Using shared savings to foster coordinated care for dual eligibles.

T are 9.2 million people who are eligible for both Medicare and Medicaid. They’re eligible for both programs either because they are younger than 65 years of age, disabled, and poor or because they are 65 or older and are poor or have exhausted their nonhousing assets paying for health care. These dually eligible program participants make up about 20% of Medicare beneficiaries and about 17% of Medicaid beneficiaries and account for 29% and 39% of Medicare and Medicaid spending, respectively.1 New federal policy initiatives are promoting organizations that integrate and coordinate care to meet the complex needs of this vulnerable population. The hope is that if beneficiaries are encouraged to enter into such arrangements, costs will fall and quality of care will improve. From a clinical perspective, dually eligible beneficiaries are more likely than others to have multiple chronic conditions or a severe mental disorder or to have functional limitations and cognitive impairments. Organizing care and support for this population is complicated because they frequently rely on income support, social supports, housing assistance, and long-term care that are administered and paid for by different state and local government agencies. Financing health care for dually eligible people is also challenging because they require support from the state-run Medicaid program and the federal Medicare program. These two programs have provisions, payment rules, and regulations that often align poorly with one another, which results in high-cost, low-quality care. For example, a nursing home that cares for a long-stay Medicaid patient is economically advantaged when it transfers one of its residents to an acute care hospital for treatment of, say, a urinary tract infection. When this happens, the nursing home avoids devoting resources to treatment of the infection, it receives a payment from Medicaid to hold the bed for the hospitalized resident, and it gets paid a higher per diem rate by Medicare than it would from Medicaid for a period after the patient returns because he or she qualifies for Medicarefinanced post-acute care. The fragmentation in organization and financing of care for dually eligible people is seen by federal and state policymakers as a problem that can be remedied. Many policymakers believe that greater coordination of care for the dually eligible population that uses a strong care-management system under a unified budget can lead to both savings and improved care. To address this issue, the Affordable Care Act established the Federal Coordinated Health Care Office within the Centers for Medicare and Medicaid Services. The Bowles– Simpson Commission projected that between 2015 and 2020, we could save $13 billion by moving dually eligible people into managed-care plans. Others have proposed enrolling dual eligibles in state-designed care coordination entities (CCEs). Such a move was projected to save $126 billion over 10 years, according to the most optimistic estimate.2 Twenty-six states are pursuing demonstration projects aimed at better coordinating care for dual eligibles. Because state Medicaid programs pay for most or all of a dually eligible beneficiary’s premiums and cost-sharing obligations, it has been very difficult to lure these beneficiaries away from uncoordinated, fee-for-service arrangements to more structured arrangements of care. To foster the transition, nearly all states are putting in place so-called passive-enrollment methods to expand participation in coordinatedcare arrangements. Passive enrollment involves automatic enrollment of eligible beneficiaries into a CCE with the ability to opt out. The assignment method generally uses information on a beneficiary’s needs to match him or her to a CCE’s capabilities. Passive-enrollment techniques have gained considerable credence because they have been successful in increasing participation rates in employersponsored 401(k) retirement plans. In those cases, natural tendencies toward inertia are exploited to get people to save for retirement. The beneficial effects of passive enrollment are clear: people get financial contributions from their employers toward their retirement. Failure to join a