Risk adjusting for Medicaid participation in Medicare Advantage

Determining appropriate capitated payments has important access implications for dual-eligible Medicare Advantage (MA) members. In 2017, MA plans began receiving higher capitated payments for beneficiaries with full vs partial Medicaid when payments started being risk adjusted for level of Medicaid benefits instead of any Medicaid participation. This approach could favor MA plans in states with more generous Medicaid programs where more beneficiaries qualify for full Medicaid and thus a higher capitated payment. To understand this issue, we examined adjusted Medicare spending for dual-eligible beneficiaries across states with differing Medicaid eligibility criteria. Retrospective analysis of 2007-2015 traditional Medicare data for dual-eligible beneficiaries 65 years and older. We compared predicted per-beneficiary spending levels after adjusting for any Medicaid participation and for level of Medicaid benefits across states with varying Medicaid eligibility requirements. States with the most generous Medicaid requirements had more dual-eligible beneficiaries with full Medicaid compared with the most restrictive states (median, 82% vs 55%). Nationally, Medicare spending levels were 1.3 times greater for full vs partial Medicaid participants (range across states, 0.8-1.7). When per-beneficiary spending was adjusted for level of Medicaid benefits, rather than any Medicaid participation, states with more generous Medicaid eligibility had larger gains in predicted spending per dual-eligible beneficiary than states with less generous Medicaid coverage (1.7% vs 1.3% increase). Distinguishing between partial and full Medicaid in MA payments may disproportionately increase MA payments in states that have more full Medicaid beneficiaries due to more generous Medicaid eligibility.