N.C.’s nascent Medicaid reform IV: the dual eligibles

This is the fourth post in a series on North Carolina’s nascent Medicaid reform, Partnership for a Healthy North Carolina, a reform option being pursued even as North Carolina does not proceed with the Medicaid expansion available in the ACA.

I am skeptical of the plan, but am granting the benefit of the doubt and trying to work through some key issues and asking questions about it in the hopes of helping to move Medicaid reform ahead. The posts in this series are marked with the tag NC Medicaid Plan.

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The CBO has released a great report on the Dual-Eligibles; persons who are eligible for both Medicare and Medicaid. This post continues on a theme I have written about a great deal, namely that Medicaid is not one monolithic program, but one that has a variety of types of beneficiaries, with very different needs and costs. Note that the dual-eligibles do not perfectly overlap with any group in the table below, but are shared between the Aged and Disabled categories. The remainder of this post will shift to the CBO report to provide a sense of what the dual-eligible population is like nationally.

ScreenHunter_01 May. 22 11.34

When thinking through the nascent Medicaid reform plan of having 3-4 private entities bid to provide the entire benefit package of Medicaid in all 100 counties, the dual eligibles present the toughest challenge because of the myriad services that they need that span acute care, long term care and mental health services. I understand why you would want to “do something” with the dual-eligibles, because if you want to revolutionize the cost profile of North Carolina’s Medicaid program, you must do something to address their cost of care because it is so large. However, the myriad complicated (and expensive) problems this subset of our Medicaid program faces makes me quite skeptical that ‘private entities’ will be interested in taking on the care of these folks on an at-risk basis (if they bid too low, they lose money). Of course it is theoretically possible to construct some type of risk adjustment that would adjust payment amounts for any group of patients if you have enough data. The rest of this post will work off of the figure 1 in the CBO report. As you look at the figure below, remember that:

  • the notion behind the nascent plan is that patients/consumers will exercise choice and harness the benefits of competition

With that in mind, ask yourself:

  • Does choice apply to the care of the dual eligibles? (who will decide for persons with dementia? those with persistent mental illness?)
  • How will the bidding and payment system necessary to undertake the nascent plan collect and use the data necessary to get the correct payment to private entities? (risk adjustment)
  • If private entities problem bid wrongly and lose money, what will happen if these private entities exit the system?
  • Will there remain a traditional Medicaid as an option? I think no, but if yes, the history of Medicare Advantage program suggests it will end up with the sickest patients.

ScreenHunter_03 Jun. 07 09.36

  • Many dual-eligible individuals are very ill and have many chronic conditions
  • Over 45% of them are receiving Long Term Services and Supports, which is long term care in both institutions and community settings. Medicare pays almost none of this bill. Medicaid is the ultimate back stop here.
  • Even within the group of dual-eligible patients that is very high cost for Medicaid, there is still tremendous variation in the total spending within this group; the top 10% of dual eligible spenders cost Medicaid an average of $63,000-$85,000 per year. Most of these folks live in Nursing Homes. The bottom half of dual-eligible spenders cost Medicaid less than $2,000 per year. These folks do not live in Nursing Homes. Keep in mind that this is an annual cross-section, and the dual-eligibles in the low spending group, almost certainly will later become the high spending group, prior to death.
  • Between one quarter and one third of dual-eligibles have mental health issues.

If I am running a ‘private entity’ that is deciding whether to bid for the right to provide the full benefit package for dual-eligibles, my incentives are to try and sign up the healthiest subset of the dual-eligible population if there is some sort of ‘average’ payment approach. If the entire dual-eligible must be covered by one of the private entities, then I will worry that I will get stuck with the worst risks. Constructing a bidding and payment plan to pull this off in a way that provides high quality care and works financially for the private entities and the State of North Carolina will be exceedingly difficult. We need to hear more.

update: revised for clarity

About Don Taylor
Professor of Public Policy at Duke University (with appointments in Business, Nursing, Community and Family Medicine, and the Duke Clinical Research Institute). I am one of the founding faculty of the Margolis Center for Health Policy, and currently serve as Chair of Duke's University Priorities Committee (UPC). My research focuses on improving care for persons who are dying, and I am co-PI of a CMMI award in Community Based Palliative Care. I teach both undergrads and grad students at Duke. On twitter @donaldhtaylorjr

5 Responses to N.C.’s nascent Medicaid reform IV: the dual eligibles

  1. Pingback: N.C.’s nascent Medicaid reform V: what N.C. organizations could be an ‘entity’? | freeforall

  2. Pingback: North Carolina’s nascent Medicaid reform VII: new advisory panel | freeforall

  3. Pingback: NC DHHS “High Level Overview” Medicaid Reform | freeforall

  4. Pingback: First Thoughts on N.C. DHHS Medicaid Reform Plan | freeforall

  5. Pingback: New North Carolina Medicaid reform proposal | freeforall

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