Medicare and Medicaid

"Dual eligibles" are Medicare beneficiaries who are also eligible for some form of Medicaid support. In 1995, Medicare and Medicaid spending for the roughly 6 million dual eligibles totaled $106 billion, or nearly one third of these programs' combined expenditures. The dually eligible population is expected to grow, resulting in even greater health financing expenditures and care challenges. The dually eligible population consists of persons with a range of health needs--from the young to the very old, from the healthy to the chronically ill in nursing homes. Compared with Medicare-only beneficiaries, however, dually eligible beneficiaries are more likely to be in poor health and require costly care, including long-term care. Meeting their needs under two programs that are administered under different rules complicates matters in both fee-for-service and managed care environments. The potential to cover posthospital and long-term care benefits under either program has resulted in costs being shifted between programs. Much of the financial burden falls on the federal government. To better coordinate acute and long-term care needs, some states are looking into enrolling their dually eligible populations in a single managed care plan. However, differences in Medicare and Medicaid requirements for commercial managed care participation could pose barriers.

GAO noted that: (1) the dually eligible population consists of people with a range of health needs, from the young to the very old and from the healthy to the disabled or chronically ill in nursing homes; (2) compared with Medicare-only beneficiaries, however, dually eligible beneficiaries are more likely to have poorer health status and require costly care, including long-term care; (3) meeting their needs under two programs that are administered under different rules complicates matters in both fee-for-service and managed care environments; (4) the potential to cover posthospital and long-term care benefits under either program has resulted in costs being shifted between programs; (5) because the federal government pays the full cost of Medicare and shares the cost of Medicaid with the states, the greater financial burden generally falls on the federal government; (6) to better coordinate acute and long-term care needs while holding down costs, some states are assessing the potential for enrolling their dually eligible populations in a single managed care plan; (7) however, differences in Medicare and Medicaid requirements for commercial managed care participation can create barriers to this approach; (8) because these barriers are largely related to certain statutory beneficiary guarantees, including beneficiaries' freedom to choose their own provider, granting waivers from federal requirements to states that are designing comprehensive managed care programs remains a delicate issue; (9) the implications of managing the costs of care for this population are significant at both the federal and state levels; (10) the issue is important to the federal government because it pays for Medicare as well as for over half of Medicaid's costs; (11) it is also important to state governments, because they have little control over federal decisions, such as the imposition of new Medicare cost-sharing requirements, that make their budgets vulnerable to unplanned fiscal liabilities; and (12) as states pursue greater flexibility to design more efficient and effective service delivery programs for this population through waivers of certain beneficiary protections guaranteed by federal statute, federal and state governments' rigorous oversight of care delivery remains essential.