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Dual-Eligibles and CalAIM: A New Medicaid Managed Care Model in California

By Jason Bloome

Last year in the United States, there were approximately 12.3 million dual-eligibles simultaneously enrolled with Medicare and Medicaid. Dual-eligibles are recipients who are older than 65 or, if younger, have been receiving disability benefits from the Social Security Administration for more than 24 months. More than 58% of dual-eligibles are elderly (older than 65) and 61% are women.

Many dual-eligibles have physical disabilities, multiple chronic conditions, mental illness, and cognitive impairments such as dementia and developmental disabilities. Dual-eligibles are sicker than are their Medicare-only counterparts. Twenty-six percent vs 1% (Medicare only) have had at least one hospital stay per year, 21% vs 13% have at least one emergency department visit each year, and 48% vs 27% have three or more chronic conditions.

The United States spends more than $300 billion annually providing care to dual-eligibles. As a group, dual-eligibles account for a disproportionate share of Medicare and Medicaid spending, particularly in light of the following:

• In Medicare, dual-eligibles are 17% of the total Medicare population and account for 30% of the total Medicare spending.

• In Medicaid, dual-eligibles are 15% of the total Medicaid population and account for 32% of the total Medicaid spending.

Dual-eligibles frequently encounter poor health outcomes and fragmented care delivery due to lack of coordination between Medicare and Medicaid programs. To improve health care delivery, many states are exploring the option of using Medicaid Managed Care models in which state Medicaid agencies pay per-member per-month capitated payments to managed care organizations (MCOs) that assume the financial risk for the Medicaid services provided to their members as specified in their contracts.

California Advancing and Innovating Medi-Cal
California is the state with the largest number of dual-eligibles (1.4 million) and has more than 20% of the dual-eligibles in the nation. In January 2022, California begins a new Medicaid Managed Care program, California Advancing and Innovating Medi-Cal (CalAIM). The success of CalAIM could provide valuable insight for other states improving their Medicaid health care delivery programs.

CalAIM is a five-year plan to transform California’s Medi-Cal (the state’s name for Medicaid) delivery system to integrate it more seamlessly with social service programs and to advance key priorities by leveraging Medi-Cal to help vulnerable populations including the homeless, the mentally ill, children with complex health needs, justice-involved populations, and older adults. The state is budgeting $6 billion over the next five years for CalAIM.

One component of CalAIM is statewide dual-eligible integration and the use of in lieu of services (ILOS): flexible rate categories not traditionally covered by current state Medicaid waivers that allow MCOs to offer services “in lieu of” skilled nursing facilities (SNFs) to focus on combined social and medical determinants of health and to avoid higher levels of care. ILOS are often used to avoid or provide a substitute to avoid hospital, discharge delays, emergency department use, or SNF admission. Many ILOS beneficiaries are dual-eligibles: 49% of dual-eligibles require long-term support and services (LTSS) and are overly represented in SNFs when compared with Medicare-only populations (13% vs 1%).

CalAIM authorizes 14 ILOS, including one for SNF diversion/transition to assisted living. In their 2020 LTSS report card for California, AARP/SCAN estimate at least 30% of SNF residents on LTSS have low-level care needs that could be met by community-based care settings. Using ILOS to open diversion/transition pathways from expensive Medi-Cal–reimbursed SNFs to more affordable assisted living could potentially save California millions of Medi-Cal dollars annually.

California was the first state to contract with MCOs to deliver Medicaid benefits in the early 1970s and is predominantly a managed care state. CalAIM is a bold experiment that continues the trend and promises to lower health care costs, provide efficient health care delivery, and prevent unnecessarily institutionalization of Medicaid recipients, including dual-eligibles. If it succeeds it could serve as a useful model for other states to emulate as they experiment with new Medicaid Managed Care models.

— Jason Bloome is owner of Connections – Care Home Consultants, an information and referral agency for care homes for the elderly in Southern California.