Published on 13 June 2013
Medicare Special Needs Plans: MedPAC Recommendations on Future of Special Needs Plans

Special Needs Plans (SNP) are part of the Medicare Advantage program and were created by the Medicare Modernization Act of 2003 (MMA). There are three types of SNPs, each intended to provide coordinated care for Medicare beneficiaries that meet specific criteria.

Institutional SNPs (I-SNP) serve beneficiaries who, for 90 days or longer, need institutional provider services, such as long term care, nursing homes, and inpatient psychiatric facilities. Some beneficiaries receiving community-based services or home health care also might qualify for I-SNPs. Chronic Condition SNPs (C-SNP) serve beneficiaries with at least one of 15 approved chronic conditions, including cancer, chronic and disabling mental health conditions, and dementia.

Dual Eligible SNPs (D-SNP), the largest category of SNPs, enroll Medicare-Medicaid dual eligibles. Dual eligibles also often have chronic conditions or are institutionalized, so dual eligibles make up large proportions of enrollees in other SNPs as well. They are among the most expensive beneficiaries, accounting for about one third of both the Medicaid budget and the Medicare budget.

Congress initially authorized SNPs until 2008 but has since reauthorized them several times. Currently, SNPs are set to expire on December 31, 2014. If the program is allowed to expire, SNPs can convert to regular Medicare Advantage health plans, and beneficiaries can choose to enroll in Medicare Advantage or in traditional fee-for-service Medicare.

Medicare Advantage plans typically 5 percent more than fee-for-service Medicare, so the number of beneficiaries who choose to stay in Medicare Advantage will have an effect on the Medicare budget. That cost difference likely will fall after 2014 because of changes in the Affordable Care Act (ACA) health reform, which are intended to bring Medicare Advantage costs in line with traditional Medicare spending.

MedPAC Recommendations on SNP Reauthorization:

The question for Congress is: Should it extend authorization for SNPs yet again, or let them expire after 2014? The knowledgeable staff at the Medicare Payment Advisory Commission (MedPAC) has some suggestions to help Congress decide. MedPAC publishes recommendations on a host of Medicare payment policies in its annual report to Congress.

The 2013 MedPAC report has some interesting findings and recommendations on SNPs. Here is an overview:

1. Reauthorize I-SNPs

MedPAC says Congress should permanently reauthorize Institutional Special Needs Plans. Doing so would add up to $1 billion more over five years than the current-law baseline, which assumes SNPs expire after 2014.

Reasons for MedPAC’s recommendation, pulled from the report, include:

  • Overall, I-SNPs perform better than other SNPs and other MA plans on the majority of available quality measures
  • I-SNPs also perform well on risk-adjusted rates of hospital readmissions relative to other SNPs I–SNPs attempt to reduce hospital and emergency department utilization through care management and by emphasizing the provision of primary care. For example, some I–SNPs employ nurse practitioners to work with nursing home staff to provide primary care, care planning, and coordination of medical services.
2. Allow C-SNPs to Expire, With Some Exceptions

MedPAC recommends that Congress:

  • allow the authority for Chronic Care Special Needs Plans to expire, with the exception of C–SNPs for a small number of conditions, including end-stage renal disease, HIV/AIDs, and chronic and disabling mental health conditions;
  • direct the secretary, within three years, to permit Medicare Advantage plans to enhance benefit designs so that benefits can vary based on the medical needs of individuals with specific chronic or disabling conditions; and
  • permit current C-SNPs to continue operating during the transition period as the secretary develops standards.
  • except for the conditions noted above, impose a moratorium for all other C–SNPs as of January 1, 2014.

To justify its recommendations, MedPAC noted that C-SNPs perform poorly on quality measures compared to other SNPs and Medicare Advantage plans. Most regular Medicare Advantage plans ought to be able to incorporate some aspects of the C-SNP care management model to coordinate care for people with chronic conditions.

3. Reauthorize D-SNPs that Share Risk

Congress should, MedPAC’s report says, permanently reauthorize D-SNPs that assume clinical and financial responsibility for Medicare and Medicaid benefits, and allow all other, non-integrated D–SNPs to expire.

The main thrust behind MedPAC’s recommendation is that D-SNPs have shown great potential for reducing cost and improving quality by integrating Medicare and Medicaid care for dual eligibles. I have written a fair amount about the subject on this blog, and have given several presentations on the dual eligibles market.

There are several administrative policies that make integrated D-SNPs more difficult to manage. One barrier is that D-SNPs are not allowed to market themselves as providing combined Medicare and Medicaid benefits. Other complications stem from the fact that dual eligible enrollees get two beneficiary cards, one for Medicare and another for Medicaid, even when enrolled in one D-SNP managed care plan.

To remedy those issues, MedPAC makes the following additional recommendations for Congress:

  • grant the HHS Secretary, now Kathleen Sebelius, authority to align the Medicare and Medicaid appeals and grievances processes;
  • direct the Secretary to allow these D-SNPs to market the Medicare and Medicaid benefits they cover as a combined benefit package;
  • direct the Secretary to allow these D–SNPs to use a single enrollment card that covers beneficiaries’ Medicare and Medicaid benefits; and direct the secretary to develop a model D–SNP contract for states.

Read the full report here, and go to the MedPAC section of this blog for more posts on some of the more interesting issues in MedPAC’s reports to Congress.

About Author

An expert on Medicaid, Medicare, and health reform, Kip Piper, MA, FACHE, is a consultant, speaker, and author. Kip Piper advises health plans, hospitals and health systems, states, and pharma, biotech, medical device, HIT, and investment firms. With 30 years’ experience, Kip is a senior consultant with Sellers Dorsey, top specialists in Medicaid and health reform. He is also a senior advisor with Fleishman-Hillard and TogoRun. For more, visit KipPiper.com. Follow on Twitter @KipPiper, Google +, Facebook and connect on LinkedIn.

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