Currently, nearly 10 million Americans are dually-eligible for both Medicare and Medicaid. These “dual eligibles” are low-income seniors and individuals with disabilities who are separately eligible for and receive coverage under both the Medicare and Medicaid programs.  In general, Medicare acts as the primary payer for dual-eligibles, while Medicaid provides “wrap-around” coverage for these individuals, helping with some out-of-pocket costs (such as premiums, copayments and deductibles) and offering coverage for services not otherwise covered by Medicare (vision, dental, etc.)

Because dual-eligibles tend to have lower health indicators than either the general Medicare or Medicaid populations, they also account for a discorporate share of spending (CMS notes that 17% of dual-eligible enrollees report that they have “poor” health status compared to 6% of other Medicare beneficiaries).  Currently, 36% of all Medicaid dollars are spent on dual-eligibles (despite comprising only 14% of enrollees); and 35% of all Medicare dollars are spent on dual-eligibles (despite comprising only 20% of enrollees.)

Until now, the dual-eligible population has generally been excluded from alternative payment models, such as the Medicare Shared Savings Program, on the basis that the dual-eligible population tends to be more at-risk and costly. However, on December 15th, CMS announced it is accepting letters of intent from states to launch a new Medicare-Medicaid ACO model.

While dual-eligible individuals are currently permitted to be attributed to the Medicare Shared Savings program, these ACOs are not held financially accountable for the Medicaid expenditures for these beneficiaries.  Under the proposed model, ACOs would take on accountability for (and be eligible for savings from) the full spectrum of Medicare Part A, Part B, Medicaid costs, and quality for their patients.  The legal authority for this model is based in section 1115A of the Social Security Act which generally affords the Centers for Medicare and Medicaid Innovation authority to establish alternative payment models in the Medicare, Medicaid and SCHIP programs.

CMS is seeking to partner with up to six states interested in offering Medicare ACOs which will manage the Medicaid costs for dual-eligibles.  States are invited to submit a letter of intent to participate in the Model and choose from three options for when to begin the first 12-month performance period:  January 1, 2018; January 1, 2019; or January 1, 2020.  Once a state is approved to participate in the Model, a request for application will be released to ACOs and providers in that state.   The first deadline to submit a letter of intent to participate (for the 2018 start-date) is January 20, 2017.

It will be interesting to watch what sort of interest this new ACO model receives. Managing costs across two different programs is unprecedented and the dual-eligible population presents particular risk due to the amount of services used by this population and the general heightened health risks.  If this model is successful, it will be proof that, if properly structured, the ACO model can be used for even the most at-risk populations.