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Copyright 2017. Avalere Health LLC. All Rights Reserved.

Medicaid Funding Reform: Impact on

Dual Eligible Beneficiaries

Avalere Health | An Inovalon Company

June 2017


Overview

2

1. Executive Summary

2. Understanding Links Between Medicare and Medicaid

3. Medicaid Reform Policy Landscape

4. Modeling the Impact of Medicaid Funding Reform on the Dual Eligible

Population

5. Impact on Medicare-Related Spending

6. Appendix: Methodology

This analysis was funded by The SCAN Foundation—advancing a

coordinated and easily navigated system of high-quality services for older

adults that preserve dignity and independence. For more information, visit

www.TheSCANFoundation.org.

Avalere maintained full editorial control.


Executive Summary

3

● Medicaid capped funding arrangements remain a political priority

o Federal Medicaid caps were included in the American Health Care Act (AHCA)

passed by the House on May 4, 2017 and Senate’s Better Care Reconciliation

Act (BCRA) of 2017 released on June 22, 2017

● Medicaid plays an important role augmenting Medicare coverage for low-income

beneficiaries

o Medicaid pays Medicare out-of-pocket costs for most dual eligible beneficiaries

o 24% of total Medicaid expenditures in 2010 was for certified long-term care

services for dual eligibles, which are not covered by Medicare1

● Capped Medicaid funding arrangements could adversely impact dual-eligible

beneficiaries and increase Medicare spending

o Duals are particularly vulnerable and high-cost, which increases the importance

of setting their per capita amounts and growth rates accurately

o In a capped funding arrangement, states may focus on limiting spending for their

highest growth populations, including dual eligibles

o Because Medicare covers acute services for duals, cuts to Medicaid long-term

and supportive services could drive up hospitalizations—increasing Medicare

costs and harming patients

1. KFF. August 2013. Medicaid’s Role for Dual Eligible Beneficiaries.

https://kaiserfamilyfoundation.files.wordpress.com/2013/08/7846-04-medicaids-role-for-dual-eligible-beneficiaries.pdf


Understanding Links Between

Medicare and Medicaid


Dual Eligibles Receive Benefits from Both Medicare

and Medicaid

5

Medicare MedicaidDual

Eligibles

For duals, each

program pays for:• Acute care services

• Prescription drugs

• Post-acute care

• Long-term services and supports (LTSS)

• Medicare premiums and cost sharing

• Services not covered by Medicare

In 2015, 11.4 million people were enrolled in both Medicare and Medicaid

Source: CMS. March 2017. People Enrolled in Medicare and Medicaid.

https://www.cms.gov/Medicare-Medicaid-Coordination/Medicare-and-Medicaid-Coordination/Medicare-Medicaid-Coordination-Office/Downloads/MMCO_Factsheet.pdf


Dual Eligibles Are Among the Sickest and Poorest

Beneficiaries Covered by Medicare or Medicaid

6Sources: CMS. March 2017. People Enrolled in Medicare and Medicaid. KFF. February 2017. Medicaid’s Role for

Medicare Beneficiaries. MedPAC. June 2016. Report to Congress.

Complex Health Needs

Share of State Spending

• 41% of duals have at least one mental health diagnosis

• About 60% have been diagnosed with three or more chronic health conditions

• 27% of duals receive institutional LTSS (i.e., care in a nursing home)

• Duals accounted for 14% of Medicaid population but 33% of Medicaid spending in 2011

• About three fourths of states spend more than 30% of their Medicaid budget on Medicare

beneficiaries. Spending varies by state depending on population characteristics and the

state’s choices on eligibility and services covered

• 62% of total Medicaid spending for duals in 2011 ($147 billion) went to LTSS in both

institutional care and home- and community-based services (HCBS)

Dual eligibles often have multiple chronic illnesses and daily living difficulties that

require long term care, making them costly for states

https://www.cms.gov/Medicare-Medicaid-Coordination/Medicare-and-Medicaid-Coordination/Medicare-Medicaid-Coordination-Office/Downloads/MMCO_Factsheet.pdf

http://kff.org/medicaid/issue-brief/medicaids-role-for-medicare-beneficiaries/

http://www.medpac.gov/docs/default-source/reports/chapter-9-issues-affecting-dual-eligible-beneficiaries-cms-s-financial-alignment-demonstration-and-t.pdf?sfvrsn=0


7

States Interact with Medicare on Varying Levels to

Pay for Coverage of Full Dual Eligible Beneficiaries

In general, Medicaid pays for the following benefits for full duals* but states only

have minimal control over many of these program costs:

*Partial dual beneficiaries have some of their Medicare expenses paid by Medicaid including Parts A and B premiums

and some cost sharing depending on their state and income level.

