Editor's Note: This article is taken from the Spring 2011 issue of ASA's quarterly journal, Generations, an issue devoted to the topic, “The Affordable Care Act: A Way Toward Aging with Dignity in America.” ASA members receive Generations as a membership benefit; non-members may purchase subscriptions or single copies of issues at our online store.
To the surprise of many stakeholders in the aging and disability communities, the Affordable Care Act (ACA) provides a range of opportunities to federal and state governments to reform public policies for long-term services and supports (LTSS) and chronic care coordination. This article reviews ways that states can take advantage of these options.
These opportunities to improve delivery of LTSS and chronic care coordination for older adults come at a challenging time. For the past several years, state budgets have been in their worst shape in decades. And financial constraints will continue into 2012. Just four months from the start of their fiscal years, states have collectively projected budget shortfalls totaling $125 billion (McNichol, Oliff, and Johnson, 2011). In large measure, shortfalls are because of recession-induced revenue declines and a phase-out of the fiscal relief provided to states under the American Recovery and Reinvestment Act. In fiscal year 2011, that amount totaled $59 billion. As a result, the ACA initiatives requiring state expenditures to generate federal funding, which include most of the Medicaid provisions, will be a tough sell.
At the state level, staff capacity has been reduced by hiring freezes, early retirements, and furloughs (Weil and Sheppach, 2010). So states’ ability to take advantage of new authorities for designing delivery- and payment-system reforms is limited by a workforce that must first ensure that the basic functions of state government are performed. Plus, new governors took office in twenty-six states this year, along with a new set of appointed leaders responsible for setting policy on a broad range of state health and LTSS issues.
States bear responsibility for implementing most ACA-mandated provisions, including establishing health exchanges through which individuals may purchase federally subsidized insurance coverage; regulating insurance markets to ensure compliance with new standards; and expanding Medicaid coverage to a large new group of individuals. Other statutory “must do” roles are numerous and diverse.
Many of the ACA’s provisions relating to older adults address long-standing state priorities for enhancing LTSS and chronic care coordination. In 2009, the National Academy for State Health Policy identified five goals for health and LTSS systems improvement: Connect people to needed services; promote service coordination and integration; improve care for populations with complex needs; orient health systems toward results; and increase health system efficiencies (Justice, Hess, and Weil, 2009).
The ACA provides states with significant opportunities to advance each of these five goals, typically through implementing demonstrations (as some provisions are so titled in the ACA) and adopting Medicaid state plan options. In the short term, states will need to assess their capacity to both implement the ACA’s mandates and its discretionary provisions that could improve LTSS and care coordination. Many of these options build upon current state initiatives, such as shifting public financing for LTSS to support more community-based options; improving care for individuals eligible for both Medicare and Medicaid (dual eligibles); enhancing care coordination for those with chronic conditions, particularly through the establishment of health homes; and supporting implementation of the Community Living Assistance Services and Supports (CLASS) Plan.
Four provisions enacted by the ACA give states additional options for financing Medicaid home- and community-based services and supports (HCBS) through a combination of enhanced Medicaid matching payments, demonstrations, and new Medicaid state plan options. States will need to assess each provision’s requirements, the extent to which the provisions are feasible, and whether or not they advance policy agendas.
Two of the ACA’s Medicaid HCBS provisions are time-limited, incentive-grant programs that seek to shift the balance of total state Medicaid funding for LTSS to the community. They are the State Balancing Incentive Payments Program and the amended Money Follows the Person Rebalancing Demonstration. In contrast, the Community First Choice option and an amended State Plan HCBS option permit states to amend Medicaid state plans to adopt new permanent authorities for financing HCBS.
In the near term, overwhelming fiscal pressures will limit states’ ability to significantly increase Medicaid financing for HCBS. During this time, the State Balancing Incentive Payments Program and Money Follows the Person provide an important opportunity to focus on improving the organization and delivery of HCBS, while building capacity for program expansion when state economies begin to recover. Both programs offer enhanced Medicaid matching payments for HCBS in exchange for states adopting initiatives designed to increase the proportion of their total LTSS spending devoted to non-institutional services. Since the enhanced match must be used by states to further the availability of HCBS, the provisions stimulate systems reforms and finance additional services.
