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California has had some success with Medi-Cal plans becoming SNPs and integrating ambulatory care under both Medicare and Medi-Cal into a combined delivery system designed to meet the needs of the dual eligible population.  Both Program of All Inclusive Care for the Elderly (PACE) and SCAN Health Plan (a Medicare Advantage HMO) plans focus on long term care and providing care that enables enrollees to remain at home to the greatest extent possible.  Two plans have proposed expanding the services they deliver under Medi-Cal to include and better integrate long-term care.

Due to the way Medi-Cal prices claims, it pays very little for physician, hospital, and pharmacy care for dual eligibles.  The largest state expenditures for dual eligibles are in Medicare premium payments, the Medicare Part D “clawback” or state prescription cost contributions to the federal government, nursing home care, home health care, DME, and incontinent products.  

Change Options

The payoff of improving care management for dual eligibles could be significant. If CMS allows California to be the first state to save money in Medicare and use it in a section 1115 waiver, a significant source of funding for other reform initiatives could be captured. California could pursue two types of changes in managed dual eligibles, either on a statewide or sub-state basis:

Allow the Medi-Cal program to receive a per member per month payment that would cover Medicare and Medicaid services for dual eligibles. Consolidating and coordinating care delivery for this population through Medicaid should generate some savings.  In pursuing such an option, it would be important to address possible stakeholder concerns about giving Medi-Cal any perceived inappropriate control over Medicare payment rates.  Medicare is known to be reasonably financed with rates much higher than Medi-Cal rates.  There would likely be concern about moving 1 million people from the Medicare payment rates for physicians and hospitals into the Medi-Cal system with much lower rates.  

Prevent nursing facility placement.  The second would be to use Medicare data as an early warning system for individuals at risk of nursing facility placement – before they are even on the Medicaid radar screen. The diversion effect could be used to pay for services beyond Medicare – such as home and community-based care and “high touch” care management – that would prevent nursing facility placement.

The two ideas above would be contingent on the federal government granting unprecedented flexibility. However, now may be an opportune time to push for such flexibility given the national appetite for reform.  If it looks unlikely for California to negotiate such large scale changes, there are other proposals that could be advanced in the waiver context that would still improve the program.  An enhanced PCCM model for Medicaid services for dual eligibles, possibly combined with gain-sharing for providers who reduce unnecessary utilization, could improve care coordination.  Expanded home and community-based services could also improve quality while reducing costs.

Health Management Associates/Harbage ConsultingPage 26

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