As well described throughout this book, palliative care is an approach to providing care that addresses patients’ and caregivers’ quality of life and well-being, assures preference-concordant care across settings and over time, provides timely professional expertise for the seriously ill, and focuses on pain and symptom relief while offering the potential to moderate high spending [1]. Under current law, Medicare only offers a palliative care benefit as part of the hospice benefit for people with a predictably terminal illness during their last 6 months of life. Proposals have been made to expand the use of palliative care for Medicare beneficiaries, including providing a Medicare palliative care benefit [2].

Whatever the fate of proposals to strengthen coverage of activities related to palliative care services, palliative care and other practitioners will continue to face challenges in mobilizing long-term services and supports (LTSS), that is, personal assistance to those unable to perform basic tasks of daily living on their own. No matter how well a care plan is designed to honor the wishes of people with serious or complex illness and their families, without access to LTSS, patients may end up in emergency departments or hospitals unnecessarily. These LTSS, therefore, have the potential both to improve patients’ quality of life and to prevent unnecessary ED visits, hospitalizations, or nursing home admissions. That said, identifying, accessing, and coordinating long-term care services are not easy. Further, financing to support these services is beyond the scope of standard insurance. Few people have private long-term care insurance, and Medicare does not cover LTTS. Its home health and nursing home benefits are limited in a variety of ways and are typically associated with an episode of acute care. Medicaid does cover these services; indeed, about a third of Medicaid spending finances long-term care [3]. Medicaid’s protections, however, vary considerably across states and are only available to people who are impoverished or who become impoverished as a result of medical or long-term care spending.

In this chapter, we examine the way in which Medicaid and Medicare provide benefits to persons whose complex illnesses or chronic conditions create functional impairments, and the different program structures that inhibit the coordination of medical and long-term supports and services. We next explore proposed strategies, including demonstration initiatives being launched by the Centers for Medicare and Medicaid Services, to improve care and reduce costs specifically for dually eligible Medicare and Medicaid beneficiaries, as well other program innovations designed to improve care for vulnerable populations. Finally, we make the case that Medicare should take the primary initiative in developing care models that better serve beneficiaries with serious illness and/or multiple chronic conditions and functional limitations, presenting the core elements of these models, including a commitment to the principles and practices of palliative care.

How Current Benefits and Program Operations Impede Coordination of Long-term Care

The Medicare statute explicitly prohibits Medicare payments for “custodial” (or personal) care, a provision in the law intended to assuage concerns that the establishment of health insurance for the elderly population would create uncontrollable financial obligations. Consistent with that concern, Medicare’s benefits for skilled nursing facilities (SNFs) and home health care have been closely tied to episodes of acute care and their associated “skilled” care needs. Medicare pays for care in SNFs following a hospital stay for beneficiaries who require skilled nursing or rehabilitation care, but not for those whose needs are for long-term assistance with the activities of daily living (such as bathing or dressing). The first 20 days of a SNF stay are paid in full, but beneficiaries pay substantial cost-sharing for subsequent days ($148 per day for days 21–100 in a benefit period in 2013, and all costs for each day after day 100 in a benefit period) [4]. Though originally contingent on a hospital stay, under current law Medicare’s home health benefits are generally available to beneficiaries requiring skilled nursing, therapy, or other professional (not personal care) services. These benefits are subject to limits—beneficiaries must not only have skilled needs, but must also be “homebound” and in need of only “intermittent” not full-time care—and only beneficiaries who satisfy all these requirements are eligible to receive part-time personal aide services to assist with daily activities [5].

Restricted Medicare benefits have, for the most part, produced limited coverage. In 2011, the average length of a Medicare-covered stay in a nursing home facility was 27.2 days [6]. Home aide visits accounted for 15.0 % of total home health visits or about five visits per home health user per year [7]. A recent legal settlement has required CMS to clarify that home health coverage is not contingent on evidence of patient improvement. But the skilled care requirement and other conditions on coverage remain intact to limit Medicare’s coverage [8].

In contrast, Medicaid is the nation’s primary source of public financing for long-term care, available to Medicare beneficiaries and other people who are either poor or exhaust all their resources in purchasing medical and long-term care services. In 2009, Medicaid financed 61.5 % of national long-term care spending ($203.2 billion) and paid in part or in full the costs of about two-thirds of the nation’s 1.5 million nursing home residents [9].

