In July 2011, CMS announced it was allowing states to test two new financial models intended to improve care coordination and reduce costs for individuals enrolled in both Medicare and Medicaid (known as “dual eligibles” or “Medicare-Medicaid enrollees”). The models are designed to better align the financing of these two programs and integrate primary, acute, behavioral health, and long term services and supports for Medicare-Medicaid enrollee. Specifically, the two models are: (1) a Capitated Model, under which 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; and (2) a Managed Fee-for-Service Model, under which a state and CMS enter into an agreement allowing the state to benefit from savings resulting from initiatives designed to improve quality and reduce costs for both Medicare and Medicaid. CMS recently released additional guidance to states interested offering the first option – capitated financial alignment demonstration plans. Among other things, the guidance document addresses: how prospective capitated payment rates for health plans will be developed for the provision of an integrated benefit package for the full continuum of Medicare and Medicaid benefits; how savings will be achieved for both Medicare and Medicaid; standards in key programmatic areas (including specifying that Medicare Part D prescription drug requirements will be applicable under the demonstration); and key steps and dates in the approval process. Demonstrations under this program will last three years, and CMS intends to approve demonstration proposals to allow for enrollments in 2013.