In This Report

There are approximately nine million Medicare and Medicaid jointly eligible consumers in the United States. These “duals” are typically low-income, elderly, or disabled persons who qualify for both Medicare and Medicaid programs, and caring for them has become an unsustainable cost burden for the U.S. economy. The Centers for Medicare and Medicaid Services (CMS), federal and state policymakers, and many governmental and private healthcare organizations are acutely aware that we need to rethink how the healthcare system addresses the care needs and benefits coordination across Medicare and Medicaid programs to better serve this vulnerable and costly population.

A lesser known part of the Patient Protection and Affordable Care Act (PPACA) addresses duals by establishing a coordination office within CMS to trial various programs, including creating capitated models and shared savings for managed care plans. These demonstration projects are to shift the majority of duals into capitated managed care programs within five years of the Act’s passage.

Many health insurers have shown strong enthusiasm toward capturing their share of the $300 billion spent annually to manage duals. In particular, payers with strong capabilities for managing seniors and Medicaid beneficiaries project significant revenue growth and profitability as these dollars move out of state or federally managed Medicaid or Medicare programs and into managed care. In addition, many insurers have quickly built out their seniors and Medicaid capabilities via both acquisition and infrastructure investments in the hopes of winning a large share of the demonstration projects, members, and dollars. This began in 2012, when CMS began lining up large-scale demonstration projects, and several payers forecasted positive revenue impacts regarding the massive dual eligible managed care opportunity.

While many of the Medicaid managed care plans are still bullish about revenue upside from their dual demonstration projects, the duals opportunity seems to have lost some luster with some larger commercial payers because CMS has scaled back the scope of the demonstration projects. With recently released details on shared savings opportunities and better clarity on Medicare rate adjustments, payers with large senior populations are struggling to balance other more immediate priorities like refining their Medicaid Advantage strategies in response to the new rate adjustments, and finalizing their individual market/exchange strategies ahead of 2014. Some of these managed care organizations recognize the investment needed in care management infrastructure and the uncertainty of shared savings benefits. Additionally, many states are bidding out their Medicaid contracts as they shift from fee-for-service (FF S) to a managed care approach to Medicaid medical management, and this represents a more immediate opportunity for many of the managed care companies.

Despite this moderation in enthusiasm from some corners of the healthcare landscape, TripleTree believes that managed care companies can offer meaningful improvements in care and cost. Even though CMS is slow out of the gates with its demonstration projects with delayed project start times and smaller beneficiary participation than first envisioned, these demonstration programs will provide long term program savings and care benefits within the dual population. States are learning how to contract with CMS and payers for shared savings contracts, and payers will have more time to build competencies and capabilities in care management for the most complex and chronically ill within their populations.

In our view, the duals are a good opportunity for plans with the right capabilities or who can, in understanding the needed areas, make the investment. The duals opportunity however, is not the ‘pot o’ gold’ at the end of the rainbow that it may seem. The challenges in the models are many and the financial incentives are not clear. Rather, plans already are preparing for Medicare Advantage (MA), community based care, and even ACOs will likely and perhaps unknowingly be building the needed capabilities for duals, and should look there to leverage their investments. Vendors and investors should approach duals cautiously because continued delays are likely, and success will be hard.

This report will assess the broad dual eligible opportunity and how some commercial payers are addressing significant market needs such as better alignment to manage care across the dual eligible population. Lastly, it identifies a handful of technology and services vendors with innovative solutions for improving care coordination and care delivery across the duals population. TripleTree has published several recent reports which drill deeper into adjacent areas related to duals, including health insurance exchanges, post-acute care, innovations in senior care, healthcare consumerism, and ACO enablement.