State Officials See Managed Medicaid as ‘Only Way’ to Handle Costs of an Aging Population

Medicaid spending forms the cornerstone of long-term services and supports (LTSS) as the population ages, but is facing increasing constraints as states try to navigate tight budgets — and managed Medicaid is emerging as an increasingly attractive option for states to do more with less.

To try to combat some of the challenges and learn about strategies to manage the health of the growing LTSS populations — along with the associated costs — several states last year participated in a roundtable hosted by the National Governors Association Center for Best Practices Health Division. The participating states included Arizona, Delaware, Michigan, Pennsylvania, Vermont, Washington and Wyoming.

Medicaid represents 51% of all LTSS spending, a report summarizing the key takeaways for governors noted, a tally that far exceeds the spending of Medicare on such services. Medicare only covers short stays in long-term care hospitals and skilled nursing facilities, among other services, and in 2016, Medicaid spent $167 billion on LTSS, or 30% of Medicaid budgets on average.


The potential bad news for SNFs is that states and the federal government have worked to bolster access to home and community-based services (HCBS) over institutional care, with considerable success; in 2016, HCBS accounted for 57% of total Medicaid LTSS expenditures, up from just 1% in 1981.

In addition, managed LTSS has seen significant growth in recent years. The use of managed LTSS involves state Medicaid agencies contracting with managed care organizations (MCOs) to deliver LTSS benefits, and the number of states doing this tripled over a 15-year span: Eight states were using MCOs in 2004, but in 2019, that number expanded to 24.

Managed Medicaid is poised to be a threat to SNF census and payments, experts said at the National Investment Center for Senior Housing and Care (NIC) spring conference in San Diego in February.


“On the skilled side, we’ve had complete carnage on Medicare admissions,” Brian Cloch, chairman at Attuned Care and CEO of Transitional Care Management, said at the conference. “Every hospital system we experience is sending 50% percent less discharges to SNFs and to home now. I think that same sort of math is going to come into Medicaid managed care, is that you’re going to start seeing far fewer people coming into long-term care skilled nursing facilities.”

Some states see managed care and managed LTSS as a means of improving integration, coordinating services, and establishing predictability in their budgets, the NGA report noted. In fact, participants from Delaware said that transitioning to managed LTSS was the “only way to make progress” in moving to a delivery system more focused on HCBS. California, Florida, New York, and Texas, the four most populous states in the U.S., have managed care plans providing the full continuum of services: acute, primary, behavioral health and LTSS.

During the roundtable, participants emphasized that successfully implementing managed LTSS takes time, and that states should set realistic timeframes. Pennsylvania and Virginia, two states that recently made the transition, used a regional, phased-in approach; the Keystone State’s rollout will be completed over three years, the report noted.

Dual-eligibles on the mind

Though people eligible for both Medicaid and Medicare programs — the so-called dual-eligible population, which includes about 8 million people eligible for full Medicare and Medicaid benefits — account for only 15% of the individuals enrolled in Medicaid, they rack up 33% of Medicaid spending, the report noted.

To combat this spending discrepancy, the Centers for Medicare & Medicaid Services (CMS) launched the Financial Alignment Initiative (FAI) in 2011, which gave certain states the waiver authority to develop a managed fee-for-service or capitated model to align the programs. But enrollment in the FAI demonstrations proved to be a considerable challenge for states, the report noted.

Other approaches include leveraging contracts with Dual-Eligible Special Needs Plans (D-SNPs), Medicare Advantage plans designed for dual-eligible individuals. Other ideas included engaging with federal partners to develop arrangements that let state Medicaid programs share in Medicare savings, and engaging with federal partners for states that are interested in fully integrating care and financing at the state level.

One example of a state where gubernatorial leadership played a key role in LTSS reform was Connecticut, the report noted. Former Gov. Dannel Malloy revealed the state’s Strategic Plan to Rebalance Long-Term Services and Supports in 2013, which state leaders said was key to breaking down silos across state agencies.

Connecticut’s work in the LTSS space was apparent in the success of the 60 West SNF in Rocky Hill, Conn., which was ranked one of the best facilities in the state and made the U.S. News & World Report’s list of best nursing homes. That project had support from the Connecticut Department of Mental Health & Addiction Services (DMHAS) and the Department of Corrections (DOC), with the building itself managed by iCare Health Network.

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