In comparison to the time-limited grant and demonstration programs, the Community First Choice option and State Plan HCBS option establish permanent optional Medicaid state plan authorities for financing HCBS. Both provisions establish an individual entitlement to Medicaid HCBS, reflecting the long-standing principle that LTSS provided in a preferred setting should have equal status with Medicaid entitlement to institutional services. States will need to consider whether to adopt these provisions and under what circumstances. The following two questions are the most central to ponder: How do the new provisions complement other Medicaid authorities states are using to finance services and supports? And, in current state fiscal environments, are they affordable? In today’s fiscal climate, states are struggling to maintain current levels of support for Medicaid HCBS, and many will find it difficult to establish new entitlement programs with risk of increased expenditures. For now, the two new Medicaid funding authorities may realistically be options states aspire to adopt in the coming years.
Dual eligibles are more likely than other Medicare enrollees to have multiple chronic conditions and have limitations in activities of daily living. Dual eligibles’ healthcare services and LTSS are funded across Medicare and Medicaid programs, which often results in fragmented care that fails to address the complexity of their needs. Although dual eligibles comprise 15 percent of Medicaid enrollment, they account for 39 percent of Medicaid spending (Rousseau et al., 2010).
To address fragmentation across Medicare and Medicaid programs, and tackle policy issues affecting health and LTSS delivery systems for dual eligibles, the ACA established the Federal Coordinated Health Care Office, typically known as the Duals Office, within the federal Centers for Medicare and Medicaid Services (CMS). The four-part mission of the Duals Office is to ensure that dual eligibles have full access to services; improve coordination between federal and state governments; develop innovative care coordination and integration models; and eliminate financial misalignments that lead to poor quality and cost shifting (Bella, 2011).
Partnering with the Duals Office is the Center for Medicare and Medicaid Innovation, also created by the ACA and housed within CMS. One of the Innovation Center’s primary missions is to rapidly test models for systems reform and enable demonstration results to be available quickly. In collaboration with the Center, the Duals Office recently announced it will award contracts to up to fifteen states for $1 million each to design a demonstration proposal that aligns the full range of acute, behavioral health, and LTSS to improve dual eligibles’ care (Centers for Medicare and Medicaid Services, 2010). Selected states will have twelve months to further develop models and submit implementation proposals to CMS. If funded, the state demonstrations would identify and validate delivery systems and payment models that could be replicated in other states.
Most states that have adopted an integrated model to better coordinate care for dual eligibles have relied on Medicare Special Needs Plans (SNP), a type of Medicare Advantage plan permitted to target enrollment to dual eligibles, nursing home residents, or those who have a chronically disabling condition. As of January 2009, there were 697 SNPs, of which 405 were designated as dual eligible plans. Not all dual eligible SNPs have contracts with Medicaid agencies, and among those that do, the scope of benefits covered varies considerably (Kasten, Saucier, and Burwell, 2009).
The ACA reauthorizes SNPs through December 2013, and maintains through December 2012 the current moratorium on geographic expansion by dual eligible SNPs that do not have Medicaid contracts. At that time, all dual eligible plans operating in a state must have contracts with the state Medicaid agency. The ACA also permits the Secretary of the U.S. Department of Health and Human Services (HHS) to apply the frailty adjustment of the Program of All-Inclusive Care for the Elderly (PACE) to payment rates for fully integrated SNPs having both capitated Medicaid contracts that include LTSS and average frailty levels similar to PACE programs.
Eight states use SNPs to integrate healthcare and LTSS through Medicare and Medicaid managed-care contracts. The ACA amendments that revised the rate-setting process for Medicare Advantage plans also apply to SNPs. States contracting with local community-based SNPs are concerned that these plans could be at a competitive bidding disadvantage, potentially resulting in a loss of the no-premium status and making these plans ineligible to contract with Medicaid agencies to cover dual eligibles. Also, changes in Medicare Advantage rates may lead SNPs to provide fewer services beyond the guaranteed Medicare benefit package. If states want to continue making those services available, they may need to increase Medicaid managed-care rates.
