A Primer on the “Duals” Managed Care Market Opportunity

MAR 4

Dual Eligibles are the approximately nine million individuals that qualify for both Medicare and Medicaid in the U.S.  They represent the sickest, most vulnerable and most costly demographic in our healthcare population as (according to KFF) 60% of dual eligibles have multiple chronic physical conditions, 20% have more than one mental/cognitive condition, and nearly 40% suffer from both physical and mental diseases.

In addition, more than half of dual eligibles do not have a high school education, have limited English-speaking abilities, and many duals live alone – realities which make the socio-demographic characteristics of this population all the more unique.

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It is no wonder then that coordinating the care of the duals population is a difficult task. Moreover, because Medicare and Medicaid thus far have operated as independent programs with limited information sharing and – at times – misaligned incentives, duals frequently fall through the cracks of the two programs, resulting in poor care quality, inefficiencies, and high, avoidable costs. The complex care needs of dual eligibles accounts for $300B of Medicare and Medicaid spending annually which is, as shown in Figure 1, a highly disproportionate amount of spending based on the population size.

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In the coming years, the dual eligible population, along with their associated costs, is poised to grow. Under the Patient Protection and Affordable Care Act (PPACA), Medicaid expansion will increase enrollment by 13-16 million by 2019. Simultaneously, an aging baby boomer population will continue to expand Medicare enrollment. As Medicaid and Medicare expand, the dual eligible population will inevitably expand as well. Without initiatives to address the complex and costly care coordination needs of the duals, costs will continue to spiral.

A recent report from Booz & Company estimates that only 10% of duals are enrolled in managed care programs. Therefore, the vast majority of dual eligibles are currently in fee-for-service arrangements. Though some states are planning to keep their duals in fee-for-services arrangements, CMS (Centers for Medicare and Medicaid Services) is attempting to address the duals problem by encouraging states to switch their dual eligible population to managed care. Switching duals to managed care arrangements would improve the cost and quality care for the duals population by:

  • Aligning Medicare and Medicaid programs under a single care coordinator
  • Utilizing capitated risk contracts, thereby providing strong financial incentives to coordinate care
  • Employing advanced technological capabilities – for example, Aetna and United have been investing heavily in proprietary analytics, health information exchanges, and other technologies that hold a promise of more robust care coordination programs if applied correctly


With millions of patients and billions of dollars in play, this shift of duals to managed care creates an enormous market opportunity for Managed Care Organizations (MCOs).

As a result, managed care has recently undergone massive realignment as MCOs attempt to improve their positioning ahead of the duals opportunity and the expansion of government health programs. In 2012, the large MCOs invested over $17 billion in acquisitions to improve their capabilities to serve seniors, the poor, and the dual eligible population. Recent notable transactions in this area include:


While the market for dual eligibles is certainly a compelling top line growth opportunity for MCOs, there are several challenges that MCOs will need to navigate in order to be successful. First, as referenced above, the duals population has complex and expensive care needs that will test MCO’s already thin margins. Second, with current scrutiny of government spending and budget deficits, federal and state governments have spending constraints. As a result, lawmakers may need to target Medicare and Medicaid reimbursement levels in order to meet budget requirements. Third, there will be fierce competition as MCOs, Medicaid pure plays, local health systems, and care-coordination vendors all vie to win contracts, thereby resulting in competitive pricing. Having noted these challenges, TripleTree believes the billions of dollars of dual eligible spending up for grabs is too compelling to ignore and as such, will remain a key area of focus for MCOs.

We’re watching this space closely and are interested in knowing what you think.

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Elliot Amundson