Challenges in Care for Dual Eligibles

In theory, Medicare and Medicaid have different and potentially complementary responsibilities for beneficiaries participating in both programs (or dual eligibles), including the 30 % of dual eligibles who receive Medicaid-financed long-term care [10]. In practice, however, the two programs have overlapping responsibilities. As a result, neither program assumes accountability for assuring quality care, and providers have powerful incentives to shift costs from one program to the other.

Research shows that dually eligible nursing home residents experience higher rates of preventable hospital admissions than Medicare or private-pay patients with similar health status, that lower Medicaid payment rates to nursing homes are associated with higher rates of hospitalization, that potentially preventable admission rates are close to 40 %, and that potentially avoidable rehospitalization rates range from 18 to 40 % [11, 12].

Two-thirds of these potentially avoidable hospital admissions came from nursing homes, where the incentives to avoid or shift costs are particularly strong. Nursing homes serve both short-term Medicare patients and long-term Medicaid patients. But Medicare payment rates are significantly higher than Medicaid’s. Nursing homes therefore benefit financially when they transfer Medicaid patients to hospitals—substituting treatment in the hospital for their own investment in care and gaining from Medicare’s higher payment rates at the start of the patient’s return stay. These transfers are further encouraged by nursing homes’ incentives to avoid high-cost Medicaid patients (given the way Medicaid rates are set) and by Medicaid “bed-hold” policies, under which states guarantee the readmission of transferred patients by paying nursing homes a daily rate to hold their beds [13].

How to Improve Coordination of Care and Reduce Costs for Dual Eligibles

For dual eligibles—almost half of the Medicare population who needs long-term care—the potential for better coordination across health and long-term care services for people who need both is enhanced by the creation of the Medicare-Medicaid Coordination Office within CMS. Since its establishment, this office has moved aggressively to improve the delivery of primary, acute, behavioral health and long-term services and supports for Medicare-Medicaid enrollees, and to better align and integrate the financing of these two programs [14].

Through demonstrations, negotiated between states and the federal government, CMS will allow states to rely on managed care or other mechanisms, to which Medicare and Medicaid will both contribute to provide both acute and long-term care to dual eligibles. Per capita contributions to financing from each program must be lower than projected per capita spending—a requirement justified largely on assumptions about reductions in unnecessary, expensive hospital services that care management is supposed to produce. In 2012, more than 26 states submitted proposals to the State Demonstrations to Integrate Care for Dual Eligible Individuals Initiative, and CMS is working with states on Memoranda of Understanding (MOUs) to implement demonstrations [15]. As of early 2013, nine states had signed MOUs with CMS, almost all of which are moving forward with capitated program. Only one state, Massachusetts, with a capitated program has actually begun to enroll beneficiaries in its demonstration [16]. Although others are scheduled to begin enrollment in the near future, they have not yet begun negotiating contracts with managed care plans—a task that has proved challenging, given the effort both to reduce spending and assure access to care.

Consolidating Medicare and Medicaid payment streams into a single, capitated payment that has the potential to decrease current perverse incentives to shift costs between programs, as well as to provide greater flexibility to clinicians to do what is in the patient’s best interest rather than do what conforms to payment specifications. But capitation’s powerful incentives to spend less can also reduce access to quality care. This concern is heightened by the inexperience of health plans in general, and of Medicaid managed care plans in particular, in caring for the complex social and medical needs of the dual eligible population. Patients dually eligible for both Medicare and Medicaid present unique clinical challenges requiring both specialized clinical expertise and a commitment to care coordination across providers and community-based resources. Further, the dual eligible population is extremely heterogeneous, with specific and complex health problems with which most health plans and providers may not have experience. Dually eligible patients are poorer and sicker than their non-dual Medicare contemporaries: 86 % live below 150 % of the Federal Poverty Level (versus 22 %), and 50 % report that they are in fair to poor health (versus 22 %). Dual eligible beneficiaries are also more likely to report limitations in activities of daily living (44 % versus 26 %), reside in a long-term care facility (13 % versus 1 %), suffer from dementia and/or serious and persistent mental illness (58 % versus 25 %), and more frequently experience multiple chronic conditions (55 % versus 44 %) [17].