Medicare Part A

• Medicaid pays for Medicare Part A premiums,

deductibles, and coinsurance

• States can limit cost sharing amounts to

providers based on state Medicaid rates

Medicare Part B

• Medicaid pays for Medicare Part B monthly

premiums, deductibles, and 20% coinsurance

• States have no control over premiums, but

can limit cost sharing amounts to providers

based on state Medicaid rates

Medicare Part D

• Medicaid does not typically pay for duals’

drugs directly; however states make monthly

“clawback” payments to Medicare to support

the cost of drugs for these beneficiaries

• States do not pay Part D premiums or cost sharing since full duals qualify for subsidies

• States have no control over Part D

“clawback” amount, except that they may limit

coverage of “optional” coverage categories


Medicaid Reform Policy Landscape


The BCRA Draft Alters Key Provisions of the ACA

9

Repeals industry and high-earner taxes and delays

Cadillac Tax

Repeals individual and employer

mandates

Repeals small business tax credit

Repeals limitations on repayments for excess tax credit

collection

Tax credits for incomes up to 350%

FPL

Cost-sharing reductions repealed

starting in 2020

Above 150% FPL, premium contribution tied to income + age

Tax credit benchmarked to lower value plans

instead of silver plan

Increases annual tax free contribution

limit for HSAs

Age rating standard changes from 3:1 to 5:1 and allows states to modify

further

Allows states to modify EHB / benefit limits

Provides $112 billion over 9 years for short and long

term market stabilization

Phases out enhanced FMAP

over 3 years starting in 2020

Implements per capita cap in 2020

with option for block grant for

traditional enrollees

Repeals EHB for Medicaid / changes

DSH baseline / allows work requirement

Requires states to conduct eligibility determinations every 6 months

Mandates &

Taxes

Financial

Assistance

Medicaid

Reforms

Market

Reforms

ACA: Affordable Care Act; BRCA: Better Care Reconciliation Act; AV: Actuarial Value; HSA: Health Savings Account; EHB:

Essential Health Benefits; FMAP: Federal Medical Assistance Percentages; DSH: Disproportionate Share Hospital;

OOP: Out-of-Pocket


If Capped Funding Proposals Resurface, a Number of

Components Will Determine If Funding Is Adequate

10

Each state will see a slightly different impact from the Medicaid funding formula

based on state-specific factors

Current federal match rate

Medicaid expansion

and eligibility criteria

Annual rate of

spending

Scope of benefits

Role of managed

care

Cross-subsidization

of BOE categories

Per Capita Cap

Fixed federal funding

per beneficiary

Other Factors

that Will Shape

the Impact on

States

Core

Components of

the Federal

Funding Formula

Baseline funding

level

Growth factor

Populations and

services included

BOE: Basis of eligibility


A Capped Funding Formula’s Growth Rate Is Critical

to Ensuring Adequate Funding

11

Growth Factor

Projected Average

Annual Growth Rate

2017 – 20261

Considerations

Consumer Price

Index (CPI) 2.2%

Overall inflation includes all types of goods and

services, not just medical care. Overall inflation has

been at record low levels during the past few years,

and consistently lower than medical inflation

Medical Care Inflation

(CPI-M)3.7%

Medical care inflation has historically grown faster

than overall inflation due to rising healthcare costs

Medical Care Inflation

plus 1 Percentage

Point

(CPI-M + 1)

4.7%

Index+1 caps are used to more specifically target

‘excess growth’ to 1 percent above a specified index

(e.g. inflation). Actual per enrollee spending growth is

driven by both price and utilization changes

Expected Medicaid

Spending Growth4-6%

CMS estimates 4-6% per enrollee spending growth

for 2017-2026 across different eligibility groups

If Medicaid spending growth exceeds the capped funding growth rate, then states

must either pay a higher share of Medicaid costs or find ways to reduce Medicaid

spending

1. CBO projections are from March 2016 baseline or March 2017 report on AHCA

CBO: Congressional Budget Office; CMS: Centers for Medicare & Medicaid Services


Questions Remain on How Medicaid Funding Reform

Would Impact States and Dual Eligibles (1 of 2)

12

Long-Term

Per capita cap formula Medicaid expansion

and eligibility criteria

Annual rate of spending

Would a single cap apply

for all beneficiaries or would

different caps be

established for various

Medicaid populations (e.g.,

children vs. disabled)?

