A year ago, 26 states submitted proposals to the Centers for Medicare & Medicaid Services to rein in their costs and increase quality and coordination of care for people with Medicare and Medicaid policies, known as dual-eligibles. Fifteen states were originally identified by CMS and invited to submit proposals. An additional 11 states submitted proposals on their own. Dual eligibles are among the highest-cost users of health care services in Medicare and state Medicaid programs, accounting for 16% of Medicare enrollees but 27% of spending. Most states’ plans include integrated care and targeted case management as methods to decrease cost while improving care delivery. Some build on existing managed care programs.

CMS hopes to test two methods of payment for dual eligibles, including:

Capitated Model: A state, CMS, and a health plan enter into a three-way contract, and the plan receives a prospective blended payment to provide comprehensive, coordinated care.

Managed Fee-for-Service Model:  A state and CMS enter into an agreement by which the state would be eligible to benefit from any savings resulting from initiatives that improve quality and reduce costs for both Medicare and Medicaid.

Six states (California, Illinois, Massachusetts, Ohio, Virginia, Washington) have received approval from CMS for their projects. California, Washington and Massachusetts have since delayed their start dates. Massachusetts will most likely be the first state to start enrolling dual eligible beneficiaries into their demonstration project, targeting October as a start date. New York, Michigan, Hawaii, Iowa, Missouri and Vermont have not received CMS approval, but also plan to delay their start dates. Most proposals listed January 2014 as project implementation dates, which is proving to be too difficult to meet.

Three states—Arizona, New Mexico and Tennessee—have officially announced they are dropping out of the program. Oregon, Minnesota and Wisconsin are looking to change their proposals into ones that might fit other CMS projects.

CMS says they understand that many states need extra time and flexibility but also fears the program implementation delays will delay cost savings. CMS Medicare-Medicaid Coordination Office Director Melanie Bella, speaking at a recent Medicaid Congress Conference, said the agency is permitting a lot of variation among the state demonstrations because their circumstances differ significantly. She also expressed concern that some providers are discouraging dual eligible beneficiaries from opting into the demonstration projects. CMS wants to work with states that are dropping out to create similar programs outside of the demonstration project. For example, CMS is currently working with Tennessee to make some changes to its current Special Needs Plans to provide more of a coordinated care approach.

Some advocates have been concerned that the size and scope of the proposals may be too difficult to manage, causing more disorganization in care than improvements. Following a bad experience with transitioning dialysis patients with Medicaid as their primary insurance into Medi-Cal Managed Care plans, the California Dialysis Council was successful in advocating that people with end-stage renal disease be exempt from the state’s dual eligible demonstration proposal.

Twenty-four state proposals are available for review at the CMS website (www.cms.gov, search for Financial Alignment Initiative). These states include Arizona, California, Colorado, Connecticut, Hawaii, Idaho, Iowa, Illinois, Massachusetts, Michigan, Minnesota, Missouri, New York, North Carolina, Ohio, Oklahoma, Oregon, Rhode Island, South Carolina, Texas, Vermont, Virginia, Washington and Wisconsin.


1. Daly, R. States delaying, dropping controversial dual-eligible pilot program, Modern Healthcare, May 23, 2013

2. Financial Alignment Initiative, www.cms.gov.

3. CMS, By Giving States More Time On Duals Demos, Faces New Challenges, Inside Health Policy, May 31, 2013, www.insidehealthpolicy.com.