Care Coordination for Dual Eligibles

Ken Thorpe has a new study funded by AHIP out in white paper form that suggests that moving all dual eligibles (covered by Medicare and Medicaid) into private plans using care coordination could save the federal government and states $125 billion over 10 years. Thorpe notes that CBO projects that combined Medicare and Medicaid spending on the duals will be $3.7 trillion over 10 years by default, owing to their multiple health care needs (over half have 5+ chronic conditions and many reside in nursing homes). The 9 million dual eligibles are among the most sick and vulnerable members of society.

Thorpe proposes defaulting dual eligibles into private plans who will have strong incentive to reduce costs since they would be responsible for all care; similar incentives for Medicare and Medicaid are now reduced owing to the ways they share the cost of caring for the duals. A few details:

  • All dual eligibles would be enrolled in a health plan with an opportunity to opt out. All covered Medicaid and Medicare services would be provided through the health plans.
  • States can innovate and design their own approaches, but must have an evidence based design.
  •  Health plans would be responsible for coordinating the multiple needs of their patients, including contracting with other entities such as community health teams (defined in section 3502 of the Affordable Care Act) or medical homes.

The paper includes a rich literature review that suggests costs can be reduced while improving quality, and he includes a simulation of potential 10 year savings if all duals were in private plans: $80.9 billion for Medicare and $44.6 billion for Medicaid, around $35 billion of which would be savings to the states (clearly upper bound estimates):

I have suggested that dual eligible costs should be federalized (essentially making Medicare responsible for their total cost), with the main point being to put one payer in charge of all their care in order to incentivize cost reduction while increasing quality. Thorpe’s idea would achieve the same general goal using private insurance. There are many relevant details to discuss about Thorpe’s proposal (how would premiums for private plans be set?, what are realistic uptake estimates?, etc.), but it is clear that the current approach to caring for the dual eligibles is wanting both in terms of cost and quality. The only question is what changes should be undertaken to better care for them?

Update: There has been lots done on TIE about private v. public plans and cost control and the evidence tilts toward public doing better than private at controlling costs [FAQ and podcast]. Most Dual Eligibles have not been in private Medicare plans, so the balance of the evidence does not include them. However, the special needs plans do cover duals. There was some interesting tweeting yesterday about distribution of dual eligibles in such plans; I will try and track down a linkable source and blog about these issues more over the next week. Finally, by noting in the first sentence of the post that this is a ‘white paper’ that means it has not been subjected to peer review.

About Don Taylor
Associate Professor of Public Policy at Duke University and author of Balancing the Budget is a Progressive Priority. On twitter @donaldhtaylorjr

7 Responses to Care Coordination for Dual Eligibles

  1. foosion says:

    >>Ken Thorpe has a new study funded by AHIP out in white paper form that suggests that moving all dual eligibles (covered by Medicare and Medicaid) into private plans>>

    “A new study funded by X that suggests that moving more business to X” No conflict there.

    Moving dual eligibles into one Federal program is a better idea.

  2. Don Taylor says:

    @foosion
    I noted who funded for obvious reasons. The default is not working so it is useful to see options. Biggest question for federalizing is how CMS will get the local relationshps necessary to navigate (especially) the LTC aspect of the dual eligible issue.

  3. George says:

    How sensitive are existing measures of quality of care to meaningful differences in the quality of care provided to large populations?

    I am asking as someone who knows almost nothing about these measures or how much confidence I should have that meaningful differences between plans would be detected.

    • Don Taylor says:

      @George
      measurement of quality is not my best thing, but it is an important question. Austin wrote last week (I think) that in moving toward private plans that cost savings was not the most important question. I have historically mostly thought of potential savings via private plans as the main or even only thing, but coming around to that being too narrow. I am not going to be able to offer anything short term on your questions about sensitivity of quality measures but maybe others will chime in.

  4. Dean S says:

    I invite you to review the literature on Medicare’s experience with private plans during the nineteen-nineties. The GAO and many others researchers found that adverse selection was a major problem that resulted in billions of dollars in overpayment each year. The lesson drawn from these experiences is that Medicare payments to the private plans must be made using a risk adjustment methodology, otherwise the private plans will exploit the beneficiaries option to “opt-out” to pressure expensive, sicker people to go back to the fee-for-service model. While the higher needs of dual eligibles make their distribution of costs somewhat less skewed then among the general population, it is still true that among them a smaller number of highly expensive beneficiaries generate a disproprtionately high proportion of total expenditures. If these people can be driven back to fee-for-service the potential for overpayment is massive.

    U.S. General Accounting Office. Medicare: Changes to HMO Rate Setting Method Are Needed To Reduce Program Costs (GAO/HEHS-94-119, 1994, September

    U.S. General Accounting Office. Medicare+Choice Payments Exceed Cost of Fee-For-Service Benefits, Adding Billions to Spending. (2000, August).
    U.S. General Accounting Office. Medicare HMOs: HCFA Can Promptly
    Eliminate Hundreds of Millions In Excess Payments. (1997, April).

    Riley, G. Tudor, C, Chiang, Y., Ingber, M., “Health Status of Medicare
    Enrollees in HMOs and Fee-for-service in 1994”. Health Care Financing
    Review. Summer 1996/Volume 17, Number 4.

    Greenwald, M. Leslie, Levy, M. Jesse, Ingber, J. Melvin, “Favorable
    Selection in the Medicare+Choice Program: New Evidence.” Health Care Financing Review. Spring 2000/Volumne 21, Number 3.

    Thiede Call, Kathleen, Dowd, Bryan, Feldman, Roger, Maciejewski,
    Metthew. “Selection Experiences in Medicare HMOs: Pre-Enrollment
    Expenditures.” Health Care Financing Review. Summer 1999/Volumne 20, Number

    • Don Taylor says:

      @Dean S
      I updated the post with links to stuff done at TIE on private plans v. Medicare FFS and note the evidence points to FFS Medicare doing better. However, the special needs plans are newer so dual eligibles (spec needs plans created by MMA 2003) are not really a part of this literature, as you say. I follow the logic that general selection effects in MA make us even more worried about dual eligibles who are very ill and expensive. Would love to see a long term follow up study that started at age 65 and followed a sample in and out of FFS and MA with cost info while in MA (and death of course). One thing you say that pique’s my interest: duals have higher needs and thus much higher mean, but variance lower. Does that mean easier or harder to do MA? Key I think is still selection in and out….

  5. Dean S says:

    Thorpe proposes a model of care that would provide improved coodination of care that would certainly benefit physicially impaired dual eligibles suffering from multiple chonic diseases, such as diabetes, arthritis, heart disease and respiratory disorders. What is missing in the proposal is a discussion of how that model of care would also address the needs of the functionally impaired dual eligibles who require care in non-acute skilled nursing, assisted living and home health settings and what the remaining role of the States will be. For many functionally impaired, assisted living and home and community-based services may provide marginal savings as an alternative to residence in a skilled nursing facility while offering greater independence and quality of life to the individual. It is the States who are providing these alternatives currently in the form of a wide range social support services, and that responsibility is not likely to be assumed by the private plans.

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