In 26-state dual-eligible demo, hospitals push insurers to pay Medicare rates

Project aims to improve care for the nation's sickest, costliest patients

A CMS demonstration program launching in 26 states will require hospitals and health systems to negotiate rates for dual-eligible patients directly with insurers, rather than the federal government.

Under the major demonstration project, 26 states will shift up to two million patients that are dually eligible for Medicaid and Medicare into managed care or managed fee-for-service plans. The project hopes to improve care coordination for the nation's sickest and costliest patients.

According to CQ HealthBeat, the government will set the managed-care plans' per-beneficiary capitated payments that it gives the managed care plans selected for the program. Hospitals will have to convince the managed care plans to pay them at the higher Medicare reimbursement rates.

Although CMS supports using the Medicare rate, it will follow a federal statute banning CMS from interfering in contract negotiations between plans and providers in Medicare Advantage's managed care program. According to the law, which is included in an amendment of the Social Security Act, the ban is needed "in order to promote competition."

However, CMS will conduct a readiness review to examine a range of issues and determine whether the health plans have built adequate provide networks for patients with complicated medical needs.

If many hospitals refuse to sign a contract with a health plan because of payment rates, then CMS may not consider the plan ready.

States expect to receive Medicare rates

Massachusetts was the first state in the demonstration to receive approval for its plan, which is expected to launch on April 1. CMS soon will announce the health plan participants and their capitated payment rates.

State officials say they expect that hospitals will be offered Medicare rates. Nonetheless, hospitals have expressed concern over the uncertainty.

"Our strong support for the concept that underlies this initiative is equaled by our great concern that inadequate reimbursement may undermine its potential success," says Massachusetts Hospital Association EVP Timothy Gens. He notes that the association continues to advocate for "a specific requirement for Medicare rates."

Meanwhile, CMS officials are finalizing proposals that would allow states such as California, Ohio, and Wisconsin to move forward with their plans.

According to CQ HealthBeat, California's proposal may be completed within one month. It would affect about 550,000 dual eligibles in eight counties. If adopted statewide, the plan would shift 1.1 million dual eligibles into managed care.

Echoing the statements of Massachusetts officials, Toby Douglas—director of the California Department of Health Care—last week said that "Medicare is going to be in many ways the floor" for payments to hospitals and health systems in the project (Adams, CQ HealthBeat, 9/12 [subscription required]; Adams, CQ HealthBeat, 9/14 [subscription required]).

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