Reducing Avoidable Hospitalizations for Medicare-Medicaid Enrollees in Nursing Facilities: Issues and Options for States

States that contract with health plans to provide comprehensive Medicare and Medicaid services for dually eligible enrollees in nursing facilities can work with these plans to reduce avoidable hospitalizations. Since the health plans are fully responsible for Medicare hospital, physician, skilled nursing facility, and prescription drug services, as well as Medicaid long-term nursing facility services, they have financial incentives and many of the tools needed to reduce avoidable hospitalizations. In contracting with health plans, states can promote efforts to reduce avoidable hospitalizations through contract requirements, performance incentives, and performance improvement projects. Health plans themselves, with encouragement and support from states, can use the tools they have to work with nursing facilities, hospitals, physicians, pharmacists, enrollees, and their families to achieve that goal. States can lay a firmer groundwork for this by making changes in Medicaid fee-for-service nursing facility payment systems to reduce incentives for hospitalizations.