State–Federal Program Provides Capitated Payments to Plans Serving Those Eligible for Medicare and Medicaid, Leading to Better Access to Care and Less Hospital and Nursing Home Use

Policy Innovation Profile

State–Federal Program Provides Capitated Payments to Plans Serving Those Eligible for Medicare and Medicaid, Leading to Better Access to Care and Less Hospital and Nursing Home Use

Snapshot

Summary

Under the Minnesota Senior Health Options program, participating health plans receive a capitated fee to deliver and coordinate acute, primary, and long-term care as well as social services to those eligible for Medicare and Medicaid (“dual eligibles”). Enrollment in the program is voluntary, and those who choose to enroll receive a standard set of services—including a uniform health assessment, customized care plan, and care coordination—designed to meet their health care needs and help them remain as independent as possible. The state encourages plans to pay providers using some type of value-based payment system (and will require this in the future). In addition, the state and Centers for Medicare & Medicaid Services put in place various requirements and support structures to encourage the provision of high-quality, low-cost services. The program has enhanced access to care, reduced preventable hospital and nursing home admissions, and generated high levels of satisfaction among members and participating providers.

Evidence Rating

Moderate: The evidence consists of pre- and post-implementation comparisons of use of community-based long-term care services (rather than nursing homes), along with post-implementation data on the following: the proportion of participants having a primary care visit in the last year, comparisons of inpatient admission rates among program participants and those eligible only for Medicare, and beneficiary and provider satisfaction with the program.

Use By Other Organizations

Massachusetts and Wisconsin also have managed care programs that combine Medicare and Medicaid benefits for dual eligibles.

Date First Implemented

1997

The program began as a Medicare demonstration project in 1997 and became a formal part of the Medicare Advantage program in 2006.

Problem Addressed

The roughly 9 million individuals who qualify for Medicare and Medicaid have substantial health and social service needs that often go unmet. Although the combination of Medicare and Medicaid covers the full spectrum of health care services, a general lack of coordination between the programs often leads to confusion about benefits and to suboptimal care coordination and management, which in turn generates high costs.

  • A more vulnerable population: People who qualify for both Medicaid and Medicare are more likely than other Medicare beneficiaries to be in fair or poor health, have cognitive or functional impairments, and live in institutions rather than the community. The typical dual-eligible individual has multiple chronic conditions (often including mental health issues) and requires personal care or skilled nursing assistance.
  • Poorly coordinated care: Medicare acts as the primary insurance for the dual-eligible population, with Medicaid providing secondary coverage. Although the combination of the two programs potentially offers comprehensive coverage of acute, primary, and long-term care, the lack of coordination between them confuses beneficiaries and providers alike, and often leads to difficulties in transitioning between the two systems. For example, plans only responsible for Medicare may encourage nursing home placement (which is paid for by Medicaid) as a solution to poorly managed chronic disease or frequent hospital admissions. As a result, care tends to be fragmented, with many opportunities missed to provide needed care and services, including followup and care coordination.
  • High costs: Due in part to the inefficiencies outlined above, the average dual-eligible beneficiary has costs nearly double those of someone who qualifies only for Medicare. Overall, dual eligible beneficiaries make up approximately 15 percent of the Medicaid population nationwide, but account for 39 percent of Medicaid spending. The dual-eligible population faces a higher risk of hospitalization and nursing home placement than those eligible only for Medicare; for example, 26 percent of dual eligibles are hospitalized each year, compared to just 18 percent of those eligible only for Medicare.

Description of the Innovative Activity

Under the Minnesota Senior Health Options program, participating health plans receive a capitated fee from Medicare and Medicaid to deliver and coordinate acute, primary, long-term care, and social services for dual eligibles. Enrollment is voluntarily, and those who choose to enroll in the program receive a standard set of services—including a uniform health assessment, customized care plan, and care coordination—designed to meet their health care needs and help them remain as independent as possible. To align incentives, the state encourages plans to pay providers using some sort of value-based payment system (and will require this in the future). In addition, the state and Centers for Medicare & Medicaid Services (CMS) put in place various requirements and support structures to encourage the provision of high-quality, low-cost services. Key elements of the policy-based initiative are detailed below:

