States Want To Integrate Medicare And Medicaid, But They Need Federal Resources And Flexibilities


Editor’s Note

This text is the newest amongst a series in response to the newest developments in policy and research affecting the dual-eligible population. Other authors will contribute to the series as well.

The series is produced with the support of Arnold Ventures. Included articles are reviewed and edited byHealth Affairs Forefront staff; the opinions expressed are those of the authors.

The series will run through August 30, 2022; submissions are accepted on a rolling basis.


Over the past decade, state and federal policy makers have worked to higher integrate Medicare and Medicaid advantages, financing, and administrative processes to enhance look after the greater than 12 million people in the US dually eligible for these programs.

Federal laws and rulemaking have made it possible for states, health plans, and providers to develop several integrated care models: the Program for All-Inclusive Look after the Elderly (PACE), state-based demonstrations under the federal Financial Alignment Initiative, and programs during which Dual Eligible Special Needs Plans (D-SNPs) are closely aligned with Medicaid managed care plans.

But despite federal policy actions and state investments, only about 12 percent of full-benefit dually eligible individuals were enrolled in an integrated care program in 2020.

A Range Of State Experiences And Perspectives

States have a spread of experiences with Medicare-Medicaid integration (exhibit 1). Just a little lower than half of states have an illustration under the Financial Alignment Initiative and/or an aligned D-SNP/Medicaid managed care model. Thirty states have a number of PACE organizations. Some states have significant experience designing and operating these programs, while others are still considering how and when to maneuver forward.

Exhibit 1: State participation in Medicare-Medicaid integration demonstrations

Source: Creator’s evaluation.

This text highlights perspectives from state Medicaid officials on the federal policies which have advanced Medicare-Medicaid integration and areas where they consider additional federal policy actions are needed. In March 2022, my colleagues and I solicited the thoughts of Medicaid representatives in 4 states with various degrees of experience developing and operating integrated care models: Maine, Recent Mexico, Ohio, and Tennessee.

We focused on these 4 states partly because they use different approaches to realize Medicare-Medicaid integration: Tennessee has a long-standing integrated program based on aligned D-SNPs and Medicaid managed care plans; Recent Mexico has each D-SNPs and a Medicaid managed long-term services and supports program but much less experience with integrated care; Ohio operates MyCare Ohio, a capitated model demonstration under the Financial Alignment Initiative; and Maine is in search of to advance integration in a Medicaid fee-for-service environment.

Federal Policies Related To Medicare-Medicaid Integration

Federal policies related to Medicare-Medicaid integration fall into several broad categories, including financial incentives, flexibility, and permanency/sustainability (exhibit 2). We asked state Medicaid representatives to reflect on how their integration efforts have been shaped by federal policies in each of those areas and offer perspectives on what has been helpful and where latest or refined federal policies are needed.

Exhibit 2: Federal policies related to Medicare-Medicaid integration

Source: Adapted from Center for Health Care Strategies, State Efforts to Integrate Look after Dually Eligible Beneficiaries: 2020 Update.

Financial Incentives

Dually eligible individuals often have a spread of care needs that, depending on the service required, are paid for primarily by Medicare (for instance, emergency department visits and inpatient hospitalizations) or Medicaid (for instance, certain behavioral health supports and long-term services and supports). Historically, state investments in increased Medicaid services to enhance look after dually eligible individuals resulted in savings that accrued to Medicare on account of lower acute care use. In consequence, states had little incentive to create integrated care programs in the event that they reap no financial profit.

Useful Federal Policies. The Financial Alignment Initiative, created by the Centers for Medicare and Medicaid Services (CMS) in 2011, allowed states to check latest approaches to serve dually eligible individuals with opportunities for shared savings.

For instance, officials in Ohio, which launched the MyCare Ohio demonstration under the Financial Alignment Initiative, noted that the state benefited from the initiative’s shared savings achieved through its rate-setting structure. They said that the demonstration’s financing structure allowed the state to speculate in a comprehensive approach to profit design, including increased access to homemaker and residential attendant services, the addition of supplemental advantages, and the choice to self-direct some home- and community-based services to higher meet the needs of enrollees.