While SNPs currently represent the most viable option for large-scale integration of Medicare and Medicaid benefits for dual eligibles, the Duals Office’s new demonstration program will provide states other options for integration. Of particular interest are models that allocate shared savings between the Medicare and Medicaid programs, resulting from better care coordination on behalf of duals.
Because of service coverage policies of the two programs, Medicaid has the most flexibility to pay for care coordination functions, but the financial benefits resulting from potentially lower emergency room use, fewer avoidable hospitalizations, and more efficient use of specialists would accrue to Medicare. The CMS has indicated that it is committed to exploring avenues for shared savings.
The ACA enacted a set of new initiatives aimed at achieving better care coordination for people with multiple chronic conditions. Most are authorized under the Medicare program. While these efforts may target beneficiaries with multiple chronic conditions and limitations in conducting in activities of daily living—characteristics that practically define the dual eligible population—they do not establish any direct links to state Medicaid programs.
The new Medicaid authority for establishing health homes, also a provision under the ACA, is generating a significant level of state interest. Effective this past January, the Act gives states the option of amending Medicaid state plans to fund health home services, components of which include comprehensive case management, care coordination and health promotion, transitional care, patient and family support, referral to community and social services, and health information technology to link services. States may apply to the CMS for a planning grant of up to $500,000 for the development of health home state plan amendments. An enhanced federal match amount for Medicaid services (Federal Medical Assistance Percentage, or FMAP) of 90 percent will be provided to states for health home services expenditures made during the first eight quarters that a state plan amendment is in effect.
States can define eligibility for health home services as persons who have at least two chronic conditions, one chronic condition and are at risk for another, or a serious, persistent mental health condition. Eligibility can include all three categories, or it could be narrowly drawn to include only a subset of one. As a state adds a new covered population or extends coverage to other parts of the state, it will be eligible for a new period of eight quarters of enhanced FMAP for the health home services provided to the new population. That way a state can build program capacity gradually or target individuals who meet specific eligibility criteria.
For the past several years, many states have been developing medical home models under the Medicaid and Children’s Health Insurance Program (CHIP) programs. While model designs vary considerably, they typically differ from the new health home initiative in several ways. First, some medical homes might be structured to improve primary care provided to all persons without specifically targeting a population with multiple chronic conditions. Second, health homes will expand upon the traditional care coordination roles of medical homes to build linkages to community and social supports and enhance coordination of medical, behavioral, and LTSS. Third, the ACA provides a defined financing vehicle for health home services in contrast to the varied approaches states have used to pay for medical home services, such as Medicaid primary care case management, full-risk managed-care contracts, and demonstration authorities.
States may not exclude dual eligibles from enrolling in a health home. Covering dual eligible health home expenditures through the Medicaid program presents the same dilemma for states as previously discussed. Health home service costs are billed to Medicaid, but most savings projected from improved care coordination are likely to accrue to Medicare. The CMS has indicated it is working to assist states in integrating Medicare and Medicaid benefits. Because one of the health home goals is to enhance coordination of medical and behavioral services and LTSS, this model could become an important vehicle for integrating care for duals.
Community Living Assistance Services and Supports (CLASS) is a new federally administered, voluntary insurance program enacted by the ACA and financed by individual enrollees. Premium amounts will be set by the Secretary of HHS at a level necessary for the program to remain solvent. To qualify for benefits, individuals must have paid premiums for five years, have a disability expected to last at least ninety days, and meet the functional or cognitive eligibility criteria established by the Secretary. The benefit amount paid to eligible enrollees will vary based on individual measures of disability.
