CMS Financial Alignment Demonstration

In 2011, CMS announced a financial alignment demonstration that is  intended to align Medicare and Medicaid services and funding to reduce  costs and improve the quality of care for dual-eligible beneficiaries. Under the capitated model, CMS and states  provide a single capitated payment to health plans to provide all Medicare  and Medicaid benefits to enrolled dual-eligible beneficiaries. Overall Spending for High-Expenditure Disabled Dual-Eligible Beneficiaries Driven Largely by Medicaid Spending

		Medicaid Spending— Particularly for Users of Community-based LTSS— Accounted for Nearly Two- Thirds of Overall Spending for High-Expenditure Beneficiaries

High Medicaid spending for disabled dual-eligible beneficiaries drove high  combined (Medicare and Medicaid) program spending for these  beneficiaries. 1.) Only 26 percent of high-expenditure beneficiaries were  in both the top Medicare and the top Medicaid spending quintiles in their  states. 2.) Service Use and Characteristics Differed Widely between High- Medicare-Expenditure and High-Medicaid- Expenditure Disabled Dual-Eligible Beneficiaries

		Beneficiaries with High Medicare Expenditures Were More Likely to Use Inpatient Services; Beneficiaries with High Medicaid Expenditures Were More Likely to Use LTSS

The services most commonly used by disabled dual-eligible beneficiaries  in the top Medicare-spending quintile and those in the top Medicaid- spending quintile often differed widely. Beneficiaries with High Medicare Expenditures Were Far More Likely than Those with High Medicaid Expenditures to Have Multiple Health Conditions

Disabled dual-eligible beneficiaries with high Medicare expenditures were  considerably more likely than beneficiaries with high Medicaid  expenditures to have multiple chronic or mental health conditions. The presence of multiple health conditions may drive the use of costly  Medicare services among beneficiaries with high Medicare expenditures. Fully Integrated D-SNPs Often Provided High Quality Care, but Had Limited Experience Serving Disabled Dual-Eligible Beneficiaries or Demonstrating Medicare Savings

		Fully Integrated D-SNPs Often Met Criteria for High Quality, but Relatively Few of Those Plans Served Disabled Dual-Eligible Beneficiaries

FIDE-SNPs in 2013 were far more likely than other D-SNPs to meet  criteria for high quality. The 14 high quality  FIDE-SNPs operated across four states under programs through which all  D-SNPs fully integrated Medicare and Medicaid benefits. Relatively Few High Quality FIDE-SNPs Showed Potential for Medicare Savings, Regardless of Whether They Served Disabled Dual-Eligible Beneficiaries

Only 8 of the 35 FIDE-SNPs—and 3 of the 14 with high quality—bid  below Medicare FFS spending in 2013, an indication that these plans can  provide standard Medicare Part A and B benefits at a lower cost than  what Medicare would have likely spent for these beneficiaries in FFS. Moderately Better Health Outcomes for Disabled Dual-Eligible Beneficiaries in D-SNPs Relative to Those in Traditional MA Plans Did Not Translate into Lower Levels of Costly Medicare Services

D-SNPs’ performance for disabled dual-eligible beneficiaries relative to  traditional MA plans’ was similar on average for process measures, but  was moderately better on health outcome measures. Concluding Observations

These results suggest that CMS’s expectations regarding the extent to  which integration of benefits will produce savings through lower use of  costly Medicare services may be optimistic. In addition,  many fully integrated D-SNPs that demonstrated the potential for  Medicare savings operated in service areas where D-SNPs with less  integration of benefits demonstrated more potential for Medicare  savings. Despite moderately better performance on health  outcome measures for both disabled and aged dual-eligible beneficiaries,  the fact that D-SNPs had similar levels of costly Medicare-covered  services (i.e., inpatient admissions, readmissions, and emergency room  visits) as traditional MA plans for this population has significant  implications for program costs. The agency provided technical comments, which  we incorporated as appropriate.
Why GAO Did This Study

In 2009, the Medicare and Medicaid programs spent an estimated $103 billion on disabled dual-eligible beneficiaries—those individuals who are disabled, under age 65, and qualify for both Medicare and Medicaid benefits. Recently, Congress and CMS have emphasized benefit integration for all dual-eligible beneficiaries—both disabled and aged—including beginning a financial alignment demonstration, which CMS expects will improve care and reduce program spending.
GAO was asked to provide insights for potentially improving the care provided to disabled dual-eligible beneficiaries while reducing spending. GAO examined (1) spending, utilization, and health status patterns for the portion of this population with the highest spending, (2) the extent to which integrated D-SNPs provided high quality of care for this population while controlling Medicare spending, and (3) D-SNPs' and traditional MA plans' performance in serving this population based on quality and resource use measures.
To do this work, GAO analyzed Medicare and Medicaid 2009 claims and summary data—the most recent data available. GAO identified D-SNPs that met standards of quality and integration and compared their 2013 costs to expected Medicare FFS spending. GAO used 2011 data—the most recent data available when GAO began its analysis—from the Health Care Effectiveness Data and Information Set to evaluate D-SNPs' and traditional MA plans' performance.

What GAO Found

Overall spending for high-expenditure disabled dual-eligible beneficiaries—those in the top 20 percent of spending in their respective states—was driven largely by Medicaid spending, and the service use and health status often differed widely between those with high Medicare expenditures and high Medicaid expenditures. For these beneficiaries, Medicaid expenditures accounted for nearly two-thirds of overall spending. Also, states with high Medicaid spending often had lower Medicare spending but nearly always had greater overall spending for these beneficiaries. Furthermore, service use and health status often differed widely between high-Medicare-expenditure and high-Medicaid-expenditure disabled dual-eligible beneficiaries. Those with high Medicare expenditures were considerably more likely than those with high Medicaid expenditures to have multiple health conditions and use inpatient services but far less likely to use long-term services and supports.
Dual-eligible special needs plans (D-SNP)—Medicare Advantage (MA) private plans designed to target the needs of dual-eligible beneficiaries—that fully integrated Medicare and Medicaid benefits often met criteria for high quality but had limited experience serving disabled dual-eligible beneficiaries or demonstrating Medicare savings. D-SNPs that the Centers for Medicare & Medicaid Services (CMS)—the agency that administers Medicare and oversees Medicaid—designated as Fully Integrated Dual-Eligible (FIDE) SNPs were far more likely to meet high quality criteria compared with other D-SNPs. However, relatively few FIDE-SNPs with high quality served disabled dual-eligible beneficiaries or reported lower costs for Medicare services than expected Medicare fee-for-service (FFS) spending in the same areas. Additionally, FIDE-SNPs that demonstrated the potential for Medicare savings often operated in service areas where D-SNPs with less integration of Medicaid benefits demonstrated more potential for Medicare savings (i.e., lower relative costs for Medicare services).
Moderately better health outcomes for disabled dual-eligible beneficiaries in D-SNPs relative to those in traditional MA plans did not translate into lower levels of costly Medicare services (that is, inpatient stays, readmissions, and emergency room visits). These results were also similar whether dual-eligible beneficiaries were at risk for high Medicare spending (those with six or more chronic health conditions), aged (those age 65 and over), or aged and enrolled in FIDE-SNPs.
These results suggest that CMS's expectations regarding the extent to which integration of benefits will produce savings through lower use of costly Medicare services may be optimistic. While operating specialized plans and integrating benefits could lead to improved care, GAO's results suggest that these conditions may not reduce dual-eligible beneficiaries' Medicare spending compared with Medicare spending in settings without integrated benefits.
CMS reviewed a draft of the report and provided technical comments, which GAO incorporated as appropriate.