Would enhanced federal

funding continue for

Medicaid expansion

populations?

How would the base year be

determined—at current

spending, or lower?

Would the selected growth

factor sufficiently account for

high cost populations?

Impact: Dual eligibles, on

average, have higher costs

than other beneficiaries,

and a non-specific per

capita cap may not fully

cover the higher costs for

duals

Impact: If funding for ACA

expansion beneficiaries

were reduced, states that

maintain eligibility for those

individuals would need to

find savings elsewhere—

potentially impacting duals’

services

Impact: If spending on

services for dual eligibles—

such as LTSS, clawbacks,

and Part B premiums—grows

faster than the growth rate,

states could seek to cut

services

ACA: Affordable Care Act; LTSS: Long-term services and supports


Questions Remain on How Medicaid Funding Reform

Would Impact States and Dual Eligibles (2 of 2)

13

Long-Term

Scope of benefits Role of managed care Cross-subsidization of

BOE categories

Would states cut any

optional benefits under the

pressure of a funding

cap? Would states seek

waiver approval to cut

mandatory benefits?

Given the need to cap

spending, would states

increase use of risk-based,

capitated managed care to

cover additional

populations or services?

Could states use savings from

one basis of eligibility (BOE)

group to cross-subsidize

another group that is not

adequately funded through a

per capita cap?

Impact: Medicaid covers

community-based and

institutional LTSS and the

scope of these benefits

could be reduced.

Impact: Duals moved into

capitated LTSS could see

a change in services.

Duals who currently have

non-risk-based care

coordination could see a

reduction in services to

limit costs

Impact: If cross-subsidization is

allowed, states may be able to

absorb decreases in funding

for one higher cost eligibility

group if they net funds for a

lower cost group. This could

make overall funding pressure

less dramatic

LTSS: Long-term services and supports


14

If Funding Is Not Adequate, States Would Need to

Reduce Costs, Likely Using Three Primary Levers

HSA: Health Savings Account

Enrollment Services Payment

● Tighten eligibility criteria

● Reduce income

thresholds

● Eliminate coverage for

some categories of

enrollees

● Require beneficiaries to

meet job search or work

requirements

● Enact lockout period for

when beneficiaries miss

payments, appointments, or

other program requirements

● Reduce provider payment

rates for long-term care

providers

● Reduce capitation rates to

health plans

● Increase beneficiary cost-

sharing

● Premiums

● Copays / Coinsurance

● Contributions to HSAs

● Limit covered benefits

● Eliminate coverage for

some services, like LTSS

● Cap benefits (e.g., fixed

number of visits or length

of stay)

● Tighten utilization

management


Modeling the Impact of Medicaid Funding

Reform on the Dual Eligible Population


Avalere Modeled the Impact of the AHCA and BCRA on

the Dual Eligibles

16AHCA: American Health Care Act; BCRA: Better Care Reconciliation Act; FMAP: Federal Medicaid Assistance

Percentage; NE: Newly-Eligible: CPI: Consumer Price Index: IHS: Indian Health Service

AHCA BCRA

Growth

Rates

• Per capita cap: CPI-M or CPI-M+1%,

based on population

• Block grant: CPI-U

• Per capita cap: CPI-M, CPI-M+1%,

based on population until 2024. CPI-U

beginning in 2025

• Block grant: CPI-U

Included

Populations

• Per capita cap: Aged, disabled,

children, adults, and NE adults

• Block grant: Children, adults

• Per capita cap: Aged, disabled,

children, adults, and NE adults

• Block grant: Adults

Excluded

Populations

• CHIP, IHS, breast and cervical cancer

eligible individuals, and partial-benefit

enrollees

• Blind/disabled children, CHIP, IHS,

breast and cervical cancer eligible

individuals, and partial-benefit enrollees

• Avalere used its Medicaid forecasting and simulation model to analyze the potential impact of

Medicaid per capita cap policies contained in the AHCA and BCRA on dually-eligible beneficiaries

• In this analysis, Avalere estimates the potential impact of Medicaid per capita caps policies on

federal Medicaid spending: in total, for aged and disabled enrollees, and for dually-eligible

beneficiaries

• Dual eligible beneficiaries would fall into either the aged or disabled beneficiary groups


Federal Medicaid Spending on Aged and Disabled

Would Vary Meaningfully Between AHCA and BCRA

17

Change in Federal Medicaid Spending by Basis-of-Eligibility Group

Under the AHCA and BCRA, 2020-2026

Funding for duals decreases by almost 80% under BCRA compared to AHCA. This

results mainly from the shift in growth factor under BCRA to CPI-U in 2025.

