On September 24th, I was at the Heritage Foundation with state Medicaid officials and others discussing what states could do to improve how long-term care services are provided and financed.

The session was organized by Dennis Smith of Heritage. Dennis was, until earlier this year, the head of the Medicaid program at the Centers for Medicare and Medicaid Services. He is a true professional with much valuable experience, having served previously in state government in Virginia and California.

I spent a good portion of my time making the point that the federal government is in no position to put more resources on the table for another elderly health care entitlement (my entire written presentation can be seen here).

But most of the day was spent on the more productive topic of what to do about the so-called “dual-eligibles.” These are the beneficiaries eligible for both Medicare benefits and Medicaid coverage for nursing home and other long-term care services.

As matters stand, it is very difficult for states to improve efficiency in long-term care services because many elderly and disabled beneficiaries needing such services get their Medicare-covered services in an unmanaged, fee-for-service environment.

Chuck Milligan of the Hilltop Institute observed that, ideally, the “duals” get a combined Medicare and Medicaid entitlement paid as capitation to a health plan which would be responsible for providing them the full spectrum of services. There’s plenty of evidence that this coordinated approach to care across settings produces better health outcomes at lower cost than unmanaged fee-for-service.

The main barrier to building such a system is Medicare’s structure and incentives. Four out of five Medicare beneficiaries have access to retiree wrap-around insurance or supplemental coverage that makes fee-for-service Medicare the most attractive option around. Indeed, it is hard to blame Medicare beneficiaries for choosing insurance which offers unlimited choice of providers and no cost to them for using more services.

Unfortunately, by the time these fee-for-service beneficiaries need long-term care, it is often too late to prevent nursing home stays with better care management in the home.

There are many regulatory, political, legal, and financial hurdles to building better coordination between Medicare and state Medicaid programs. Still, the conversation last week revealed widespread recognition of the problem and some possible ways to move forward. For that reason alone, the session was highly valuable.

Details for the full event can be found here. An audio recording is available here, and video below: