Medicare, Medicaid Payment Policies Inconsistent for Dual Eligibles

November 01, 2022 - Poor alignment in the Medicare and Medicaid programs leads to higher spending and worse outcomes for dual eligible beneficiaries. Thus, policymakers should develop payment policies that offer a more consistent approach to how the programs pay for care for this population, a Health Affairs policy brief detailed.

Medicare and Medicaid have inconsistent payment strategies and offer different services, making it difficult to control costs for beneficiaries who are eligible for both programs.

Provider reimbursement under Medicare fee-for-service differs depending on the beneficiary receiving care. Due to “lesser-of” payment policies, providers receive lower reimbursement when treating dual eligible beneficiaries compared to Medicare-only beneficiaries.

Most dual eligible beneficiaries qualify for Medicaid coverage of Medicare cost-sharing amounts. But state Medicaid programs can choose not to cover the total Medicare cost-sharing amount if the Medicaid payment rate for a service is lower than the Medicare payment rate.

These payment policies are associated with reduced access to primary care, the brief noted. Primary care providers can be paid up to 20 percent less to treat dual eligibles than those without Medicaid because Medicare has a 20 percent coinsurance for physician visits. Lower reimbursement may dissuade primary care providers from offering care to dual eligible beneficiaries.

Certain policies allow hospitals to recover unpaid cost-sharing amounts under bad debt provisions. For example, CMS reimburses hospitals for 65 percent of bad debt.

In 2023, health plans will be required to pay providers in full when dual eligible beneficiaries accrue enough cost-sharing to reach their out-of-pocket limit, even if Medicaid did not pay the total amount of cost-sharing.

Current capitated payment policies benefit Medicare Advantage plans that serve dual eligible beneficiaries. Capitated payments to Medicare Advantage plans are higher for this population because they have higher average traditional Medicare spending than Medicare-only beneficiaries.

In addition, accountable care organizations (ACOs) and bundled payments in value-based payment models allow for higher expected spending among dual eligible beneficiaries.

Medicare Advantage enrollment has increased among dual eligible beneficiaries, according to the brief. Physician practices that treated high shares of dual eligibles were also more likely to form a Medicare ACO.

However, value-based payment programs that tie payments to quality performance may hurt safety-net providers that serve dual eligibles with more social risk factors who are likely to have poorer health outcomes.

“Such trends raise concerns that providers and plans will avoid treating beneficiaries with multiple social risk factors, including dual eligible beneficiaries, to avoid negative impacts on quality scores and associated payments,” the brief stated.

CMS has introduced social risk adjustment in some programs to help avoid significant penalties for safety-net providers.

As policymakers work to integrate Medicare and Medicaid, they should also work on aligning payment policies for dual eligible beneficiaries.

For example, the federal government could increase payment amounts for providers treating dual eligibles. Updated traditional Medicare benefits could lower cost-sharing for primary care and lower providers’ exposure to unpaid Medicare cost-sharing.

Policymakers could also federalize Medicaid assistance with premiums and cost-sharing to provide full cost-sharing coverage for all services. This may help streamline coordination for cost-sharing coverage among providers, Medicare Advantage plans, and other organizations, researchers wrote.

Additionally, instead of risk-adjusting quality outcomes for social risk factors, Medicare could risk-adjust payments to give providers who treat patients with social risk factors more resources. These providers would be held to the same performance standards as other providers.

Medicare could also risk-adjust for factors such as education, language, and housing adequacy. This may help address several contradictory Medicare and Medicaid policies, such as recognizing low-income Medicare beneficiaries eligible for Medicaid assistance with premiums or cost-sharing but are not enrolled in Medicaid.