Fe

de

ral M

ed

icaid

Sp

en

din

g (

Bill

ion

s)

Note: See Methodology for details. Assumes no states select the block grant option.

Report. Projections for CPI-M are from the Congressional Budget Office.

*Projections for spending changes for dual eligibles are based on weighted averages of the spending changes for the aged and disabled.

Capped funding proposals have not included a dual-specific category to date, but duals would be either aged or disabled beneficiaries.

AHCA: American Health Care Act; BCRA: Better Care Reconciliation Act

$22

-$5

$14$16

-$26

$3

-$30

-$20

-$10

$0

$10

$20

$30

Aged Disabled Duals

AHCA BCRA


Spending for Duals Is Expected to Grow

Faster than CPI-M

18

CPI-M+1%

(4.7%)

CPI-M (3.7%)

Note: Projections for Medicaid per enrollee spending growth come from CMS 2016 Medicaid Actuarial Report. Projections for CPI-M are

from the Congressional Budget Office. Avalere estimated the composition of dual eligibles that are aged or disabled using a combination of

MACPAC reports, MSIS data, and Census population projections.

The selection of growth factor will determine the extent of impact on dual eligibles.

Shifting to a CPI-U growth factor in 2025 would likely drive states to constrain

costs for both aged and disabled duals by cutting enrollment, services, and/or

provides rates

4.8%

5.0%5.1%

5.2%5.3% 5.3% 5.3%

4.4%

4.2%4.3%

4.5%4.6%

4.7% 4.7%

4.1%3.9%

4.0%4.1%

4.3%4.4% 4.4%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

5.0%

5.5%

6.0%

2020 2021 2022 2023 2024 2025 2026

Avera

ge P

er

Enro

llee G

row

th R

ate

Disabled

Aged

Duals

CPI-U (2.4%)

Beginning in 2025 per capita

funding would be tied to CPI-U, far

below projected growth rates


19

-30%

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036

AGED DISABLED

2025: BCRA growth rate adjusts to CPI-U -26%

-24%

1%

-5%

Note: Projections for Medicaid per enrollee spending growth come from CMS 2016 Medicaid Actuarial Report. Projections for CPI-M are

from the Congressional Budget Office. Avalere estimated the composition of dual eligibles that are aged or disabled using a combination of

MACPAC reports, MSIS data, and Census population projections.

BCRA: Better Care Reconciliation Act

BCRA Federal Spending Reductions Intensify Outside

the 10-Year Budget Window

Over two 10-year budget windows between 2020-2036, federal Medicaid funding

reductions for aged and disabled become increasingly larger due to growth rate

adjustment to CPI-U.

Percent Reduction in Federal Medicaid Spending for Aged and Disabled Under BCRA, 2020-2036


20

V

T NH

AK

(-4%)

DC

(-5%)

CA

(-4%)

OR

(-4%)

WA

(-4%)

ID

(-5%)

NV

(-5%)

AZ

(-4%)NM

(-6%)

UT

(-5%)

MT

(-4%)

WY

(-4%)

CO

(-4%)

ND

(-4%)

SD

(-4%)

NE

(-4%)

KS

(-4%)

OK

(-4%)

TX

(-4%)

MN

(-4%)

IA

(-4%)

MO

(-5%)

AR

(-4%)

LA

(-5%)

WI

(-4%)

IL

(-4%)

MI

(-5%)

IN

(-4%)

OH

(-4%)

KY (-4%)

TN (-3%)

MS

(-4%)

AL

(-3%)

GA

(-4%)

FL

(-4%)

SC

(-4%)

NC

(-4%)

VA

(-4%)

WV

(-4%)

PA

(-4%)

NY

(-3%)

DE (-4%)

MD (-4%)

CT (-3%)

RI (-4%)

MA (-4%)

VT

(-4%)

NH

(-4%)

ME

(-4%)

4% reduction (38)

3% reduction (5)

5-6% reduction (7 + DC)

NJ (-4%)

Percent Change in Federal Medicaid Spending for Duals Under BCRA, 2026

Percent Change

HI

(-3%)

All States Would See Reductions of 3 to 6% in

Federal Funds for Duals in 2026 Under BCRA

Direct reductions in federal Medicaid spending for duals stem from federal caps for

aged and disabled enrollees. States would either need to reduce state Medicaid

spending or be forced to pay their own share plus the federal shortfall.