States can support CLASS implementation in two major ways. First, they can foster links between Medicaid-funded LTSS delivery systems and CLASS benefits. Although CLASS will be federally administered, it will interact with state LTSS programs in several ways. The HHS will contract with state and local entities to provide counseling to enrollees on obtaining and coordinating LTSS; many of these entities will likely be the same ones that perform these functions for participants in existing Medicaid programs. State Protection and Advocacy Agencies will assist CLASS enrollees in accessing appeals processes and other advocacy as needed, which is consistent with their roles in state LTSS systems. Two years after CLASS has been enacted, states will be required to assess the supply of fiscal agents responsible for providing employment-related services for CLASS beneficiaries. If supply is inadequate, states will be required to designate or create additional agents.
State Medicaid agencies, HHS, and the U.S. Department of the Treasury will need to establish links between enrollment and payment systems to identify joint beneficiaries and transfer funds between agencies. CLASS beneficiaries receiving Medicaid-financed HCBS will retain 50 percent of their CLASS payment, with the balance applied to Medicaid service and supports costs. Ninety-five percent of the CLASS benefit payable to Medicaid-eligible institutional residents will be allocated to care costs. Medicaid will finance all remaining service and supports costs beyond the CLASS benefit.
Second, state governments can also support CLASS implementation by assuming the role of participating employer. States can enroll their employees in CLASS and deduct premiums from wages. And, states can conduct initiatives to educate workers on the benefits of program participation, as has occurred with long-term-care insurance as a self-financed employee benefit.
Many of the ACA’s optional provisions that improve healthcare and LTSS for older adults will compete for financing and policy attention with ACA state mandates. Stakeholders interested in advancing these discretionary opportunities need to engage in state-level policy debates and develop well-crafted analyses that highlight the provisions’ effectiveness and efficiency in meeting the health and LTSS needs of the state’s residents. The climate of change and innovation brought about through the ACA’s enactment presents an opportunity to advance reforms that can ride on the wings of healthcare reform. Achieving that will require a productive and well-informed partnership between stakeholders and state officials.
Diane Justice, M.A., is senior program director at the National Academy for State Health Policy in Washington, D.C.
Bella, M. 2011. “Integrating Care for Dual Eligibles.” Webcast presentation sponsored by The SCAN Foundation. https://www.120.livemeeting.com/cc/communique/view?id=T7ZNTW.
Center for Medicaid, CHIP, and Survey & Certification/ Survey & Certification Group, Centers for Medicare and Medicaid Services. 2010. Health Homes for Enrollees with Chronic Conditions. www.cms.gov/smdl/downloads/SMD10024.pdf. Retrieved March 23, 2011.
Centers for Medicare and Medicaid Services. 2010. State Demonstrations to Integrate Care for Dual Eligible Individuals. Informational Bulletin. www.dhcs.ca.gov/Documents/State%20Demonstrates%20to%20Integrate%20Care%20for%20Dual%20Eligibles.pdf. Retrieved March 23, 2011.
Justice, D., Hess, C., and Weil, A. 2009. State Policymakers’ Priorities for Improving the Health System. National Academy for State Health Policy. Portland, Maine. www.nashp.org/node/1226. Retrieved March 23, 2011.
Kasten, J., Saucier, P., and Burwell, B. 2009. State Purchasing Strategies Drive State Contracts with Medicare Special Needs Plans. Issue brief commissioned by the U.S. Department of Health and Human Services, Office of the Assistant Secretary for Planning and Evaluation, Office of Disability, Aging and Long-Term Care Policy. Washington, D.C.
McNichol, E., Oliff, P., and Johnson, N. 2011. States Continue to Feel Recession’s Impact. Washington, D.C.: Center on Budget and Policy Priorities. www.cbpp.org/cms/?fa=view&id=711. Retrieved March 23, 2011.
Rousseau, D., et al. 2010. Dual Eligibles’ Medicaid Enrollment and Spending for Medicare Beneficiaries in 2007. Report from the Kaiser Commission on Medicaid and the Uninsured. Washington, D.C. www.kff.org/medicaid/7846.cfm. Retrieved March 23, 2011.
Weil, A., and Sheppach, R. 2010. “New Roles for States in Health Reform Implementation.” Health Affairs 29(6): 1178–82.
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