population, and 60% in the commercial market. It will deliver Medicare acute care services on a fee-for-service basis rather than a capitated arrangement because state and federal officials failed to agree on how Rocky Mountain would be reimbursed by Medicare.

Reimbursement cut 25% to 30%

Rocky Mountain HMO is one of the nation’s 37 mostly rural Medicare HMOs, which are paid on a fee-for-service rather than a capitated basis. For the dual-eligible project, state officials pushed for Medicare reimbursement based on fee-for-service utilization, similar to the adjusted average per capita cost (AAPCC) approach in place for more urban HMOs. Federal officials promoted capitation based on a risk-adjustment methodology mandated by the BBA for HMOs by the year 2003.

"It would mean a 25% to 30% reduction" from current reimbursement, said Dann Milne, manager of delivery system development for the Colorado Department of Health Care Policy and Financing. Instead, the project calls for Rocky Mountain to provide fee-for-service acute care services under Medicare and capitated community-based and nursing home care under Medicaid.

"If they do a really good job, Medicare gets the savings, not the health plan," Mr. Milne said. "Still, this is a step in the right direction."

General fear’ derails expansion

The BBA’s rate hike reductions may be hardest on mature managed care markets, where years of aggressive managed care have held the line on Medicare’s AAPCC and the fee-for-service utilization on which it was based. In Minnesota, officials in the Senior Health Options program (MSHO) hoped to expand its seven-county program for integrating Medicare and Medicaid into Scott County. The expansion was derailed when the intended contractor, Blue Cross & Blue Shield of Minnesota, pulled out of the local market. "There’s just a general fear of the Medicare market here," MSHO program director Pam Parker said.

Minnesota’s program is notable for the degree to which it has been able to integrate financing of Medicare and Medicaid services for the dual-eligible population. Despite general concern over Medicare reimbursement rates, evidence exists that some Medicare HMOs may be willing to take on the task of caring for dual-eligibles. In Colorado, Mr. Milne said he is having "conceptual" discussions with two Denver HMOs interested in joining the project.

"There’s actually a financial benefit to providing integrated care. You have to take a long-run view of these things," he said.

Contact Mr. Meiners at 301-405-1077, Ms. Bodiford at 850-414-2096, Mr. Milne at 303-866-5912, and Ms. Parker at 612-296-2140.