BC

RA

Pe

r

Ca

pita

Ca

p


21

V

T NH

AK

(1%)

DC

(0%)

CA

(0%)

OR

(1%)

WA

(0%)

ID

(0%)

NV

(0%)

AZ

(0%)NM

(-1%)

UT

(0%)

MT

(1%)

WY

(1%)

CO

(1%)

ND

(1%)

SD

(1%)

NE

(0%)

KS

(0%)

OK

(0%)

TX

(0%)

MN

(0%)

IA

(0%)

MO

(0%)

AR

(1%)

LA

(0%)

WI

(1%)

IL

(1%)

MI

(0%)

IN

(0%)

OH

(0%)

KY (1%)

TN (2%)

MS

(1%)

AL

(1%)

GA

(1%)

FL

(1%)

SC

(0%)

NC

(0%)

VA

(0%)

WV

(0%)

PA

(0%)

NY

(1%)

DE (1%)

MD (0%)

CT (2%)

RI (1%)

MA (1%)

VT

(0%)

NH

(1%)

ME

(0%)

1-2% increase (24)

Less than 1% change (25 + DC)

1% reduction (1)

NJ (1%)

Percent Change in Federal Medicaid Spending for Duals Under AHCA, 2026

Percent Change

HI

(1%)

With Higher Growth Rates, Funding Under AHCA

Would Be Close to Projected Costs for Duals

The AHCA’s growth factor of CPI-M+1% for aged and disabled is more aligned with

spending for these populations and would lead to less drastic cuts for duals

compared to BCRA in most states in 2026.


AHCA: American Health Care Act; BCRA: Better Care Reconciliation Act

AH

CA

Pe

r

Ca

pita

Ca

p


Impact of Adjustments to BCRA Medicaid

Funding Model


Policymakers in the Senate Are Likely to Adjust

BCRA’s Medicaid Proposals

23

The Senate is currently discussing options for Medicaid reform. Avalere modeled

the impact of one potential change which would exclude disabled adults from

BCRA’s per capita formula.

Gradual Expansion

Phase Down

Lowered

Growth Rate

ACA: Affordable Care Act; AHCA: American Health Care Act

Adjusted BCRA Per Capita Cap

Po

pu

lati

on

s Included • Aged, children, adults, and NE adults

Excluded

• Disabled adults

• Blind/disabled children

• CHIP, IHS, breast and cervical cancer eligible

individuals, and partial-benefit enrollees

Gro

wth

Fa

cto

r

2020-2024• Children, adults, NE adults: CPI-M

• Aged, disabled: CPI-M + 1%

2025+ • Aged, disabled, children, adults, NE adults: CPI-U

Ad

jus

ted

BC

RA

Pe

r Ca

pita

Ca

p


24

Excluding Disabled Adults Would Result in $14 Billion

More in Federal Funding For Duals



Ad

jus

ted

BC

RA

Pe

r Ca

pita

Ca

p

$3

$14

$0

$2

$4

$6

$8

$10

$12

$14

$16

BCRA BCRA (Excluding Disabled Adults)

Fe

de

ral M

ed

icaid

Sp

en

din

g (

Bill

ion

s)

Change in Federal Medicaid Spending for Duals Under BCRA Per Capita Cap

Excluding Disabled Adults, 2026

Excluding disabled adults from BCRA’s per capita cap results in almost 5 times the

increase in federal Medicaid spending for duals compared to BCRA as proposed.