  • Plan eligibility requirements: Participating plans must be nonprofit organizations and maintain local advisory committees made up of members, families, and others with an interest in the program. The state requires participating plans to measure and analyze costs and outcomes under the program.
  • Single point of enrollment, using standard educational materials: Most seniors who are eligible for Medicare and Medicaid can enroll in the voluntary program. Those interested can sign up by contacting the State Medicaid office, a county Medicaid office, or a participating health plan office. To encourage enrollment, participating plans agree to use standard educational materials that integrate information on services covered by Medicare and Medicaid, thus making it easy for beneficiaries to navigate the plan and understand its benefits. Each plan “customizes” these materials by adding its logo and contact information.
  • Capitated payments at plan level: Participating plans contract directly with CMS and the State Medicaid program. They receive capitated payments from both organizations that together cover all Medicare- and Medicaid-eligible services. Under this arrangement, participating plans have a financial incentive to manage all aspects of the individual's health, with no incentive to shift responsibilities and costs to the “other” program.
  • Full spectrum of standardized services, including care coordination: Participating health plans agree to offer the same set of services to members, as outlined below:
    • Uniform health assessment and customized care plan: All plans agree to use the same tool to assess the medical and social needs of members. The health assessment forms the basis for development of a customized care plan to meet the individual's health care and social service needs and help him or her remain as independent as possible.
    • Comprehensive services: Based on the care plan, participating health plans provide all necessary medical and social services covered by both programs, including prescription drugs and long-term care. In addition, participating plans cover services under Minnesota's Elderly Waiver Program (also known as the community-based waiver program) for those 65 years and older who require nursing home services but wish to remain in the community. Examples include assisted living, personal care assistance, homemaking services, home-delivered meals, home modifications, and other supplies and equipment.
    • Care coordination: All plans assign a trained care coordinator to each member who takes charge of administering the uniform assessment and working with beneficiaries and their families to develop and execute the customized care plan. Health plans may contract with local public health agencies or other organizations (including physician practices and health systems) to provide these services. Although the state does not require specific ratios for number of patients per care coordinator, it requires plans to submit a staffing plan that outlines how and who will provide care coordination services.
    • Nontraditional services: Plans are free to use funds for services not traditionally covered by either program, but that nonetheless help improve or maintain the health of a particular member. For example, the plan may pay for a blender for someone who needs to consume pureed foods or for an air conditioner for a member whose health is worsened by the heat.
  • Value-based payments to providers, with simplified billing: Although plans maintain substantial flexibility in how they pay providers, the state strongly encourages the use of some form of value-based purchasing. (The state plans to make this a requirement in the future.) This has led to the development of various innovative payment arrangements with providers. Providers submit one bill to the plan for services, instead of the traditional approach of first submitting a bill to Medicare, then billing Medicaid if turned down. Examples of payment systems used by plans are outlined below:
    • Subcapitated model: At least one plan pays doctors within a health system a capitated fee to provide and coordinate the full spectrum of Medicare and Medicaid services, including primary, acute, and long-term care (either in the community or a facility).
    • Shared savings: Some plans use a shared-savings model to pay providers, with savings based on success in reducing avoidable hospital admissions and other costly care. For example, these providers may use more intensive care coordination services or physician extenders, may waive hospital stay requirements that Medicare uses to determine eligibility for extended care, or may substitute services to meet member needs at a lower cost.
    • Care coordination payments: Some plans pay primary care providers a fee for assuming care coordination responsibilities for plan members.
  • State-level requirements and support to promote better, lower-cost care: The state and CMS put in place various requirements and provide a variety of support to promote plan- and provider-level improvements in the quality and efficiency of program services, as outlined below:
    • Common database: To improve coordination between the two programs, the state maintains a common database of Medicaid and Medicare claims and eligibility information.
    • Standardized membership materials, with streamlined approval: State-level staff and representatives of participating plans work collaboratively to develop and periodically refine the single set of membership materials described above, with CMS approving these materials. For its part, CMS coordinates comments from reviewers to ensure that all plans receive consistent feedback.
    • Quality assurance and improvement: Participating plans agree to carry out quality assurance and improvement activities, including collecting data to allow evaluation of performance on Health Plan Employer Data and Information Set (HEDIS) and other measures, conducting satisfaction surveys, and investigating member complaints. They also agree to initiate a new quality improvement project each year, and to be audited on a periodic basis by the Minnesota Department of Human Services. Although the state does not require that all plans target the same areas for improvement, plans tend to work collaboratively on these projects and have jointly contracted with the regional Medicare Quality Improvement Organization to design and execute quality improvement initiatives.
    • Collaboration among plans: The state encourages the health plans to work together on a variety of topics to ensure uniform services and quality across the state. In addition to membership materials and quality assurance projects, other topics for collaborative workgroups include managing relationships with counties and tribes, care coordination challenges, and outcomes measurement.

