Within this population, however, individuals’ health needs and associated medical costs can vary substantially. Compared with Medicare-only beneficiaries, dually eligible beneficiaries are more likely to live in a nursing home or live alone; have a serious and chronic condition, and physical or cognitive have less access to a regular source of care and preventive services, and higher use of emergency room care. Medicaid is a health insurance program financed and administered by both the federal government and the states. According to the level of support provided by Medicaid, the dually eligible population is divided into two major groups: (1) those receiving Medicare cost-sharing support and additional Medicaid health care benefits (“full-benefit” individuals) and (2) those receiving help from Medicaid only to cover out-of-pocket costs after payment by Medicare. Benefit Overlaps Foster Shifting of Fee-for-Service Costs Between Programs

Both Medicare and Medicaid devote substantial resources to providing care to the dually eligible population. This makes the substitution of services provided—and the resulting shifting of costs between federal and state levels—one alternative for limiting a program’s fiscal liability. The net burden is likely to fall more heavily on the federal government, as the payer for all Medicare and more than half of Medicaid expenditures. reduce its costs by capitalizing on the movement of Medicare’s home health benefit from a post-acute focus to include long-term care benefits. States’ Desire to Use Managed Care May Conflict With Federal Guarantees to Medicare Beneficiaries

States are beginning to explore the use of managed care to serve their dually eligible populations. Thus, as states consider enrolling dual eligibles in their managed care programs, they face certain barriers that require federal and state cooperation to overcome. With federal waivers from some statutory requirements, several states have removed key administrative obstacles, permitting the enrollment of the dually eligible population. Differences in Managed Care Participation Terms Complicate States’ Efforts to Coordinate Care

altogether in the case of states that have obtained special approval from HCFA. As states seek greater control of their health financing and care delivery obligations, these program differences may serve as barriers to enrolling dual eligibles in a single managed care plan. But dually eligible beneficiaries who exercise their Medicare right to leave the plan during the Medicaid lock-in period may expose the state to the cost-sharing obligations incurred with a fee-for-service or Medicare managed care provider and preclude the Medicaid plan’s potential to organize a system of coordinated services. setting—people with the demographic and health status traits of dual eligibles makes it difficult to identify beneficiary protections that will be effective and will minimize problems in coordinating these two programs. Regardless of the approaches taken, our recent work in both Medicare and Medicaid managed care stresses repeatedly that, to ensure program accountability for the interests of both beneficiaries and the federal government, rigorous federal and state oversight of care and effective quality monitoring systems are essential. 5, 1997). 4, 1995).
Why GAO Did This Study

Pursuant to a congressional request, GAO discussed several issues that arise in financing health care for people known as dual eligibles, Medicare beneficiaries who are also eligible for some form of Medicaid support, focusing on: (1) the health characteristics of those who are eligible for both Medicare and Medicaid and the key structural differences between the two programs that serve this population; (2) benefit overlaps between these two programs and the associated shifting of care and costs between federal and state levels; and (3) states' efforts to use managed care to serve this population.

What GAO Found

GAO noted that: (1) the dually eligible population consists of people with a range of health needs, from the young to the very old and from the healthy to the disabled or chronically ill in nursing homes; (2) compared with Medicare-only beneficiaries, however, dually eligible beneficiaries are more likely to have poorer health status and require costly care, including long-term care; (3) meeting their needs under two programs that are administered under different rules complicates matters in both fee-for-service and managed care environments; (4) the potential to cover posthospital and long-term care benefits under either program has resulted in costs being shifted between programs; (5) because the federal government pays the full cost of Medicare and shares the cost of Medicaid with the states, the greater financial burden generally falls on the federal government; (6) to better coordinate acute and long-term care needs while holding down costs, some states are assessing the potential for enrolling their dually eligible populations in a single managed care plan; (7) however, differences in Medicare and Medicaid requirements for commercial managed care participation can create barriers to this approach; (8) because these barriers are largely related to certain statutory beneficiary guarantees, including beneficiaries' freedom to choose their own provider, granting waivers from federal requirements to states that are designing comprehensive managed care programs remains a delicate issue; (9) the implications of managing the costs of care for this population are significant at both the federal and state levels; (10) the issue is important to the federal government because it pays for Medicare as well as for over half of Medicaid's costs; (11) it is also important to state governments, because they have little control over federal decisions, such as the imposition of new Medicare cost-sharing requirements, that make their budgets vulnerable to unplanned fiscal liabilities; and (12) as states pursue greater flexibility to design more efficient and effective service delivery programs for this population through waivers of certain beneficiary protections guaranteed by federal statute, federal and state governments' rigorous oversight of care delivery remains essential.