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CMS creates direct contracting model to serve individuals dually eligible for Medicare and Medicaid

The new opportunity will test how financial risk-sharing can reduce Medicare expenditures while preserving the quality of care for beneficiaries.

Mallory Hackett, Associate Editor

The Center for Medicare and Medicaid Innovation has created a new direct contracting model to enable Medicaid Managed Care Organizations to better serve enrollees who are dually eligible for Medicare and Medicaid.

The innovation center created a new type of direct contracting entity that allows Medicaid MCOs to participate in the global and professional options of the direct contracting model.

Currently, Medicaid MCOs have no incentive to coordinate care for their dually eligible beneficiaries in a way that reduces Medicare fee-for-service costs, CMS said in its announcement.

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The new opportunity will test how financial risk-sharing arrangements can reduce Medicare expenditures while preserving or enhancing the quality of care for beneficiaries. It will also create the previously lacking incentives and flexibilities for Medicaid MCOs to better coordinate care for dually eligible beneficiaries.

To participate in the direct contracting model, MCO-based direct contracting entities must obtain a letter of support from their state Medicaid agency. CMS said it would provide additional information about the content of this letter in the near future.

In early 2021, CMS will release a request for applications for all professional and global direct contracting entities and Medicaid MCOs will begin participating in the model in January 2022.


CMS believes that creating this incentive opportunity will help dually eligible individuals get access to a full scope of care, including primary, acute, long-term, behavioral and social care.

Medicaid MCOs participating in the new direct contracting opportunity will be able to take actions to better serve their dually eligible individuals such as: connecting beneficiaries to a primary care provider, targeting coordinated care resources at beneficiaries at risk of high Medicare spending, training and deploying in-home aides who can provide Medicaid services, and creating value-based purchasing agreements with nursing facilities.


Last year, more than 12 million Americans were enrolled in both Medicare and Medicaid, according to CMS. This population is especially at risk, with 70% of dually eligible individuals having three or more chronic conditions and more than 40% having at least one mental health diagnosis.

In November, the innovation center announced that 51 provider and accountable care organizations are participating in direct contracting in the upcoming year. The 51 direct contracting entities serve beneficiaries in 39 states as well as in the District of Columbia and Puerto Rico.


"Beneficiaries eligible for both Medicare and Medicaid are some of our most vulnerable neighbors and friends, and the COVID-19 pandemic has made this abundantly clear as this population had some of the highest rates of hospitalizations for COVID-19," said CMS Administrator Seema Verma.

"For too long we have struggled to deliver acceptable outcomes for this vulnerable population, but today's model is a game-changer. It represents a significant step toward addressing these longstanding issues and ensuring they receive the coordinated care they rightfully deserve."

Twitter: @HackettMallory
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