Serving Older Adults with Complex Care Needs: A New Benefit Option for Medicare


Medicare was originally designed to protect beneficiaries from the financial burden of acute episodes of illness. As lifespans lengthen, Medicare must adapt to serve beneficiaries with substantial long-term physical or cognitive impairment who need personal care assistance. These beneficiaries often incur high out-of-pocket costs for Medicare-covered services as well as home and community care not covered by Medicare. This latter category of care is often key to continued independence. To improve Medicare’s capacity to serve such beneficiaries, and to prevent unnecessary institutionalization, this issue brief, one in a series on Medicare’s future challenges, proposes a complex care benefit option that would include home and community services, and describes how it might be structured to balance the goals of improving care for beneficiaries and ensuring affordability.


Analysts of the Medicare program have long noted that it does a poor job serving those with multiple chronic illnesses. Most conspicuous is its lack of coverage for home- and community-based services, which enable seniors with complex conditions to live independently.

While home- and community-based services are covered through state Medicaid programs, less than a third of Medicare beneficiaries with complex care needs are covered by Medicaid (the so-called dual eligibles). Low- and modest-income Medicare beneficiaries not covered by Medicaid face significant obstacles—financial and otherwise—to obtaining these services. Even beneficiaries who can afford to pay out of pocket for noncovered services can find it challenging to identify reliable, competent personal care providers. Physicians, nurses, and other traditional health care providers often cannot make knowledgeable recommendations about community services, such as senior day care centers, support for caregivers, or other personal care providers. This can even be true for individuals in Medicare Advantage Special Needs Plans (Medicare managed care plans that cover dual eligibles and facilitate coordination with Medicaid benefits), unless the contracting entity offers its enrollees a highly coordinated program.

Medicare has tried an array of approaches to delivering care more effectively to high-risk Medicare beneficiaries, with mixed results. Although the proportion of beneficiaries requiring complex care for multiple conditions is relatively small—an estimated 17 percent—care provided to this group accounts for 32 percent of Medicare spending on noninstitutionalized beneficiaries. Figuring out how to improve benefits for this population could have a positive impact on the entire Medicare program and on overall costs.

A new complex care benefit option for Medicare beneficiaries could improve patient and caregiver experience, help beneficiaries continue living at home, and reduce burdens on families who now try to patch together the resources needed to pay for care. One challenge is how to design a payment structure for a broader set of services that appropriately rewards providers of home and community care, thus helping to spread successful models of care more broadly.

This issue brief describes the characteristics and needs of Medicare beneficiaries who require complex care, the goals of a new benefit option that could be made available to this population, and a proposed structure that would both improve care and achieve savings.

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