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The Centers for Medicare & Medicaid Services (CMS) recently announced several new initiatives focused on improving care for people who are eligible for both Medicare and Medicaid (dual eligibles).

Two initiatives relate to providing fully integrated services to dual eligibles, through both capitation and fee-for-service structures.  A third initiative addresses preventing unnecessary hospitalizations of nursing home residents, with special focus on nursing facilities that serve high numbers of dual eligibles and that have high hospitalization rates.  Finally, CMS announced the creation of a resource center to "assist States in delivering coordinated health care to high-need, high-cost beneficiaries."[1]  The goals of the resource center are to help States "to better serve beneficiaries, improve quality and reduce costs."[2] This Alert offers some more information on the three initiatives.

Initiatives 1 and 2 – Integrated Services

In a State Medicaid Director letter (SMDL) dated July 8, 2011, the Centers for Medicare & Medicaid Services outlined two new models for States to use to integrate primary, acute, behavioral health, and long-term supports and services for their enrollees who are dual eligibles.[3]

The new initiative comes from the work of the Medicare-Medicaid Coordinating Office (MMCO), which was established under authority of the Affordable Care Act to improve access to health care services for dual eligibles and to address issues of the high cost of care for that population.  In an earlier initiative, MMCO awarded contracts to 15 States to develop plans to integrate services.[4]

The capitated model contemplates a three-way contract between a State, CMS, and a health plan.  The plan will receive a capitated rate that is a blend of the Medicare and Medicaid rates to provide all benefits of both programs.  The blended rate is expected to provide savings for both States and the federal government.  The model anticipates testing certain flexibilities, including the provision of supplemental benefits, enrollment flexibilities, uniform appeals, audit, and marketing rules and procedures.  Under current law, each program may have different rules in such areas, making it complicated for a single plan to meet both sets of standards.

The fee-for-service model seeks to address an issue that has long been raised by States.  That is, if States improve quality and provide better long-term supports and services, beneficiaries may have fewer Medicare-paid-for hospitalizations, but the States do not get the benefit of the Medicare savings.  The new model allows States to share in Medicare savings that are produced by serving dual eligibles more efficiently and effectively.

The SMDL includes templates of Memoranda of Understanding relating to both models.

Initiative 3 – Improved Care Quality for Nursing Facility Residents

This demonstration is offered through collaboration between the MMCO and the Center for Medicare and Medicaid Innovation (CMMI), which was authorized by the Affordable Care Act to test a variety of payment models to improve health care without increasing cost or to reduce cost without reducing quality.  According to the CMS press release, the initiative addresses "a wide-spread and costly problem:  nursing facility residents are subject to frequent preventable inpatient hospitalizations" that are potentially harmful to the residents and very costly to Medicare.[5]

Under the nursing home demonstration, CMS will contract with independent entities (i.e., outside the nursing facility's staff) to provide enhanced clinical services to people in 150 skilled nursing facilities nationwide.  Such services could include focus on improving transitions between hospitals and skilled nursing facilities and implementing better practices to prevent the conditions that often lead to hospitalizations:  falls, pressure ulcers, and urinary tract infections.

As noted above, CMS will target facilities with high rates of hospitalization and high numbers of dual eligibles among their residents.

One concern about this initiative arises in connection with how "hospitalization" is defined when measuring the success of interventions.  Quality measures generally look at "inpatient" hospitalizations when calculating the rate of "hospitalizations" and "rehospitalizations."  In recent years, the Center for Medicare Advocacy has seen a substantial increase in the numbers of Medicare beneficiaries whose hospital stay is labeled as "observation" status rather than "inpatient" status.[6]  In the context of this initiative, a hospital stay on "observation status" could lead to an incorrect conclusion that the particular intervention has been successful, when, in fact, the resident was subject to all the potential bad outcomes associated with inappropriate hospitalizations.


The new initiatives offer promise of improved care for the sickest and frailest individuals in our society.  They also come with a clear emphasis on reducing the costs to Medicare and Medicaid of caring for these most vulnerable individuals.  Advocates will have to stay engaged with the process as details of the initiatives unfold to ensure that strong beneficiary protections are woven into all aspects of the initiatives.[7]  The Center will continue to analyze and write about these initiatives as details are reported.

For more information, contact attorney Patricia Nemore ( in the Center for Medicare Advocacy's Washington, DC office at (202) 293-5760.

[1]  CMS, "Obama Administration Offers States New Ways to Improve Care, Lower Costs for Medicaid; Initiatives Focus on People Receiving Medicare and Medicaid Benefits." Press Release (July 8, 2011), also CMS, "Testing Financial Models to Support State Efforts to Coordinate Care for Medicare-Medicaid Enrollees; Two New Models Available to States to Improve Quality and Decrease Costs," Fact Sheet (July 8, 2011),
[2] Id.
[3] Letter from Cindy Mann, Director, Center for Medicaid, CHIP and Survey & Certification, and Melanie Bella, Director, Medicare-Medicaid Coordination Office, to State Medicaid Directors, re:  Financial Models to Support State Efforts to Integrate Care for Medicare-Medicaid Enrollees, SMDL #11-008, ACA #18 (July 8, 2011),
[4] The 15 states are:  CA, CO, CT, MA, MI, MN, NY, NC, OK, OR, SC, TN, VT, WA, WI
[5] CMS, "Demonstration to Improve Care Quality for Nursing Facility Residents; Initiative to Reduce Preventable Hospitalizations," Fact Sheet (July 8, 2011),
[6] See Extended Observation Stays in Acute Care Hospitals:  Criticism, Legislation and Discussion at and Preventable Emergency Department Visits by Nursing Home Residents  at
[7]   See, e.g. Letter of December 13, 2010 from 38 organizations and individuals to Secretary Sebelius and  attached Recommendations for Beneficiary Protections in Models Approved by the Center for Medicare and Medicaid Innovations, available at   See also, Kevin Prindiville and Georgia Burke, Ensuring Consumer Protections for Dual Eligibles in Integrated Models,  July 2011 at

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