Medicaid-Capitated D-SNPs: An Innovative Path to Medicare-Medicaid Integration

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AUTHOR – Allison Rizer

In eight short months, Medicare Advantage Dual Eligible Special Needs Plans (D-SNPs) will be operating under new Bipartisan Budget Act (BBA 2018) rules that require D-SNPs to assume a more active role in integrating Medicare and Medicaid. The BBA requirements also mean states must commit to a more intentional strategy in how they contract with D-SNPs for integration activities. Specifically, beginning in January 2021 D-SNPs must meet at least one of the following integration pathways or the Centers for Medicare & Medicaid Services (CMS) can freeze their enrollment:

Approaching the January 2021 deadline, there continues to be significant focus among states, plans, and those in the policy world on what Medicare-Medicaid integration actually means, whether the January 2021 requirements go far enough (they don’t, but incremental is important), and what other approaches states and CMS should consider. Most policy recommendations to increase integration aim for D-SNP alignment with a Medicaid managed LTSS (MLTSS) program, leading to a FIDE SNP. However, more than half the states don’t have an MLTSS program, and even among those that do, Medicaid reprocurements can cause considerable disruption (I wrote about this potential disruption in a blog post last year).

Recognizing these barriers, an approach that isn’t getting the attention it deserves is the “Medicaid-capitated D-SNP” model. A Medicaid-capitated D-SNP is an incredibly innovative way to bring Medicaid and Medicare under a single contract, in a manner consistent with the BBA integration requirements but without requiring an MLTSS program. Essentially, a state provides a capitation payment directly to its D-SNP contractors to cover specific Medicaid services. The dollar amount of this capitation, the specific Medicaid services and requirements – they all sit in the DSNP contract (the “MIPPA” or “SMAC”). A separate Medicaid managed care contract isn’t necessary for the D-SNP to meet HIDE or FIDE requirements.

Very few states currently use this approach (or some version of it—take a look at the graphic below),[1] but it could create considerable alignment and integration for the nearly 3 million duals enrolled in D-SNPs today. It also could provide a pathway to MLTSS in states without an MLTSS infrastructure already in place, by easing individuals, providers, and the state into a managed care experience.

What is the MIPPA?

All D-SNPs must have an executed contract with the state they operate in, often referred to as the “MIPPA” contract (named after the legislation that required it). All MIPPA contracts must address minimum regulatory requirements including how the D-SNP will integrate and coordinate with Medicaid, which dual eligibles can enroll, the service area covered by the D-SNP, and other core requirements. D-SNPs typically “negotiate” the MIPPA contract with states each spring and then submit the contract to CMS for review by July 1, to operate a DSNP the following year.

How do states use the MIPPA?

States can choose which organizations to enter into MIPPA contracts with, and they have considerable latitude to modify the terms of the MIPPA contract beyond the minimum federal regulatory requirements. While many states use a standard MIPPA contract, several have figured out how to leverage the contract as a tool to promote higher levels of Medicare-Medicaid integration. For example, numerous states require D-SNPs to share Medicare encounters and other reporting with the state, several engage in the D-SNP’s clinical model design, and others use enrollment policies such as “default enrollment” to allow D-SNPs to auto-enroll certain individuals who become newly dually eligible. Some states take the MIPPA even further, for example engaging with D-SNPs on their Medicare benefit design (read more about this trend here), or, going so far as to capitate Medicaid services directly into the MIPPA contract.

Why a Medicaid-capitated DSNP program makes sense

Capitating Medicaid services directly into the D-SNP MIPPA contract could create considerable alignment and integration for duals, and the research and policy communities should include this approach in their recommended options moving forward. D-SNP infrastructure already exists in 44 states and territories and enrolls nearly 3 million dual eligibles—policymakers should leverage this scale.

Of course, a Medicaid-capitated D-SNP doesn’t eliminate the challenges present in disparate funding streams (Medicare dollars are still spent on “Medicare” services, and Medicaid dollars are spent on “Medicaid” services), but it does improve the beneficiary experience through things like a single ID card, a single care model, and a single care management team. It allows D-SNPs to create more targeted benefit designs and remove some of the redundancy and misaligned financial incentives that exist when duals are served across separate programs. It can improve the provider experience too, by allowing them to bill a single organization when they treat a dual eligible. A Medicaid-capitated D-SNP is similar in many ways to the Medicare-Medicaid financial alignment program, but has the advantage of scale, stronger Medicare funding to afford richer benefit design, and program permanency.

Moving forward

States won’t be able to implement a Medicaid-capitated D-SNP in time to meet the January 2021 integration requirements, unless they’re well underway designing it. But this model should be a strong contender for 2022 and beyond particularly in states without managed LTSS or BH for duals. First, however, we likely have to address two barriers: expanding states’ understanding of the Medicare program and convincing them of the value in integration.

  1. A Medicaid-capitated D-SNP becomes a negotiation between a state and a Medicare Advantage carrier about how to structure an integrated program with a seamless benefit package. But state Medicaid agencies are accountable for running Medicaid programs. They aren’t Medicare experts and lack the deep Medicare Advantage knowledge to engage strategically in this sort of program design. And many also lack the financial resources to hire consultants with the necessary expertise. Entities with interest in fostering innovative integration approaches should provide funding to states for adequate education and technical support on the Medicare Advantage program.
  2. States continue to perceive “value leakage” when Medicare and Medicaid funding are integrated into one plan – the notion that Medicaid invests but Medicare recoups the savings. This creates a significant barrier to states pursuing integrated programs. As a matter of policy (and to ensure the program is sustainable), states should be discouraged from trying to shift Medicaid costs directly to the Medicare ledger. However, a gainshare or shared savings program between a Medicaid-capitated D-SNP and a state may offer promise, much like Medicare Advantage plans that share savings with providers who invest in approaches that improve utilization and member experiences. A single contract lends itself to this sort of shared savings between the plan and the state and could improve quality in the process.

If designed right and with appropriate funding, a Medicaid-capitated DSNP could address some of the lingering obstacles preventing integration, particularly in states without a comprehensive MLTSS program. It would reduce misaligned incentives, remove redundancy, and enhance quality. And most importantly, it would improve the beneficiary experience.

[1] Partial capitation (e.g., cost-sharing only) would not be compliant as a HIDE or FIDE SNP

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