On paper, there are some things that seem to make eminent sense: Officials from Medicaid and Medicare would like to move patients who qualify for both programs into managed care to save money.

Yet these so-called "dual eligibles" are among the sickest and poorest in both programs and the transition is proving to be difficult. Several medical groups have opposed the move and are urging a step back from the process.

When health care administrators proposed the idea a few years ago, the fiscal benefits were apparent: Some nine million dual eligibles represent 21 percent of Medicare beneficiaries, but consume 36 percent of the program's expenditures, according to the Kaiser Commission on the Medicaid and Uninsured, which published a study on the subject in 2011.

Dual eligibles separately qualify for Medicaid—the medical program for the poor—and Medicare. Compared to the general Medicare population, they are more likely to use emergency rooms, live in nursing homes, be hospitalized and have mental health needs. Their higher use of acute and long-term care is at a level five times that of the average Medicare patient.

As part of a larger government strategy to improve care and lower costs, the agencies behind both programs have been working on integrating benefits for dual eligibles.

As part of the Affordable Care Act (ACA), the Federal Coordinated Health Care Office (also sometimes referred to as the Medicare-Medicaid Coordination Office) was established to create an "alignment initiative." The goal was to design an integrated care model, using managed care where appropriate.

Several demonstration projects were set up across the country to see if that model could work on a large scale. Nearly all of the states and Medicare could save money. The states are hoping that this will reduce their Medicaid outlays, although it's too soon to tell if that will happen.

Medicare would benefit by keeping these folks out of costly acute care settings and nursing homes. At this point, though, it's all an experiment in the demonstration phase. It's safe to say that most states are chafing under their Medicaid burdens and are examining ways of reducing their expenditures. The insurance trade group American's Health Insurance Plans estimates that some $150 billion could be saved annually if these patients were enrolled in managed care. Yet the integration will be complicated. Here's a recent summary from Drew Altman, chief executive officer of the Kaiser Family Foundation:

"Of the 26 proposed state demonstrations, most are planning capitated managed care models, but some propose using a managed fee-for-service approach. For the capitated model, states and the federal government will enter a three-way contract with private managed care companies to manage the care of the enrolled population. Medicare, which mainly pays for acute care, and Medicaid, which mainly pays for long-term care, will blend payments into one rate, with savings taken off the top for both Medicare and Medicaid. The demonstration is moving quickly; half of the 26 states are looking to implement either the capitation or fee-for-service model in 2013 and others in 2014. Both the challenges and the potential of this health reform experiment are enormous."

Part of the difficulty with pulling together such a project is that Medicaid and Medicare are two different programs with dissimilar sets of rules. Medicaid, for example, is a joint state-federal program that's largely administered by the states. Medicare generally covers those 65 and older, but also provides care for those permanently disabled or those with end-state renal disease. On the Medicaid end, the coordination has largely fallen on state programs, which have been underfunded in recent years and have struggled to bring down costs.

States that successfully finish the program design contract—they received $1 million each initially—can move to the implementation phase if they meet certain guidelines.

Not surprisingly, the conflict between cost-reduction and maintaining a standard of care has come to light. As a result, physician groups in Texas and California, which operate two of the largest Medicaid programs in the United States, have opposed the integration. Doctors are also concerned that patient care will suffer under the managed care model:

“The people who are affected are our most fragile, our elderly, our poor, the ones who are unable to fend for themselves,” C. Bruce Malone, MD, an orthopedic surgeon from Austin, Texas and president of the Texas Medical Association, said at a March 27 rally, as reported by American Medical News.

Say, for example, you moved a patient out of long-term care into managed care, which is predicated on "capitation," meaning paying set amounts of patient regardless of condition. If someone needed to stay in a nursing home—or acute care hospital—and were moved out before they recovered to limit costs, they might suffer relapses or their health could decline.

Several medical groups have urged the states and Medicare to move slowly on the integration. Last month, The Alliance of Specialty Medicine in a letter asked the Centers for Medicare &  Medicaid Services (CMS) for a one-year delay on the grounds that "the current direction and speed" of the project's implementation would jeopardize payments to providers and compromise patient care. The Federation of American Hospitals has also "cautioned against expediency" in the process. Note that providers in managed care settings are generally not in the fee-for-service model, so their overall compensation could be lower for dual eligibles.

Myriad questions remain on how patients can ensure that their quality of care remains the same or improves. What happens if they receive poorer service in managed care? Will they be able to disenroll? How are dual eligibles being informed on plan choices? Are they being properly educated on how to choose the best plan? Will they be able to retain their current doctors?

On the administrative side, the questions are no less complicated. With even fewer federal dollars flowing into Medicaid, how will the states handle benefit cutbacks? Will they have to raise deductibles? If patients had grievances or are harmed by the transition to new providers, what recourse will they have?

When it comes to the Medicare side of the equation, what does the integration mean to Medicare Advantage Plans (Part C), if the impact is significant at all? Does it involve a significant expansion over time? And if it does, how will the system accommodate the new patients? As it stands now, Part C plans are highly subsidized. Would the addition of dual eligibles imperil Medicare's fiscal picture even more?

It's clear that all sides in this debate need to open the lines of communication on what has become a difficult and labyrinthine transition.