25

V

T NH

AK

(0%)

DC

(0%)

CA

(0%)

OR

(0%)

WA

(0%)

ID

(0%)

NV

(0%)

AZ

(0%)NM

(0%)

UT

(0%)

MT

(0%)

WY

(0%)

CO

(0%)

ND

(0%)

SD

(0%)

NE

(0%)

KS

(0%)

OK

(0%)

TX

(0%)

MN

(0%)

IA

(0%)

MO

(0%)

AR

(0%)

LA

(0%)

WI

(0%)

IL

(0%)

MI

(0%)

IN

(0%)

OH

(0%)

KY (0%)

TN (1%)

MS

(0%)

AL

(0%)

GA

(0%)

FL

(0%)

SC

(0%)

NC

(0%)

VA

(0%)

WV

(0%)

PA

(0%)

NY

(0%)

DE (0%)

MD (0%)

CT (1%)

RI (0%)

MA (0%)

VT

(0%)

NH

(0%)

ME

(0%)

1-2% increase (2)

Less than 1% increase (48 + DC)

NJ (0%)

Percent Change in Federal Medicaid Spending for Duals Under BCRA Per

Capita Cap Excluding Disabled Adults, 2026

Percent Change

HI

(0%)

Excluding Disabled Adults in BRCA Would More

Closely Approximate Projected Costs for Duals

Excluding disabled adults from BCRA’s per capita cap would maintain federal

funding for duals at levels close to projected cost growth, with all states having

funding levels within 2% of projected costs.



Ad

jus

ted

BC

RA

Pe

r Ca

pita

Ca

p


Impact on Medicare-Related Spending


Under Capped Funding, States Could Face Pressure

for Duals’ Costs Related to Medicare Spending

27

• States have limited control over many of their costs for duals, including for premiums

o Capped funding proposals to date have excluded duals’ Part B premiums from

caps

o If federal cap policies do not distinguish state payments for Medicare from other

Medicaid payments, this could force states to pay a larger share of Medicare

costs

• Reductions in federal Medicaid spending could potentially lead states to reduce benefit

eligibility or generosity, especially for populations that have the highest spending

growth (such as aged and disabled beneficiaries)

• State changes in Medicaid coverage for duals around long-term care could trigger

increased Medicare costs, such as higher hospital costs due to a lack of LTSS services

• Faced with funding reductions under a per capita cap, states may decrease investment

in activities to improve care coordination for the dual eligible population


States Can Use Flexibility in Paying Medicare Cost

Sharing to Providers

28

• States have flexibility in how they pay providers for Part A and Part B cost-sharing if

total payment to the provider (deductible, coinsurance, and copayments) for a

service would exceed the state’s Medicaid rate

• The state Medicaid-to-Medicare physician fee index measures the state Medicaid

rates relative to Medicare rates for similar physician services

• Most states choose to pay the lesser of:

o The full amount of Medicare deductibles and coinsurance

o The amount by which the Medicaid rate exceeds the amount paid by Medicare

• In states where the Medicaid rate is less than Medicare, the “lesser of” policy results

in states paying less than the Medicare cost sharing requirement

• Some states have chosen to pay more than what is required and pay the full

Medicare rate for services provided to duals despite the Medicaid-to-Medicare index

Data Sources: MedPAC and MACPAC. 2017. Beneficiaries Dually Eligible for Medicare and Medicaid.

http://www.medpac.gov/docs/default-source/publications/jan17_medpac_macpac_dualsdatabook.pdf?sfvrsn=0


29*No data available for Tennessee because it does not have a FFS program

**State pays the full Medicare rate for outpatient hospital, inpatient hospital, skilled nursing facilities, and physician services

Data Sources: KFF. 2014. Medicaid-to-Medicare Fee Index; MACPAC. 2017. State Medicaid Payment Policies for Medicare Cost Sharing

FFS: Fee-for-service

Despite Lower Medicaid Rates, Five States Pay Full

Medicare Rates for Services Provided to Duals

V

TN

H

AK

DC CA

OR

WA

ID

NV

AZNM

UT

MT

WY**

CO

ND

SD

NE

KS

OK

TX

MN

IA**

MO

AR**

LA

WI

IL

MI

IN OH

KY

TN*

MS AL GA

FL

SC

NC

VAWV

PA

NY

DE MD

CT RI

MA

VT**NH

ME**

Medicaid rate between 81-89% of

Medicare rate (7)

Medicaid rate less than 80% of

Medicare rate (34 + DC)

Medicaid rate greater than 90% of

Medicare rate (9)

NJ

Five states (AR, IA, ME, VT, WY) pay the full Medicare rate for services provided to certain

categories of duals despite the Medicaid rate in the state. Under pressure from per capita caps,

states with higher Medicaid-to-Medicare index rates could be incentivized to cut Medicare

provider reimbursement levels leading to potential access issues for patients

Medicaid-to-Medicare FFS Payment Index, 2014

State Medicaid-to-Medicare Index

HI

http://kff.org/medicaid/state-indicator/medicaid-to-medicare-fee-index/?currentTimeframe=0

https://www.macpac.gov/publication/state-medicaid-payment-policies-for-medicare-cost-sharing-2016/


