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are under 65.6  Dual eligibles tend to be in poorer health than other Medicare beneficiaries. For example, when compared to other Medicare beneficiaries, dual eligibles are 100 percent more likely to be in poor health, 50 percent more likely to have diabetes, 600 percent more likely to reside in a nursing facility, and 250 percent more likely to have Alzheimer’s disease.7  

As dual eligibles tend to have more health needs, on average they require more Medicare resources than Medicare-only beneficiaries, and more Medicaid resources than Medicaid-only beneficiaries.  For example, in 2002, dual eligibles comprised 17 percent of Medicare beneficiaries, yet accounted for 29 percent of Medicare spending. Dual eligibles comprised 14 percent of Medicaid beneficiaries in 2003, yet accounted for 40 percent of Medicaid expenditures.8  This demonstrates that, despite having access to benefits from both the Medicare and Medicaid programs, dual eligibles used more Medicare resources than the average Medicare-only beneficiary and more Medicaid resources than the average Medicaid-only beneficiary.9

Challenges Integrating Medicare and Medicaid Services for Dual Eligibles

Medicaid and Medicare have different purposes and coverage designs, and the two programs can work at cross purposes. This often leads to poorly coordinated care for dual eligibles, avoidable costs, and cost shifting.  Medicare was designed with a benefit package that resembles employer-sponsored insurance, with a heavy emphasis on services delivered by licensed professionals (such as physicians), and focused on acute care, treatment, and improvement.  Medicare was not designed to maintain a person’s functional status, nor was it designed to provide long-term custodial and paraprofessional (or so-called unskilled) supports, especially long-term care.

Instead, Medicaid is the major payer for long-term custodial supports aimed at meeting an individual’s basic support needs, which might relate to dementia or incontinence, for example.  Medicaid incurs these heavy expenses in both institutional settings (such as nursing facilities) and home- and community-based settings (sometimes through waivers, and sometimes in Medicaid state plan services such as home health and the optional Medicaid service of personal care).  Under federal law, Medicaid state plans must include coverage of institutional long-term care for those individuals who qualify on the basis of financial tests (for Medicaid) and functional tests (to meet the given state’s determination of who requires a nursing facility level of care).

In addition, Medicaid and Medicare are responsible for reimbursing different sets of medical services for dual eligibles.  This fragmentation makes it hard to coordinate care, and the actions of providers in one program can affect the utilization and costs for which they are not accountable.   This diminishes the incentive to provide quality care, and may increase the incentive to seek to shift costs between programs, for example:

6 Toby Douglas, Deputy Director, California Department of Health Care Services, “Managing the Care and Costs of High Cost Beneficiaries in Medi-Cal FFS,” December 15, 2008 CHCF Conference presentation.

7 The Henry J. Kaiser Family Foundation, Medicare Chartbook. Third Edition, Summer 2005.

8 Ibid.

9 Ibid.

Health Management Associates/Harbage ConsultingPage 23

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