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Financial Alignment Initiative

The Financial Alignment Initiative (FAI) was authorized under Section 3021 of the Patient Protection and Affordable Care Act (P.L. 111-148, as amended) to test ways to improve care for dually eligible beneficiaries and reduce program costs by aligning financing and coordinating care across Medicare and Medicaid. As of February 2020, approximately 435,000 beneficiaries were enrolled in the demonstration in 11 states: California, Illinois, Massachusetts, Michigan, Minnesota, New York, Ohio, Rhode Island, South Carolina, Texas, and Washington. The demonstrations, the earliest of which began enrolling beneficiaries in 2013, were originally scheduled to last for three years but many were subsequently extended. Demonstrations in two states, Colorado and Virginia, ended in 2017 . New York’s FIDA demonstration–one of two in state –ended in 2019. Those still in operation are scheduled to end by 2022 unless CMS grants further extensions.

Key Features of Financial Alignment Initiative Demonstrations


Type of model

Beneficiaries enrolled1

Scheduled end date

California Capitated 110,690 December 31, 2022
Illinois Capitated 57,415 December 31, 2022
Massachusetts Capitated 26,590 December 31, 2020
Michigan Capitated 40,182 December 31, 2020
Minnesota Alternative 39,315 December 31, 2020
 New York, FIDA-IDD Capitated     1,593 December 31, 2020
Ohio Capitated 73,365 December 31, 2022
Rhode Island Capitated 13,578 December 31, 2020
South Carolina Capitated   18,016 December 31, 2020
Texas Capitated 42,902 December 31, 2020
Washington MFFS 11,544 December 31, 2020
Notes: FFIDA-IDD is Fully Integrated Duals Advantage – Intellectual and Developmental Disabilities. MFSS is managed fee for service. Enrollment totals are for February 2020. Demonstration scheduled end dates may be extended at the joint discretion of CMS and the state.
Sources: MACPAC, 2020, analysis of CMS monthly enrollment reports and state memoranda of understanding, Minnesota Department of Human Services health care programs managed care enrollment totals as of February 2020, and Washington State Health Care Authority FFS dual eligible demonstration monthly report as of February 2020.
FAI models

Most states choosing to participate in the FAI established either a capitated model or a managed fee-for-service model. Minnesota established an alternative model focused on administrative alignment.

Capitated model. The capitated model involves a three-way contract between the Centers for Medicare & Medicaid Services (CMS), the state, and participating health plans, referred to as Medicare-Medicaid Plans (MMPs), to enable states to test models to integrate primary, acute, behavioral health, and long-term services and supports for their dually eligible beneficiaries. This model is being tested by 9 of the 11 participating states, and includes most of the FAI’s 435,000 enrollees. One state, New York, operated two demonstrations under this model: the Fully Integrated Duals Advantage (FIDA) and the Fully Integrated Duals Advantage for Individuals with Intellectual and Developmental Disabilities (FIDA-IDD). While New York’s FIDA demonstration ended in 2019, the FIDA-IDD demonstration is ongoing.

Managed fee-for-service model. This model involves an agreement between CMS and the state in which the state is eligible to benefit from a portion of any savings resulting from initiatives to improve quality and reduce costs for both Medicaid and Medicare. Originally two states were testing this model, Colorado and Washington, but Colorado’s demonstration ended in December 2017.

Alternative model. Minnesota obtained permission from CMS to test an alternative model that focuses on aligning administrative aspects of the two programs to improve beneficiary experience. Minnesota’s demonstration began in 2013 as part of the state’s longstanding Minnesota Senior Health Options (MSHO) program and was not designed to result in any new enrollment.

For more information on the FAI, see the issue brief and accompanying state fact sheets on the Financial Alignment Initiative for Beneficiaries Dually Eligible for Medicare and Medicaid.

For more information on beneficiary experiences with the FAI, see the contractor report on Experiences with the Financial Alignment Initiative in Massachusetts, Ohio, and California.

For more information on enrollment in the FAI, read the contractor report The Complex Art of Making It Simple: Factors Affecting Enrollment in Integrated Care Demonstrations for Dually Eligible Beneficiaries