For Dual Eligibles, Cuts to Medicaid-Funded Benefits

Could Lead to an Increase in Medicare Costs

30

• Dual eligibles have a higher prevalence of physical and cognitive impairments and

are more likely to have multiple chronic conditions

• Initiation of LTSS, including HCBS, among the dually eligible population reduces

growth in total healthcare costs—with significant reductions in inpatient stays (paid by

Medicare)

• Beneficiaries with unmet needs related to activities of daily living (ADL) are at a

higher risk for acute care admissions and readmissions

ADL: Activities of Daily Living; LTSS: Long-term services and supports; HCBS: Home- and community-based services

1. Allen, SM, Piette, ER and Mor, V. The Adverse Consequences of Unmet Need Among Older Persons Living in the Community: Dual-Eligible

Versus Medicare-Only Beneficiaries. Journals of Gerontology, Series B: Psychological Sciences and Social Sciences, 69(7), S51–S58.

2. Service Use and Expenditures Before and After Entry into California’s LTSS Programs. California Medicaid Research Institute. Published April

17, 2104. See Report. March 31, 2017.

3. Mitchell II, GP, Salmon, JR, Polivka, L and Soberon-Ferrer, H. The Relative Benefits and Cost of Medicaid Home- and Community-Based

Services in Florida. The Gerontologist. 2006: Vol. 46, No. 4, 483–494.

4. Xu, HP, Weiner, M, Paul, S, Thomas III, J, Craig, B, Rosenman, M, Doebbeling, CC, and Sands, LP. Volume of Home- and Community-

Based Medicaid Waiver Services and Risk of Hospital Admissions. Journal of American Geriatrics Society. 58:109–115, 2010.

5. Sands, LP, Wang, Y, McCabe, GP, Jennings, K, Eng, C, and Covinsky, KE. Rates of Acute Care Admissions for Frail Older People Living with

Met Versus Unmet Activity of Daily Living Needs. Journal of American Geriatrics Society. 54:339–344, 2006.

6. DePalma, G, Xu, H, Covinsky, KR, Craig, BA, Stallard, E, Thomas III, J and Sands, LP. Hospital Readmission Among Older Adults Who

Return Home With Unmet Need for ADL Disability. The Gerontologist. 2012: Vol. 53, No. 3, 454–461.

Given these findings, a reduction or elimination of LTSS and/or HCBS under

capped Medicaid funding could potentially lead to an increase in otherwise

preventable hospitalization, which is bad for beneficiaries’ health and costly for

Medicare

Many studies show LTSS and HCBS for the dual eligible population reduces total

health expenditures

http://www.thescanfoundation.org/sites/default/files/camri_service_uses_before_after_entry_04-22-14.pdf


Appendix: Methodology


Data Sources: Avalere used a combination of CMS’ Medicaid Statistical Information System (MSIS)

and Medicaid Budget and Expenditure System (MBES) data to estimate current Medicaid spending

and enrollment. For future Medicaid spending and enrollment, Avalere relied on the 2016 CMS

Medicaid Actuarial Report and U.S. Census Bureau state population projections by age group.

Avalere used CBO assumptions for projections of baseline federal Medicaid spending, and inflation,

Time Period: Avalere’s forecast period for this analysis aligns with the most recent CBO budget

window, 2017-2026.

Medicaid Enrollment Changes: Avalere’s approach to simulating the effect of Medicaid federal cap

policies, such as the AHCA and BCRA Medicaid coverage provisions, is to first estimate the effect of

the policy under the assumption that Medicaid enrollment does not change from current-law. These

‘direct’ changes in federal funding may incentivize states to make changes to their State Medicaid

programs. When states make changes in response to federal per capita cap policies that reduce

Medicaid enrollment in their state, this further reduces federal Medicaid funding.

Methodology

Avalere used its Medicaid forecasting and simulation model to understand the potential implications of

the Medicaid federal cap policy and Medicaid ACA expansion phase down proposed in the BCRA.

16ACA: Affordable Care Act; AHCA: American Health Care Act; BCRA: Better Care Reconciliation Act; CMS: Centers for

Medicare & Medicaid Services; CBO: Congressional Budget Office; FMAP: Federal Medical Assistance Percentage

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