At Last, CMS Admits It's Been Paying Too Little for Dual Eligibles

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An obscure notice on CMS' website outlines a proposed revised formula that would take effect in 2017.

Health plans have long complained that they are shortchanged for caring for so-called “dual eligibles” — patients who meet the criteria for both Medicare and Medicaid. It’s a problem with huge significance, because it relates to the broader issue of how CMS calculates the cost and risk of caring for patients with the greatest health challenges.

If health plans are paid too little to care for dual eligible beneficiaries, and then get hit with downgrades in star ratings when those patients don’t meet health targets, what’s the incentive to care for them at all? That’s been the complaint of health plans. But for years, CMS dismissed it.

Until now. First reported in Modern Healthcare, CMS published an obtuse notice on its website October 28, 2015, that announced an adjustment to its risk formula for calculating payment for patients with dual eligibility. The move comes amid reports that the agency is also, at long last, examining whether it’s time to adjust its Medicare Advantage quality ratings to account for socioeconomic status.


The risk formula notice is open for comment until November 25, 2015. Health plan lobbyists greeted the news warmly, with many saying the tide suddenly turned at the recent conference of America’s Health Insurance Plans (AHIP), where CMS deputy administrator Sean Cavanaugh said “there is some substance” to the industry’s longtime complaints.

Research at medical meetings and in peer-reviewed journals have highlighted the fact that patients with lower socioeconomic status come to the healthcare system with more problems than those from wealthier areas, and punishing Medicare plans that care for patients who may have gone most of their lives without health insurance only takes money from health systems and safety net hospitals that most need it.

An issue brief published this week by the Kaiser Family Foundation on the role of social determinants in healthcare notes that the role of social status and neighborhood in health has been documented since the cholera outbreak of London in the 1854, and the brief cites a 2007 paper in the New England Journal of Medicine that found social and environmental factors account for 20% of a person’s health outcomes.

In March 2015, The American Journal of Managed Care wrote about research presented at the American College of Cardiology, in which a team led by Jacob A. Udell, MD, MPH, found that safety-net hospitals delivered care that met or exceeded the ACC’s quality care standards relative to hospitals in wealthier areas, but patients might still have higher mortality rates because they came in with higher rates of diabetes, obesity and smoking.

Based on its memo, CMS will publish a final notice for changes to its payment formula in February 2016, which will take effect in 2017.