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Delivery System Reform: Improving Care for Individuals Dually Eligible for Medicare and Medicaid

Since 2013, the Bipartisan Policy Center’s Health Project has released recommendations to improve value in the U.S. health care system and to finance long-term services and supports (LTSS).

Collectively, those recommendations required a comprehensive analysis of alternative payment models (APMs), as well as the financing and integration of health and LTSS. The range of issues involved highlighted the importance of the Medicare and Medicaid programs in addressing the needs of individuals with complex conditions, especially low-income Medicare beneficiaries who are eligible for Medicare and Medicaid, known as “dual-eligible” individuals.

As part of the Patient Protection and Affordable Care Act, Congress gave the Health and Human Services secretary unprecedented authority to test new health care payment models in Medicare and to expand the scope of models that lower costs and/or improve or maintain quality of care. In the Medicare Access and CHIP Reauthorization Act of 2015, Congress imposed an aggressive timeline to implement physician payment reform based on participation in APMs and models that improve coordination across the care continuum.

As new reimbursement structures are implemented in Medicare, policymakers must recognize the challenges associated with making certain that vulnerable populations with complex needs are ensured continuity of care and do not lose access to services. At the same time, policymakers should also seek opportunities in delivery system reform to improve quality and access to services.

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In recent years, public health researchers have joined with health plans and provider organizations to better understand and document treatment of patients with complex health care needs. There is emerging consensus around common elements of successful care models, strategies for stratifying risk to target services for improved outcomes, and the importance of addressing social determinants of health, particularly for low-income patients.

Public health experts define social determinants to include a broad array of issues that include but are not limited to: income, employment, and environmental health. However, for the purposes of this discussion, we refer to a limited array of evidence-based interventions that include a subset of many of the health-related services that have potential to improve patient outcomes. These services are not reimbursed under Medicare’s fee-for-service payment structures, and other reimbursement structures may lack the necessary flexibility to address these types of interventions. As a result, the current reimbursement structures fail to adequately reimburse health care providers for services necessary to align existing care models with the growing population of Medicare beneficiaries with multiple chronic conditions and complex needs, making care models fiscally unsustainable over the long-term.

This report examines reimbursement structures that serve dual-eligible beneficiaries, including Special-Needs Plans in Medicare Advantage (MA), the Program of All-Inclusive Care for the Elderly, and Medicare-Medicaid Plans under the Financial Alignment Initiative demonstration. BPC will issue a second report in 2017 to address similar issues in other Medicare reimbursement structures, including MA, the Medicare Shared Savings Program, and Medicare demonstrations.

As a part of this report, BPC commissioned an analysis of 2011 Medicare and Medicaid claims and administrative data, to compare cost and utilization patterns for full-benefit dual-eligible beneficiaries relative to other Medicare beneficiaries. Among other trends, this analysis demonstrated that:

  • On average, full-benefit dual-eligible beneficiaries have risk scores that are 50 percent higher than the average risk score for all other Medicare beneficiaries. The average full-benefit dual-eligible beneficiary has six chronic conditions, while all other Medicare beneficiaries average only four chronic conditions.

  • One-tenth of the full-benefit dual-eligible population accounted for 38.5 percent of total combined Medicare and Medicaid spending on all full-benefit dual-eligible beneficiaries in 2011.

  • Average annual Medicare spending for full-benefit dual-eligible beneficiaries is more than twice as high as average annual Medicare spending for all other Medicare beneficiaries.

  • Full-benefit dual-eligible beneficiaries have higher rates of hospitalizations and re-hospitalizations for medical conditions such as hypertension, congestive heart failure, and chronic obstructive pulmonary disease, for which comprehensive care can often prevent the need for a hospital inpatient admission for treatment.

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