Gaps In Federal Policy. So far, states operating D-SNP-based integrated care models haven’t been in a position to access savings. Massachusetts hopes to launch a Duals Demonstration 2.0 that mixes One Care, its Financial Alignment Initiative demonstration for dually eligible individuals younger than age 65, with Senior Care Options, its D-SNP-based integrated care model for dually eligible individuals ages 65 and older. The state proposed a joint savings approach, but it surely is negotiating the small print with CMS.

Opportunities to access Medicare savings from D-SNP-based programs may encourage other states to implement similar programs. Medicaid officials in Maine and Recent Mexico said that sharing savings through D-SNP-based models could be helpful. An Ohio official noted that and not using a shift in federal policy, transitioning from a Financial Alignment Initiative demonstration to a D-SNP-based program in the long run would mean a lack of shared savings potential because that model doesn’t support state savings.

Officials in Maine favored the concept of state Medicaid agencies receiving an enhanced Federal Medical Assistance Percentage for creating more integrated systems of look after their dually eligible populations. This approach or alternatives resembling federal grant dollars could support states each with and without managed care-based Medicaid programs.

Tennessee, which has a D-SNP-based integrated care model, agreed with the necessity to align financial incentives between Medicare and Medicaid, including shared savings opportunities, but urged federal policy makers to take a long-term view and create a very integrated program during which advantages, administration, and financing are fully integrated and dually eligible populations can access a profit package that addresses all their care needs.


One challenge in serving dually eligible populations is working inside the bounds of Medicare and Medicaid program rules, that are incessantly at odds with one another. Different requirements for provider networks, health plan marketing, beneficiary notices, and grievance and appeals processes, amongst other things, make it difficult for states, health plans, and provider organizations to construct models that effectively meet the needs of dually eligible populations.

Useful Federal Policies. Over time, CMS has provided increased flexibility in program requirements which have allowed states more freedom to develop modern and responsive integrated care programs. Perhaps most importantly, starting in 2013, the agency required D-SNPs to fulfill state-specified contract requirements.

States’ ability so as to add requirements to D-SNP contracts or limit whom they contract with gives them the chance not simply to shape but to guide the design of integrated care programs. Tennessee said that this flexibility led to the state’s decision a decade ago to only contract with latest D-SNPs in the event that they were aligned with TennCare managed care plans. Going forward, Tennessee hopes to further align its Medicaid and Medicare D-SNP contracting through a competitive procurement during which it might only contract with aligned plans.

CMS recently proposed latest rules for D-SNPs that will provide additional flexibilities for states, particularly around plan oversight. Officials from Maine noted that this might give states more insight into the interior workings of D-SNPs. As Maine officials begin fascinated by leveraging their D-SNP contracting authority to advertise integrated care, they’re in search of to higher understand the capacities needed to observe D-SNP activities.

Gaps In Federal Policy. Through the annual Medicare Advantage rulemaking process, CMS created flexibilities to integrate grievance and appeals processes, develop integrated beneficiary notices, and alter other administrative processes that make it easier for states to align their Medicaid programs with rules that D-SNPs must follow. One area where states are desirous to see increased flexibility is in D-SNP network adequacy standards which might be set by CMS. In states resembling Recent Mexico which have many frontier and rural counties, D-SNPs may struggle to construct provider networks that meet CMS requirements, subsequently posing a barrier to statewide coverage of aligned Medicaid managed care plans and D-SNPs. Additional federal flexibilities could help states with similar challenges attract D-SNPs and construct integrated care programs.


Federal policy makers have sought to make sure the permanency and sustainability of integrated care programs. Without that support, states, health plans, and other stakeholders could possibly be reluctant to speculate in program development, and the programs may not grow quickly enough to stay viable over the long run.

Useful Federal Policies. When D-SNPs were authorized by Congress in 2003, they required annual reauthorization, however the Bipartisan Budget Act of 2018 provided everlasting operating authority for D-SNPs. Between 2018 and 2022, the variety of D-SNPs increased by 77 percent, and D-SNP enrollment increased by 93 percent. To make certain, other aspects—resembling state requirements to operate aligned D-SNPs—may influence the expansion of Medicare products. Regardless, the expansion of D-SNPs over the past 4 years is an indication of increased confidence on this platform as a foundation for integrated care.

