Medicare and Medicaid Duals Integration "Cliff"? Not So Fast

Overview:

• The Calendar Year (CY) 2025 Medicare Advantage (MA) Technical Notice finalized provisions to push increased alignment of the dually eligible population in 2027 and 2030.
• Dual Eligibles are only 17% of total MA enrollment, but closer to 35-40% of total spending and a focus area for insurers.
• Investors may expect a major disruption in the duals market, but our analysis suggests the effect will be much more nuanced and likely less impactful.
• We believe those with the largest overlay of Medicaid and Dual Special Needs (D-SNP) lives are best positioned long term to capitalize on the provisions of this rule.

The TD Cowen Insight

The final CY 2025 MA and Part D Technical Notice includes provisions to promote closer alignment of MA dual special needs plans (D-SNPs) and Medicaid Managed Care Organizations (MCOs) in 2027 and 2030. Our nuanced analysis suggests the implementation will be less dramatic than is generally understood.

Our Thesis

A cursory reading of the provisions may lead investors to expect a dramatic shift in D-SNP enrollment starting in 2027 by reducing the number of allowable plans and forcing disenrollment of D-SNP members of insurers without a Medicaid Managed Care (MMC) plan in the same service area. This would have disproportionately advantaged companies with expansive Medicaid businesses. However, our analysis leads to more nuanced conclusions:

• We see the provision having a minimal overall impact on D-SNP enrollment with much of the rule's implementation left to interpretation by states' individual Medicaid programs.
• The provisions create advantages for MCOs with greater Multi-State Medicaid Database (MDCD) and MA alignment by creating additional enrollment opportunities that could benefit their respective D-SNP market shares.
• We see this rule as more longitudinally favorable to more aligned MCOs versus “day 1" impactful, with no meaningful enrollment “cliff” at 2027 and 2030.
• We expect insurers will continue to be aggressive in their MMC procurement strategies to maintain and grow their D-SNP businesses.

What Is Proprietary?

We’ve compiled and analyzed numerous industry statistics on the D-SNP and MDCD markets and public company commentary. Our thesis is also informed by several key opinion leaders (KOL) interviews and discussions with industry experts and insurer executive leadership. We compiled a set of scenarios and frequently asked questions (FAQs) for investors answering the most impactful questions.

Financial and Industry Model Implications

The impacts of Medicaid procurement wins, losses and enrollment changes through 2030 make extrapolating the future financial impacts challenging and imprecise. That said, we see the advantages of overlaying Medicaid and D-SNP as directionally positive if not distinctly advantageous.

What To Watch

The Proposed CY 2027 MA Technical Notice, likely published in November 2025, is the next key catalyst outside legislative intervention or Centers for Medicare and Medicaid Services (CMS) publishing a separate proposal. We also look to states that do not currently have Medicaid managed care to see if they change posture or indicate moving in this direction. Other company-specific actions we are watching include:

• Medicaid and D-SNP market entrances and exits by MCOs through Request for Proposal (RFP) wins, losses,
• annual shifts in D-SNP market share,
• annual D-SNP benefits changes (visible Oct 1 on PlanFinder) and
• further discussion of duals integration on earnings calls and company investor presentations.

Other potential industry dynamics we are keeping an eye on include:

• state-specific integration efforts,
• state-specific implementation and interpretation of the duals integration rule,
• lobbying efforts by the managed care industry/states regarding duals integration and
• potential clarification/interpretation guidance from CMS on duals integration.

Potential Key Strategic Actions by Companies

We look for MCOs to bid for Medicaid or Integrated Duals RFPs where markets strategically align with their existing MA and/or D-SNP presences. MCOs could develop and stand up robust D-SNP products in markets where they already have a Medicaid presence and are looking to grow or break into D-SNP. Also, MCOs could adjust their marketing and outreach strategies due to new Significant Economic Presence (SEP) provisions and based on their existing Medicaid market position, or lack thereof, in markets where they are trying to gain or maintain D-SNP share.

Background

The Centers for Medicare & Medicaid Services (CMS) is the U.S. federal agency that administers Medicare and works with states to administer Medicaid. In 2024, CMS issued the CY25 Medicare Advantage (MA) Technical Notice, which among other actions implemented provisions to push greater alignment of Medicaid Managed Care (MMC, which refers to a system where states contract with private health insurers called Managed Care Organizations, or "MCOs" to administer Medicaid benefits to beneficiaries) and dual special needs (D-SNP, which refers to private health insurance plans for individuals that are eligible for both Medicare and Medicaid) plans beginning in 2027.