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Shift Duals into Managed Care, Medicaid Commission Urges

By John Reichard, CQ HealthBeat Editor

November 17, 2006 -- A commission charged with finding ways to overhaul Medicaid recommended a plan Friday that would place the program's sickest enrollees in managed care plans, give states more power to shape benefit packages, and push individuals to take more responsibility for their own nursing home costs.

The panel, which has been examining the issue for 18 months, also said Congress should give individuals tax breaks for private health coverage to keep them off of Medicaid in the first place and called for more frail and disabled patients to be treated outside costly nursing homes. The panel also called for boosting treatment efficiency for Medicaid enrollees by requiring each participant in the program to have an electronic health record by 2012.

Left-leaning advocacy groups lauded the panel's recommendations for boosting nursing home care alternatives but otherwise declared the work moribund. "It is a commission report that is and should be dead on arrival" in Congress, said Rachel Klein, deputy director for health policy at the left-leaning advocacy group Families USA.

Recommendations for greater state control over benefits and eligibility "are a Trojan Horse for greater cuts to people," said William Vaughan, a senior policy analyst at Consumers Union, the consumer advocacy organization that publishes Consumer Reports. With Democrats in control of the 110th Congress, "I think we now have a Congress that does not want to hurt Medicaid beneficiaries," he said.

While the Bush administration portrayed the panel as an independent commission that would take a fresh look at how to tackle the rising costs of Medicaid while addressing a growing lack of coverage in the United States, critics called it a mechanism to rubber stamp what they see as administration efforts to convert Medicaid from an entitlement into a block grant program.

Michigan Democratic Rep. John D. Dingell, incoming chairman of the Energy and Commerce Committee, issued a statement late Friday curtly dismissing the work of the panel. "While some in Congress thought this effort would bear fruit, I see no proof of that in this report," he said. "It is the job of the Congress to review the Medicaid program and legislate necessary changes, not a hand-picked Commission stacked against working families."

Montana Democratic Sen. Max Baucus, who in the 110th Congress will chair that chamber's committee with primary jurisdiction over Medicaid, said " while the Commission's interest in improving quality and promoting health information technology for Medicaid is laudable, many of its recommendations will undermine federal oversight of the program and reduce the likelihood that the most vulnerable Americans will get the comprehensive health care they need."

Seeking to counter critics who predicted the commission would prove to be a sham, the administration named Democratic former Tennessee Gov. Don Sundquist and independent former Maine Gov. Angus King to head the panel.

In a meeting Friday to take final votes on panel recommendations, Sundquist and King emphasized an aspect of Medicaid that many analysts see as a key to controlling its historically rising costs—the "dual-eligibles" who qualify both for Medicaid and Medicare.

Some 6.2 million people who receive full Medicaid benefits are duals, said David Rousseau, principal policy analyst with the Kaiser Commission on Medicaid and the Uninsured. While they make up only 14 percent of Medicaid's enrollment, they account for 40 percent of total Medicaid spending, he said, citing 2003 data.

Frequently the oldest and sickest Medicaid's 55 million enrollees, the duals suffer from a variety of costly illnesses. Their care often is not overseen by a single doctor who monitors all medications, proper preventive care, and whether they are receiving treatment in the least costly but appropriate setting. The dual system "is a mess," said commissioner Melanie Bella, vice president for policy at the Center for Health Care Strategies.

Sundquist lauded the panel's proposal to put duals in "Medicaid Advantage" plans modeled after "Medicare Advantage" plans in the Medicare program. "I believe we're going to fail if we don't try something new," he said.

Without action on the duals, "this system will break," another commissioner said. "We've got to throw things around and see what will work."

States would be authorized to place dual eligibles in Medicaid Advantage plans combining both Medicare and Medicaid benefits. The centerpiece would be a "medical home" for each dual—a doctor or doctor's office that would oversee and coordinate the enrollee's treatment.

The panel concluded that "federal law and regulations must be changed to encourage states to place all categories of Medicaid beneficiaries in a coordinated system of care premised on a medical home for each beneficiary."

While many in the non-dual Medicaid population are already in managed care plans, only about 1 million of the 6 million duals are in plans that come close to fully managing care, Rousseau said.

"These plans would be close to the patient, collecting and evaluating treatment data, and states and the federal government would monitor the plans to make sure obligations are being met," the commission reported.

To boost managed care participation, states could automatically enroll duals in managed care plans while giving them the right to opt out, the panel said.

But the panel strongly resisted efforts by commissioner Gwen Gillenwater, senior director for policy at the American Association of People With Disabilities, to ensure protection for duals switched into managed care.

Gillenwater urged that the recommendations include specific protections such as the right to continue seeing previous providers, information on which providers are included in a plan's network, ensuring a choice of plans, and access to ombudsmen to help patients cope with managed care. Vaughan noted that some 2 million of the duals suffer mental illness or dementia.

But Gillenwater was the only one of the panel's 15 voting members to back her amendment. Some commissioners said existing protections would be sufficient. In the end, she also was the only one to vote against the panel's overall package of recommendations.

The panel urged that federal and state governments provide tax breaks to encourage people to buy private long-term care policies. "For example, there should be an allowance for early withdrawal of IRAs, or other federally approved retirement accounts, for the purchase of long-term care insurance," it said. "Additionally, health savings accounts should be expanded for use for long-term care expenditures."

The panel added that employers should get tax breaks to offer long-term care insurance as an employee benefit, and friends and family should be given tax credits or deductions for providing long-term care.

But Vaughan said buyers of long-term care policies too often are hit with premium increases they can't afford despite assurances that rates won't rise sharply. "It is a royal waste of money to recommend taxpayer subsidies to buy long-term care insurance without requiring stronger national or state consumer protections," he said.

In addition to urging electronic health records, the panel said states should include provisions in contracts with plans and providers that their health information systems are compatible with other such systems. Additionally, Medicaid should focus on paying for better health care outcomes, the panel said, urging that Congress and Medicaid provide funding for care management and pay-for-performance systems that would be paid for with savings over a five-year period.

The senior lobby AARP praised the commission's recommendations for shifting to home-based care for patients who otherwise would go into nursing homes.

But giving states greater flexibility to run Medicaid programs, "while appealing, is ambiguous. Some proposals that others have labeled as flexibility are harmful because they inevitably lead to cost shifting and unnecessary denial of care," AARP said in a Nov. 15 letter to the commission. "The notion of beneficiary opt-out from mandatory enrollment in managed care also could prove illusory, especially for long-term care services . . . A state wanting to mandate managed care has no incentive to maintain an alternative fee-for-service system for opt-out."

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