Context of the Innovation

The Minnesota Department of Human Services oversees the State Medicaid program. The impetus for this program goes back to the 1980s, when the Department began offering a managed care option to Medicaid beneficiaries. However, for dual-eligible seniors, Medicare (not Medicaid) continued to serve as their primary insurance for basic medical care. As noted, this situation created problems for beneficiaries, as they often received conflicting and confusing information about coverage, especially for home health care, long-term care, and durable medical equipment. Providers also faced problems, as they had to bill twice for many services—once to Medicare for initial payment, then again to Medicaid if denied by Medicare or to secure any additional reimbursement to which they may have been entitled. The two programs also had different priorities, leading to cost-shifting that in some cases eliminated any savings realized through managed care. All of these problems convinced Department leaders of the need to create a managed care framework that integrates Medicare and Medicaid benefits into one program with aligned incentives and structures to help beneficiaries understand and navigate their coverage.

Results

The Minnesota Senior Health Options program has enhanced access to care, reduced preventable hospital and nursing home admissions, and generated high levels of satisfaction among beneficiaries and participating providers.

  • Enhanced access to care: Ninety-eight percent of dual eligibles enrolled in the program have had a primary care visit within the last year. By comparison, among Medicare beneficiaries with 6 or more chronic conditions, 92 percent nationally had a physician office visit in 2010.
  • Fewer hospitalizations and less use of nursing homes: Though dual beneficiaries have more chronic illnesses, those enrolled in the program are less likely to be admitted to the hospital than traditional Medicare beneficiaries or Medicare HMO members in the state. Although up to three-fourths of dual eligibles qualify for long-term care, the program has significantly enhanced use of community-based services as an alternative to nursing home placements. For example, before implementation of this program, roughly 9.5 percent of dual eligibles took advantage of home-based long-term care services offered through the Elderly Waiver program. By 2012, that figure increased to nearly 40 percent.
  • Satisfied beneficiaries and providers: Satisfaction scores among program participants are among the highest of all managed care programs run by the state of Minnesota. Although beneficiaries can leave the program at any time (beginning the next month), the disenrollment rate remains below 2 percent. For their part, providers working with participating health plans report high levels of satisfaction with the program and its reimbursement rates.

Evidence Rating

Moderate: The evidence consists of pre- and post-implementation comparisons of use of community-based long-term care services (rather than nursing homes), along with post-implementation data on the following: the proportion of participants having a primary care visit in the last year, comparisons of inpatient admission rates among program participants and those eligible only for Medicare, and beneficiary and provider satisfaction with the program.

Planning and Development Process

Key steps included the following:

  • Securing planning grant: In 1991, leaders of the Minnesota Department of Human Services approached CMS and the Robert Wood Johnson Foundation about setting up a demonstration program for dual eligibles. Both rejected the idea, but Robert Wood Johnson agreed to fund a planning grant to explore the possibility of a future project, including the technical issues that needed to be resolved in advance of launch.
  • Conducting focus groups with dual eligibles: As part of the planning process, the state held focus groups with dual eligibles to identify their needs and preferences related to a combined program. These sessions emphasized the need for a single contact point for both programs, easy-to-understand educational materials, and a strong emphasis on care coordination.
  • Planning and executing demonstration project: In 1995, Minnesota received approval from CMS to conduct a demonstration project that combined Medicare and Medicaid into a single managed care program for dual eligibles. (Similar projects in Massachusetts and Wisconsin were funded at the same time.) State officials worked closely with the regional CMS office to work out program details and recruit eligible health plans. Because the state was conducting the demonstration, there was one contract for Medicare and Medicaid. However, funds flowed separately from CMS and the state to the plans. The demonstration project formally launched with 3 participating health plans in a 7-county area in 1997, with 11,000 beneficiaries voluntarily enrolling. CMS and the State Medicaid office shared oversight, but the state oversaw day-to-day management of the program. In 2000, the program expanded to include disabled individuals who qualify for Medicaid and Medicare.
  • Statewide expansion: As part of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, CMS ended the demonstration project and offered the state the opportunity for the program to become a formal Medicare initiative open to all dual eligibles in Minnesota. Launched in 2006, the new program was modeled after the demonstration program, but operates as part of the dual-eligible special-needs plan platform of the Medicare Advantage program. The plans contracted directly with CMS to receive Medicare funds and directly with the state for Medicaid funds. Six additional plans joined the program, integrating Medicare benefits into their existing Medicaid plans.

