Coordinating care is expected to save the state and federal government $243 million in Medicaid spending through the end of 2016, said Ohio Medicaid Director John McCarthy.
The bigger benefit, he said, will be better health care. Providers, as an example, will make decisions based on need rather than whether it's paid for by Medicaid or Medicare, McCarthy said.
"That's our No. 1 concern," he said, "making sure the person gets what they need."
The federal Medicare program serves the elderly and disabled, while Medicaid provides coverage for the poor though state and federal funding.
The two programs operate fairly independently of each other. Medicare generally helps pay for doctor and hospital visits, along with prescription drugs. Medicaid typically helps pay for long-term care, such as nursing homes, among other services.
Officials worked to create a three-year demonstration project aimed at better coordinating the care of the beneficiaries in the programs.
The project would affect a portion of the dual-eligible population — almost 114,000 people living in seven urban regions. Voluntary enrollment in the program begins Sept. 1.
Federal officials had to sign off on the project before the state could move forward. Wednesday's agreement makes Ohio the third state — after Massachusetts and Washington — to finalize such a proposal, the Kasich administration said.
As a result of the lack of connection between Medicaid and Medicare, some patients are more costly to the system, officials say.
For instance, a patient could be discharged from a hospital to a nursing home instead of to a less expensive home-based care because the two programs aren't talking to each other in the same setting.
The state wants to better link the two programs so that the beneficiaries have to work with only a single entity to receive the services.
Individuals would get a care manager to help them with medical decisions and to live independently if they are still at home.
Ohio's plan is also designed to eliminate unnecessary health tests, prevent medication errors and keep people healthier and out of emergency rooms.
"Better care coordination across the state means healthier Ohioans, and it will also help in driving down costs in the long run," Kasich said in a statement.