Accordingly, although conceptually advantageous to dual eligible beneficiaries, these demonstrations could fundamentally alter financing and delivery for as many as two million people nationwide, based on assumptions—not evidence—that the proposed arrangements will generate better care at lower cost. Efforts to engage such large populations and reduced funding up front distinguish these dual eligible demonstrations from most other payment and delivery reforms CMS is pursuing under the Medicare program. Typically, these and other demonstrations are relatively small scale, with savings shared between Medicare and participating provider organizations if they emerge. By contrast, both Medicare and Medicaid payments will be reduced from the outset of these demonstrations, despite the inexperience of both Medicare and Medicaid managed care plans with this vulnerable high risk population and the dearth of evidence on their ability to provide quality care at lower costs. Given this inexperience, taking savings up front raises concerns that plans may seek to reduce expenses by limiting both provider payments and access to care, rather than promoting efficiency. In theory, these state initiatives are time-limited demonstrations, with continued operation and expansion contingent on demonstrable evidence of reduced costs and/or improved quality at equal costs. However, past experience with negotiated demonstrations or waivers in state Medicaid programs raises questions about the ability of policymakers to unwind large scale financial and delivery arrangements to which states are administratively and financially committed [18].

Regardless of the merits and eventual findings from this integrated Medicare and Medicaid payment demonstration, major delivery reform aimed only at the dual eligible population excludes roughly half the Medicare beneficiaries who have impairments, but are not Medicaid-eligible, whose care would also be improved by better coordination across acute and long-term care services. Moreover, it shifts to states responsibility for better coordination of Medicare-financed care for dually eligible beneficiaries at high risk of hospitalization—an objective that is at the heart of Medicare payment and delivery reforms promoted by the Affordable Care Act (ACA).

Why Medicare Should Focus on Care Coordination for Medicare Beneficiaries with Functional Impairments [19]

The Medicare payment and delivery reform agenda, initiated by the ACA, aims to improve quality and save money by reducing provision of unnecessary and expensive care. Although CMS is well underway in pursuit of this goal, its initiatives have focused overwhelmingly on people whose chronic conditions generate a need for complex medical care, without regard to the need for assistance with routine activities of life (such as bathing, dressing, and toileting), that is, the need for LTTS.

This approach reflects unfortunate myopia. The 15 % of Medicare beneficiaries who have both chronic illness(es) and personal care needs account for about a third of all Medicare spending (Fig. 9.1). In comparison, enrollees with substantial chronic illness—as indicated by the presence of three or more chronic conditions, but without functional impairment—represent roughly equal shares of the Medicare population and Medicare spending. Thus, it is the high cost associated with enrollees with the combination of chronic illness and functional limitations—and not the cost of those with multiple chronic conditions alone—that drives the disproportionate share of Medicare spending associated with enrollees with multiple chronic conditions.

Fig. 9.1
figure 1

Chronic conditions and functional limitations, not chronic conditions alone, explain high per person Medicare costs. Source: Komisar HL, Feder J. “Transforming Care for Medicare Beneficiaries with Chronic Conditions and Long-Term Care Needs: Coordinating Care Across All Services.” (Washington, DC: Georgetown University, October 2011)

Full size image

Average Medicare spending for chronically ill beneficiaries with functional limitations is twice as high as for beneficiaries with three or more chronic conditions and no functional limitations—about $15,800 compared with $7,900 in 2006. While about a quarter of Medicare beneficiaries with chronic conditions and functional limitations reside in nursing homes, the majority do not—and for both groups, Medicare spending is significantly higher than for beneficiaries with three or more chronic conditions and no functional limitations. The pattern of higher spending for chronically ill people with limitations, as compared to chronically ill people without limitations holds true no matter what the number of chronic conditions. Among enrollees with chronic conditions and no functional limitations, average annual spending in 2006 ranged from $2,800 (for people with one chronic condition) to $10,200 (for those with five or more chronic conditions). In comparison, the amount for those with functional limitations ranged from about $13,000 for those with one to three chronic conditions to nearly $19,000 for those with five or more chronic conditions—more than twice as high as those without functional limitations at every level of chronic illness.

Not surprisingly, beneficiaries with functional limitations and long-term care needs are among Medicare’s highest spenders (Fig. 9.2). Nearly half the beneficiaries in the top 20 % of Medicare spenders have functional limitations as well as chronic conditions. Among Medicare’s top five percent of spenders, the proportion is even higher. Three out of five of these highest-cost Medicare beneficiaries are chronically ill people who need long-term care.

