Since the Medicare Modernization Act of 2003, the United States has steadily shifted away from traditional Medicare Part A and B, towards coverage under privately administered Medicare Advantage (MA) plans. Today, 25M Medicare beneficiaries (nearly 40% of people eligible for Medicare) are enrolled in MA, and an estimated 90% of Medicare-eligible individuals receive prescription drug coverage under Medicare Part D. This array of Medicare options is no doubt familiar to many Americans.
A lesser-known, and less-understood, growth area of Medicare Advantage is the ‘dual-eligible plan’ (D-SNP): an option uniquely designed for individuals who are simultaneously eligible for Medicare and Medicaid. Although D-SNP eligibility applies to 11 million individuals in the U.S. and boasts an annual growth rate of 7.3%, only 4 million individuals are currently enrolled in its program.
Why does such a broadly applicable program lag behind the enrollment success of Medicare Advantage? Put simply: D-SNP’s novelty and complexity have kept members at arm’s length. Although today D-SNP is a permanent fixture in the healthcare landscape, it was once (as recently as 2019!) little more than a demonstration project between the Centers for Medicare and Medicaid Services (CMS) and State Medicaid agencies. Moreover, members who are eligible for D-SNPs often experience complex circumstances; those who stand to benefit most from D-SNP enrollment have multiple physical and mental health challenges accompanied by a variety of social and disability needs.
Additionally, D-SNP’s promise to better manage the conditions of, and to provide a better experience to, many of a community’s most vulnerable individuals — namely, those over 65 who are experiencing poverty and those under 65 who experience disability — places a direct focus on complex populations most health plans have little experience in actively enrolling, managing, or engaging.
For many experts used to more ‘traditional’ healthcare arrangements, the contracting and administration aspects of D-SNP may seem a bit daunting. Navigation of D-SNP requires (at minimum) coordination of benefits between Medicare and Medicaid, or (at maximum) a full integration of benefits in a three-way contract between an MCO, State Medicaid Authority (SMA), and CMS. But while this no doubt layers complexity onto a traditional health plan’s operating model, it simultaneously creates a tremendous opportunity for that same plan — because, prior to the formation of a D-SNP, benefits and services covered by Medicare and Medicaid are wholly uncoordinated. Where once healthcare was approached in a piecemeal fashion, D-SNP requirements emphasize coordination and integration of Long Term Support Services (MLTSS) and behavioral health services. The result fashions a model of care that provides life-changing relief for members who are homebound, disabled, or who deal with challenging mental health and/or substance abuse issues.
In light of market and regulatory trends towards further and deeper integration, D-SNP should be a near-term priority for health plans looking to enter new products, drive membership growth, and provide a better service model to their Medicare or Medicaid members. When viewed with an eye towards creating a robust health plan that’s built to succeed, D-SNP’s extraordinary value proposition boils down to three irrefutable benefits:
- Competition and speed to market: Launching and operating a D-SNP is not for the faint of heart. It’s no surprise, then, that more than 80% of D-SNPs in the United States are owned and operated by national insurance carriers — juggernauts that enjoy lots of capital and scale, as well as the ability to operate across state lines. Local and regional health plans, in contrast, don’t have such advantages. Instead, their power lies in being deeply rooted in the communities they serve. Conceptually, that same power is foundational to the promise of D-SNP: increased engagement and better health outcomes for vulnerable members and communities. As National insurance carriers learn how to acquire and medically manage D-SNPs faster than their local competition can, smaller, community-focused providers risk losing numerous opportunities that come from being early to market. After all, once national carriers sink their teeth deeper into any given geography, it becomes increasingly difficult to convince members to switch plans.
- Member Experience: Despite their early success in launching D-SNP plans, national carriers are paradoxically ill-suited to deliver on their promise of a better member experience for dual-eligible individuals — and, by virtue of being national, they have no obligation to any singular local geography. In 2021, national carriers opened over 100 new D-SNP plans, but national carriers also exited over 16% of the counties in which they operated. This indifference to local needs creates instability for physicians and members who are reliant on the coordination of Medicare and Medicaid benefits to offer efficient and comprehensive care. Average Net Promoter Scores (NPS) for national carriers are low, relative to those of the healthcare industry at large. In 2021, the highest such score for a national carrier was Aetna at 16, against an industry average of 38. Such data clearly indicates local and regional actors, not by the big national players, more often provide better satisfaction with care and administrative experience.
- Value Creation: D-SNP is a capitated program, meaning the pursuit of financial sustainability in operating one requires beating a benchmark premium for Medicare and/or Medicaid. In short, the D-SNP program and its members must be managed. This is good news for health plans — they’re delegated insurance premium dollars to manage two programs (Medicare and Medicaid) tied to a single member, rather than for the management of just one program (Medicare OR Medicaid) attached to that member. The result is more freedom, flexibility, and opportunity in the structuring and administration of benefits.
This more flexible approach pairs traditional Medicare Part A (hospital benefits) with Part B (professional), Part D (pharmaceutical), and Medicaid benefits — the last of which, depending on the state Department of Health, may include services such as transportation, food security, and housing support. By encapsulating all these benefits in a single insurance product, the D-SNP health plan sponsor becomes the “prime mover” who can, in effect, coordinate and curate the best possible experience not only for an individual member but also for the larger D-SNP population that sponsor serves. Finally, thanks to D-SNP, such sponsors can provide access and visibility to the most services — and can provide dollars to pay for those services — that a dual-eligible member needs.
While some states, including California and New York, are moving to fully integrated D-SNPs as a requirement through which to enroll and service dual-eligible individuals, many other states are choosing a lighter and more step-wise approach towards these transitions. Irrespective of the regulatory environment of individual states, health plans should begin the planning process to launch a D-SNP as soon as possible — there is simply no better or more comprehensive way to attract market share, deliver a better member experience to elderly and disabled people, and enjoy a head start on securing the capabilities and processes required to manage our robust and growing D-SNP population.