Tennessee recently decided against moving forward with a high-profile CMS demonstration project focused on aligning reimbursements for so-called "dually eligible" beneficiaries due to concerns about plan rates and timing issues, and Hawaii has also dropped out of the program, Inside Health Policy has learned. Tennessee's biggest concern is that plans involved in the demo would be paid less and face stricter quality and care coordination requirements than existing Medicare Advantage plans serving the dual eligible population, according to a letter obtained by IHP. The state also fears the recent court settlement ending CMS' improvement standard could drive up utilization, an issue that other states may also be facing.
A CMS Medicare-Medicaid Coordination Office (MMCO) official affirmed that 23 states still plan to pursue the financial alignment demonstration, and the office also continues to work with California and hopes to enter into a Memorandum of Understanding on that state's duals demo as soon as a few outstanding issues are ironed out.
Twenty-six states originally voiced interest in pursuing the financial alignment demonstration announced by MMCO in July 2011, which allows states to align payments for their dually eligible residents using one of two alternative pay models -- capitation or managed fee-for-service (see related story). New Mexico formally withdrew from the demonstration last August after realizing it would be unable to carve out payments for beneficiaries with developmental disabilities per the state's plan. State Medicaid director Julia Weinberg told MMCO director Melanie Bella at the time that the state would work to achieved the same goals of integrated care through a separate Medicaid waiver process.
Tennessee's Medicaid office told Bella about its decision in a Dec. 21, 2012 letter, and informed interested stakeholders in a letter dated Jan. 4. State officials stressed that they still believe in the underlying goal of the demonstration and intend to continue working with MMCO to explore ways to better align administrative and financial incentives in the two programs, yet would be unable to continue due to a series of concerns. Hawaii made its decision this month after realizing that it would be unable to start the demonstration until 2015, which is counter to the rules of the demonstration, a source tells Inside Health Policy.
A spokesperson with Hawaii's HHS department confirmed that the state has decided not to pursue the demonstration in calendar year 2014. "We will revisit for CY2015 and continue to work with CMS in the interim," the spokesperson adds.
In the letter to Bella, Tennessee's Medicaid office says the states' greatest concern is that it has been unable to resolve concerns that the demonstration plans would be paid less than existing Medicare Advantage plans serving the dual eligible population, yet would have higher expectations around quality and care coordination. "While we understand the savings targets to be negotiable and we absolutely believe that savings will be realized...making those reductions on the front end may have the unintended consequences of forcing plans too quickly to shift their focus away from what we believe are the hallmarks of a seamless transition: continuity of services for members and continuity of payment for providers," Medicaid Director Darin Gordon writes.
The Medicaid director also worries that a recent settlement which allows beneficiaries to receive skilled nursing, home health and outpatient therapy services even when the beneficiary is no longer making improvement will drive up utilization despite HHS' claim that they expect no changes in access to services or costs. This could have "significant implications" for the duals demonstrations, he says,
The required "quality withhold" that will be tied to an as-yet-undefined measures also adds uncertainty, particularly when taking into account certain policy decisions -- such as no mandatory enrollment, no lock-in period and continuous open enrollment -- that will result in constant churn and undermine efforts to avoid costly retention efforts, the letter adds. Additionally, the state raises concerns that savings gleaned from the demonstration would impact its effort to shift patients into Home and Community Based Services, since those savings would instead be directed to the federal government.
The state also worries about timing, since officials had yet to start work on the Memorandum of Understanding. "In addition, Gordon writes, "it appears that many of the decision items thought to previously be part of the MOU process are instead being pushed to the 3-way contracts discussions," and states believe the contract negotiations will be even more in-depth than the MOU talks.
Meanwhile, Bella on Friday wrote a letter to California Medicaid Director Toby Douglas saying that negotiations with the state have made "significant process" and CMS will continue to work with the state on finalizing the MOU in the near term and working toward successful implementation in September. "The final agreement will be contingent upon resolving outstanding policy considerations, including those related to Demonstration financing, rate-setting, and additional benefits," Bella wrote.