CMS has taken several actions to advertise enrollment in integrated models. For instance, the agency permitted states operating a capitated model Financial Alignment Initiative demonstration to make use of passive beneficiary enrollment (with provisions for opt-out). Ohio viewed this element as a key strength of the demonstration model. They believed that giving beneficiaries the alternative of passive enrollment into the demonstration or mandatory enrollment into the state’s Medicaid managed long-term services and supports program allowed the state to fulfill its enrollment goals and helped to sustain enrollment over time. Ohio’s approach preserved beneficiary alternative but additionally created clear incentives to enroll within the more integrated care option. Ohio provided alternative counseling at multiple points, and the recently launched My Care, My Selection tool provides additional counseling and enrollment resources for potential enrollees.

On the D-SNP platform, Tennessee noted that CMS policies to permit default enrollment—automatic D-SNP enrollment of newly Medicare-eligible individuals who’re already enrolled in an affiliated Medicaid managed care plan—has been very successful. State officials reported that default enrollment significantly increased the variety of dually eligible individuals enrolled in aligned D-SNPs and Medicaid plans, and once enrolled, these individuals select to stick with their assigned plans over the long run.

Gaps In Federal Policy. In its recent Notice of Proposed Rulemaking, CMS noted that it had made or proposed changes in Medicare Advantage policy to significantly increase the extent of flexibility available on the D-SNP platform making it more akin to the capitated model Financial Alignment Initiative demonstrations. It suggested that with those changes, the demonstrations ought to be transitioned to D-SNP-based programs to cut back the burden on states of operating and overseeing multiple integration models and on beneficiaries who often have an awesome alternative of Medicare Advantage plans.

Public comments will inform CMS’s ultimate decision on the long run of the demonstrations, but Ohio expressed concern that losing the demonstration platform would lead to lack of access to shared savings for the state. Additionally they noted that this could likely impact funding—currently available through the demonstration—for the state’s Ombudsman program and State Health Insurance Assistance Program (SHIP) that play a significant role in educating dually eligible individuals concerning the advantages of integrated care and addressing beneficiary grievances.

Tennessee also commented on the necessity for more federal policy making to support D-SNPs’ long-term sustainability—or ideally, to create a latest more fully integrated program model. The Medicaid and CHIP Payment and Access Commission (MACPAC) described the proliferation of so called “D-SNP look-alikes” —Medicare Advantage plans that will not be D-SNPs but have a cost-sharing structure and supplemental advantages that mimic D-SNPs without the D-SNP regulations requiring care coordination. These plans attract the enrollment of dually eligible individuals and draw them away from more integrated plan options.

CMS took some steps to limit D-SNP look-alikes in its Contract Yr (CY) 2021 Medicare Advantage and Part D Final Rule, but Tennessee believed that additional limits were needed to manage the expansion of competing products that don’t offer the identical degree of integration as D-SNPs. Similarly, Tennessee commented that Institutional Special Needs Plans or I-SNPs, which enroll individuals who need the extent of care provided by a long-term care facility for 90 days or longer, also attract dually eligible individuals who could also be higher served by an integrated Medicare-Medicaid product, especially because the state seeks to offer increased access to home- and community-based services.

Looking Ahead

The entire state leaders interviewed for this text expressed support for recent federal policies to advertise Medicare-Medicaid integration for dually eligible populations. At the identical time, they identified several areas where additional federal policy making would further states’ ability to advance integrated care models.

With an anticipated MACPAC advice that states develop an integrated care strategic plan, support stays strong for added federal policy making around integrated care. Our interviews confirmed that state interest in improving look after dually eligible populations will proceed to grow so long as they’ll access needed federal flexibilities and have the resources needed to craft programs that effectively meet the needs of their dually eligible populations. States value continued partnership with federal policy makers and look ahead to opportunities to advance truly integrated care.

Creator’s Notes

Thanks to the next state Medicaid officials for lending their time and perspectives to the event of this text: Olivia Alford, director, delivery system reform, Office of MaineCare Services, and Paul Saucier, director, Office of Aging and Disability Services, Maine Department of Health and Human Services; Nicole Comeaux, JD, MPH, state Medicaid director, Tallie Tolen, LTSS bureau chief, and Jeannette Gurule, LTSS deputy bureau chief, Recent Mexico Medicaid; Karla Warren, formerly integrated care manager, Ohio Department of Medicaid; and Patti Killingsworth, assistant commissioner, chief of long-term services and supports, TennCare.


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