Nov, 16 2018

Washington Managed Fee-for-Service Demonstration: 2015 and 2016 Medicare Actuarial Savings Report

Tim Engelhardt
Director, Medicare-Medicaid Coordination Office,

Washington Managed Fee-for-Service Demonstration: 2015 and 2016 Medicare Actuarial Savings Report

Today, the Centers for Medicare & Medicaid Services (CMS) released a report that demonstrates how empowering states can help reduce costs. The report summarizes the final Medicare Parts A & B actuarial savings analysis of the Washington managed fee-for-service (MFFS) demonstration under the Medicare-Medicaid Financial Alignment Initiative for 2015 and a preliminary analysis of Medicare savings for 2016. The MFFS model, tested under the authority of CMS’ Center for Medicare and Medicaid Innovation, is designed to provide enrollees dually eligible for Medicare and Medicaid with a better care experience and to better align the financial incentives of the Medicare and Medicaid programs in order to reduce expenditures and enhance quality of care. Under the model, CMS and a state enter into an agreement through which the state would be eligible to benefit from savings resulting from initiatives that improve quality and reduce costs for both Medicare and Medicaid. This demonstration leverages Medicaid health homes to improve service quality and integration while reducing costs of care for high-risk, high-cost dually eligible beneficiaries in Washington State.

Nationally, more than 11 million Americans are enrolled in both the Medicare and Medicaid programs. A longstanding barrier to improving quality and reducing costs of care for dually eligible enrollees has been a lack of alignment and cohesiveness between the two programs, including often misaligned incentives for payers and providers. The Washington demonstration tests new mechanisms to coordinate services across Medicare and Medicaid for dually eligible beneficiaries in Washington State. Through this partnership, both CMS and the state share in savings resulting from initiatives that improve quality and reduce costs for both Medicare and Medicaid.

Analysis for the 2015 and 2016 performance years of the Washington demonstration show final gross Medicare savings of $30 million and preliminary gross Medicare savings of $42 million, respectively. The Washington demonstration has saved Medicare a gross total of $107 million over the first three demonstration periods. Future analysis will include Medicaid spending estimates as the data become available.

The report shows:

  • Savings are largely driven by reductions in inpatient and professional services. For all cohorts and both years, the largest savings were achieved for inpatient hospital costs, home health agency costs, and professional services, and
  • Aggregate savings are largest among beneficiaries in home and community based service (HCBS) waiver programs. Medicare savings were highest among beneficiaries in HCBS waiver programs who were 65 or older, but without serious and persistent mental illness.

This model supports empowering states in their efforts to drive innovation to improve quality and health outcomes. The results of the Washington demonstration to date are a promising example of state-led innovation serving the highest-need dually eligible individuals.

The report is posted on the CMS website: https://innovation.cms.gov/initiatives/Financial-Alignment/

Additional information about the Washington Health Home demonstration is available on the Medicare-Medicaid Coordination Office website: https://www.cms.gov/Medicare-Medicaid-Coordination/Medicare-and-Medicaid-Coordination/Medicare-Medicaid-Coordination-Office/FinancialAlignmentInitiative/Washington.html

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