Financial Alignment Initiative


A longstanding barrier to coordinating care for Medicare-Medicaid enrollees has been the financial misalignment between Medicare and Medicaid. To begin to address this issue, CMS will test two models for States to better align the financing of these two programs and integrate primary, acute, behavioral health and long term services and supports for their Medicare-Medicaid enrollees. 

These two models include:

  • Capitated Model: A State, CMS, and a health plan enter into a three-way contract, and the plan receives a prospective blended payment to provide comprehensive, coordinated care. 
  • Managed Fee-for-Service Model: A State and CMS enter into an agreement by which the State would be eligible to benefit from savings resulting from initiatives designed to improve quality and reduce costs for both Medicare and Medicaid.

CMS is interested in testing these models across the country in programs that collectively serve up to 2 million Medicare-Medicaid enrollees.  All programs will be rigorously evaluated as to their ability to improve quality and reduce costs. Meaningful engagement with stakeholders and ensuring beneficiary protections will be a crucial part of developing and testing these models.

The 15 States that received design contracts under the State Demonstrations to Integrate Care for Dual Eligible Individuals may chose to pursue these models and use their planning contract and stakeholder processes to support the development of the demonstration proposal, described below.

State Financial Alignment Proposals

To participate in the Financial Alignment Demonstration, each State had to submit a proposal outlining its proposed approach for the Financial Alignment Demonstration.  A total of 26 States submitted proposals, and those with active proposals are listed below.  As indicated in the SMD letter, State demonstration proposals are evaluated against standards and conditions that CMS is requiring of all States seeking to participate in the demonstration. Additional information on the proposal process, including a list of standards and conditions, is available to download below.  Please note, submission of a State demonstration proposal is an important step – but not the final step – toward demonstration approval.

Arizona Demonstration ProposalNew York Demonstration Proposal
California Demonstration ProposalNorth Carolina Demonstration Proposal
Colorado Demonstration ProposalOhio Demonstration Proposal
Connecticut Demonstration ProposalOklahoma Demonstration Proposal
Hawaii Demonstration ProposalOregon Demonstration Proposal
Idaho Demonstration ProposalRhode Island Demonstration Proposal
Iowa Demonstration ProposalSouth Carolina Demonstration Proposal
Illinois Demonstration ProposalTennessee Demonstration Proposal
Massachusetts Demonstration ProposalTexas Demonstration Proposal
    Addendum to the Massachusetts ProposalVermont Demonstration Proposal
Michigan Demonstration ProposalVirginia Demonstration Proposal
Minnesota Demonstration ProposalWashington Demonstration Proposal
Missouri Demonstration ProposalWisconsin Demonstration Proposal

As part of the proposal review process, CMS hosted a public comment period for each State proposal.  These periods have closed, but interested parties can still review the State proposals above and read the public comments submitted to CMS.  Click here to read public comments submitted to CMS.

State Financial Alignment Demonstration Memoranda of Understanding (MOUs)

When a State meets the standards and conditions for the Financial Alignment Demonstration, CMS and a State will develop a Memorandum of Understanding (MOU) to establish the parameters of the initiative.

Executed MOUs and related documents are available for download below.

Background Information:

States have an option to pursue either or both the Capitated or the Managed Fee-for-Service financial alignment models. In July 2011, CMS released a State Medicaid Directors' letter (PDF) to describe the two new options. As described in the letter, States interested in the new financial alignment opportunities were required to submit a letter of intent (LOI) by October 1, 2011.

Joint Rate-Setting Process Under the Capitated Financial Alignment Demonstration

The purpose of this document is to provide States and other interested parties with additional information on the mechanism for developing payment rates for plans responsible for coordinating the full array of primary, acute, behavioral health and long-term supports and services for Medicare-Medicaid enrollees under the demonstration.  Click here to download (PDF).

Information  for Interested Plans

CMS has held a series of guidance conference calls related to capitated Financial Alignment model for interested plans. Go to a list of these audio recordings for you to download.

Download the enrollment assumptions for the Financial Alignment Demonstration States that are proposing a 2013 effective enrollment date.  

Additional information on Part D low-income subsidy cost-sharing amounts by Medicare-Medicaid Plans and operational implications for prescription drug event data and plan benefit package submissions is also available below and could be downloaded here.  

Funding to Support Options Counseling for Medicare-Medicaid Enrollees

CMS has announced a funding opportunity to support outreach, education, and counseling for Medicare-Medicaid enrollees eligible for the Financial Alignment Demonstration through the State Health Insurance Programs (SHIPs) and the Aging and Disability Resource Centers (ADRCs). More information on this opportunity is available in the Fact Sheet  and the Funding Opportunity Announcement  for this opportunity.