States' Perspective on Managed Care for the Elderly

States have relied increasingly upon managed care to deliver healthcare services to Medicaid beneficiaries. Today, every state but Wyoming and Alaska is enrolling Medicaid beneficiaries into managed care (Horvath and Kaye, 1997), accounting for about 4o percent of all Medicaid beneficiaries. But most of that enrollment has occurred with mothers and children. Until recently, states have been reluctant to move elders into managed care for several reasons. The states have been uncertain about the capacity of managed care organizations to serve this population, unclear about how to set appropriate capitation (per capita payment) rates, and confounded by the difficulty of coordinating Medicare and Medicaid. But this uncertainty is being tested as a number of states have launched efforts to provide care to Medicaid-eligible elders through managed care. In 1996, eighteen states were enrolling elders in managed care, and several others reported interest in doing so (Rawlings-Sekunda, I997). At the same time, enrollment of elders in Medicare managed care programs is growing rapidly. WHY STATES WANT TO ENROLL ELDERS IN MANAGED CARE State interest in managed care for elders has its roots in both fiscal and program concerns. One of the promises of managed care is to help states control the Medicaid budget. As enrollment in managed care becomes more common among younger populations, the likelihood of continued cost savings has come into question. Because the elderly constitute 11 percent of Medicaid beneficiaries but account for 26.3 percent of Medicaid spending (Kaiser Commission on the Future of Medicaid, I997), the cost of that service is constantly under scrutiny; managed care holds promise for reducing the growth in Medicaid expenditures for older people. But it is important to recognize that states also turn to managed care because of important program and beneficiary concerns-to increase access to quality care and to assure continuity of that care. States have long been concerned about the bias in favor of institutional care that exists in the Medicaid program and have sought waivers from the federal Health Care Financing Administration (HCFA) to allow states to increase home- and community-based services. In most of those homecare programs, case managers are identified and held responsible for developing and implementing plans of care to allow frail elders who are eligible for nursing homes to remain at home. Because virtually all Medicaideligible elders also receive Medicare, service coordination is not always easy. Medicaid tends to pay for long-term care and prescription drugs while Medicare pays for physician and hospital care. Some overlap of benefits occurs, as in the case of home health, which both programs purchase. Elders who are eligible for both programs can be caught in the middle of confusing and sometimes conflicting Medicare and Medicaid rules. Case managers cannot provide a full array of needed services since they have no authority over Medicare benefits. States see potential to improve continuity of care for these dually eligible elders through managed care, which blends the two funding streams and provides a seamless system of care for the older person. But the states view inconsistent Medicare policy as posing barriers to the goal of integration. One significant problem is created by Medicare's provisions guaranteeing elders the freedom to select their providers. This provision protects freedom of choice for beneficiaries but causes problems for the states, which have an interest in requiring beneficiaries to join a specific plan for all their care, rather than allowing them to seek out-ofplan care at will. States argue that this lock-in is needed in order to provide continuity of care and focus accountability for care. HCFA's position is that because freedom of choice is a paramount concern in Medicare, plans should provide the care and incentives that will induce elders to receive all needed care from one plan on a voluntary basis. …