Resources Used and Skills Needed

  • Staff: The equivalent of three full-time staff work on the policy development, oversight, and coordination. In addition, the state employs approximately six enrollment staff who specialize in the integrated program. In most cases, the health plans contract with the state and pay for these enrollment services. The plans contract with and pay various county and local agencies as well as providers to provide care coordination services.
  • Costs: The program received an initial planning grant of $2 million from the Robert Wood Johnson Foundation and used that money to fund the startup costs over the first 4 years. CMS initially contributed additional funds to the program as part of the Program of All-Inclusive Care for the Elderly (PACE) frailty adjustment model. Currently, the program requires no additional funds, but rather redirects existing payments under Medicare and Medicaid to provide more comprehensive services to more beneficiaries.

Funding Sources

The Robert Wood Johnson Foundation funded a planning grant from 1991 to 1995, whereas CMS funded the demonstration project from 1995 to 2005. Since 2006, the program has been funded by Medicare and the State Medicaid program through capitated payments made to participating plans.

Getting Started with This Innovation

  • Be persistent: Combining two complicated programs–one administered federally, the other by the state–takes time. Initial planning and implementation took several years, including incorporating the Elderly Waiver program into managed care and negotiating contracts with the plans.
  • Adjust cost-saving expectations to local environment: Minnesota has lower than average health care utilization and costs, so the potential savings may be greater in other, higher cost states.

Sustaining This Innovation

  • Pay attention to implementation details: Setting policies (such as requiring plans to use a standardized set of educational materials) is often easier than implementing them. In particular, ensuring that participating plans work collaboratively on educational materials, quality improvement initiatives, and other projects requires the active participation and ongoing intervention of State officials.
  • Refine requirements over time: To encourage more creative problem-solving at the provider and plan level, the state now requires that all participating plans use a value-based purchasing payment system that ties reimbursement to outcomes and quality-assurance projects. This approach creates an incentive for providers to focus on the overall health and well-being of the beneficiary. In addition, evaluation of performance on this metric yields useful information for plans and providers about what works best in caring for this population.

Use By Other Organizations

Massachusetts and Wisconsin also have managed care programs that combine Medicare and Medicaid benefits for dual eligibles.


Contact the Innovator

Note: Innovator contact information is no longer being updated and may not be current.

Pam Parker Consultant
Minnesota Department of Human Services
540 Cedar Avenue
St. Paul, MN 55155
(651) 431-2512
E-mail: pam.parker@state.mn.us



Innovator Disclosures

The innovator disclosed no relevant third party support, financial activities, or business relationships.

References/Related Articles

Young K, Garfield R, Musumeci M, et al. Medicaid and the uninsured: Medicaid's role for dual eligible beneficiaries . Kaiser Family Foundation. 2012 Apr. Available at: http://www.kff.org/medicaid/upload/7846-03.pdf.

Health Affairs. Health policy brief: care for dual eligibles . Robert Wood Johnson Foundation. 2012 Jun. Available at: http://www.healthaffairs.org/healthpolicybriefs/brief.php?brief_id=70.

Footnotes

  1. Young K, Garfield R, Musumeci M, et al. Medicaid and the uninsured: Medicaid's role for dual eligible beneficiaries . Kaiser Family Foundation. 2012 Apr. Available at: http://www.kff.org/medicaid/upload/7846-03.pdf.

  2. Health Affairs. Health policy brief: care for dual eligibles . Robert Wood Johnson Foundation. 2012 Jun. Available at:http://www.healthaffairs.org/healthpolicybriefs/brief.php?brief_id=70.

  3. Centers for Medicare & Medicaid Services. Chronic conditions among Medicare beneficiaries . Baltimore, MD: Chartbook. 2012.

Funding Sources

Centers for Medicare and Medicaid Services
Robert Wood Johnson Foundation
Minnesota Department of Human Services

Developers

Minnesota Department of Human Services
Original Publication: 07/03/13

Original publication indicates the date the profile was first posted to the Innovations Exchange.

Last Updated: 08/13/14

Last updated indicates the date the most recent changes to the profile were posted to the Innovations Exchange.

Date verified by innovator: 06/26/14

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