Fig. 9.2
figure 2

Medicare enrollees with chronic conditions and functional limitation are over half of Medicare’s highest spenders. Source: Komisar HL, Feder J. “Transforming Care for Medicare Beneficiaries with Chronic Conditions and Long-Term Care Needs: Coordinating Care Across All Services.” (Washington, DC: Georgetown University, October 2011)

Full size image

Enrollees with the combination of chronic conditions and long-term care needs are far more likely than other beneficiaries to use hospital inpatient and emergency department services. As a result, average spending per person on hospital services was nearly double for enrollees with chronic conditions and functional limitations, compared to those with three or more chronic conditions only ($4,600 versus $2,500 in 2006). Higher hospital and post-acute spending are the largest sources of the overall difference in average spending between these groups.

Improving Medicare’s Care Coordination: Innovations and Reforms Under the Affordable Care Act [20]

The Centers for Medicare and Medicaid Services are actively engaged in using new authority for innovation under the ACA to promote Medicare delivery innovations, aimed largely at reducing unnecessary hospital costs. Past experience demonstrates that in the absence of targeting beneficiaries at high risk of inappropriate and high-cost hospital use, care coordination is unlikely to produce significant savings [21]. Targeting innovations to people with chronic conditions and functional limitations—and coordinating the full range of their service needs—offers a path to achieving the cost savings and quality improvements that policymakers aim to achieve.

Although limited in number, programs with these characteristics have shown promise in reducing hospital use, nursing home admissions, and costs for selected patient groups while improving quality of care. Key elements of these models include:

  • A core of comprehensive primary medical care

  • Assessment of patients’ long-term service and support needs, plus caregiver capabilities and support needs

  • Coordination of long-term care as well as medical care (same person or team involved in coordinating both)

  • Ongoing collaboration and relationship among care coordinators, physicians, patients, and families, with attention to supporting patients during transitions between care settings

  • Monthly per-person payments to cover coordination costs Medicare does not cover

CMS can build on these delivery reform initiatives to create a Medicare platform that encourages innovations focused on beneficiaries with functional limitations and coordinating services across the continuum for both their long-term care and their medical needs. Adoption of these practices would be facilitated by accommodating the varied size and capacity of primary and specialist-level physician practices, and by improving upon, but not eliminating, the fee-for-service payment system. These interventions would:

  • Target: Zero in on people most at risk of preventable hospital use to maximize impact on reducing unnecessary and costly care

  • Customize: Allow different approaches—both networks that hire and manage care coordinators and coordinators employed by physicians’ practices—in order to maximize provider participation

  • Pay for coordination: Pay monthly amounts per enrolled patient, sufficient to support currently uncovered care coordination services

  • Hold providers accountable: Hold participating providers accountable for savings that offset these care coordination payments and pay providers—who satisfy quality standards—a share of savings if spending is less than projected

  • Make states accountable: Encourage state participation for dual eligibles provided states, like participating providers, actually invest in delivery

Investment in policies and programs aimed directly at patients with chronic conditions and functional limitations can generate much needed lessons on how to improve their care. But these initiatives should not be designed to isolate the functionally impaired population in tailored delivery or to limit lessons learned only to this patient group. The ultimate goal of targeting delivery reforms to Medicare beneficiaries with chronic conditions and functional impairments is to assure that we learn as quickly as possible what it will take to assure the whole system’s capacity to serve people with functional limitations as well as medical care needs appropriately and effectively, wherever and whenever these needs arise.

Conclusion

Detailing potential new models to improve care for people with chronic conditions and functional impairments reveals that their objectives and approach are complementary to what many envision for broadening the role of palliative care for the same target population. Specific elements of palliative care, such as vigilant attention to symptom relief and developing and following a person-and family-determined care plan, should be core elements of the care models being tested. Indeed, more interaction between palliative care practitioners and designers and implementers of these new models of care can assure that core elements of palliative care are incorporated into service design.

The other, perhaps less optimistic, message of this chapter is to emphasize that, currently, a core element of what is needed to support both palliative care and ongoing chronic care management are LTTS to help patients and their caregivers get through the day and remain safely in their preferred place—at home. The Medicare pilot test we propose would assess the need for LTTS—for patients and caregivers—and would coordinate these services and supports with the acute care services for these complex patients. But the pilot test model we propose does not contemplate actually financing long-term care on a Medicare platform. Financing remains a private and Medicaid responsibility. The absence of broader financing clearly remains a challenge to the achievement of equitable and accessible high value health care for Medicare beneficiaries and to the achievement of palliative care for Medicare beneficiaries—care that is first and foremost person and family centered and determined; is based on a care plan defined by what matters most to the patient and their family; provides effective symptom management to prevent crises; and ensures consistent and coordinated communication of care across settings and over time.