Background

Mark R. Meiners, Ph.D., Director

While Medicaid's early involvement with managed care has focused on families and children, state policymakers are increasingly interested in enrolling all Medicaid beneficiaries into some form of managed care. The expansion of managed care for aged and disabled populations inevitably raises the question of how Medicare's acute care services can be coordinated with Medicaid's long-term care services. The integration of acute and long-term care is important to the development of a coordinated managed health care system that provides the flexibility and incentives to manage the full array of care for aged and disabled consumers.

The current financing and delivery system contains many obstacles to the development of such an integrated system. Of major concern to the development of managed care programs is the fragmentation of financing and responsibility for patient care. In spite of overlapping populations, Medicare and Medicaid currently maintain wholly separate contracting, reimbursement and quality standards for managed care organizations. If managed care providers are to be effective in accessing the most appropriate and cost effective care for their patients they must be encouraged to use the entire continuum of care.

The problem of fragmentation between Medicare and Medicaid is not new. Since the late 1970s, policymakers have been looking for ways to end the fragmentation that seems inherent in a fee-for-service system that funds different types of care through multiple funding sources for a single group of clients. Beginning with The Channeling Project and On Lok in 1980s, and continuing with the Program for All-inclusive Care for the Elderly and the Social Health Maintenance Organizations in the 1980s, a variety of efforts have been made to create the necessary incentives for managed care providers to integrate acute and long-term care. These efforts form a vision of integrated care that includes the full continuum of acute and long-term care services, and allows providers to purchase the most efficient service package for their clients, regardless of specific payer regulations.

In 1992, The Robert Wood Johnson Foundation made a grant to the state of Minnesota to plan a managed care program that integrated acute care services under Medicare with long-term care services under Medicaid. The Minnesota Senior Health Options (MSHO) program received federal approval in 1995 to proceed with a demonstration program to enroll and capitate health maintenance organizations and other health plans for the entire continuum of care for dual eligible persons over age 65.

The dual eligible population represents a diverse set of populations with a wide variety of health and long-term care needs. There is no single model of Medicare and Medicaid integration that meets all their needs. Over the last several years a number of different approaches have emerged. The Medicare/Medicaid Integration Program is designed to provide states with the resources necessary to develop and test innovative approaches that have the potential to improve the quality and cost effectiveness of health care for these populations.