How Medicare Advantage Plans Can Improve Care and Save Money

Medicare Advantage plans, the managed care programs that currently insure nearly one-third of all Americans over 65, are supposed to achieve two goals: Improving health outcomes by organizing care of older Americans and reducing costs. Those two goals can sometimes conflict, but a new study provides something of a roadmap for how plans can do both.

The key, according to the health consulting firm Avalere Health LLC is a two-step process. First, the plans need to identify which of their members are at risk for high-cost care. And it turns out the best way to do that is by tracking non-medical factors such as whether a member needs help with daily activities or is living alone without a strong family support system.  Those non-medical warning signs may be better indicators of an impending emergency room visit or hospitalization than looking at past insurance claims.

Once plans identify their high-risk members, they can improve outcomes for those patients and significantly control costs though care coordination or transitional care services.

The Avelere study confirms prior work that shows how closely a senior’s functional limitations are tied to her medical costs. For example, someone who has two chronic conditions but can care for herself will cost Medicare an average of about $4,000-a-year. But if that same patient also needs help with personal activities such as bathing or cooking, her health spending will skyrocket to more than $15,000, or nearly four times as much. And remember, that’s Medicare spending alone. It does not include long-term care costs.

The trend is similar for older adults with dementia or other cognitive limitations. Medicare spending for those with 1 or 2 chronic conditions plus dementia is nearly triple that of those with chronic disease only.

In 2011, Harriet Komisar (now at AARP) and Judy Feder of Georgetown University came to a similar conclusion. They found that Medicare spends about $6,000 on an average beneficiary with chronic conditions only but nearly $16,000 for someone with both chronic conditions and functional limitations.

The Avalere study looked at how that need for personal assistance predicts whether a member will become a high-cost patient in the near future. For example, someone who had a stroke last year is actually less likely than average to have significant health care needs this year. But if she used home health care—even less than once a week—she is 16 percent more likely to be a high-cost patient this year.

The story becomes even more powerful when a senior sets off several of these social red flags. Take a 91-year-old woman with diabetes who was a high Medicare spender last year. She has a one-in-three chance of needing lots of medical treatment again this year. But if she also has risk factors such as being forgetful, living alone with no family in the area, getting no exercise, and suffering from poor nutrition, she has a 70 percent chance of being a high-cost patient.

The good news—for both health plans and seniors—is that by using good data to target case management, insurers can save money and keep their high-risk members out of the hospital.

Avalere looked at five different care transition or care coordination plans and found that all of them reduced overall costs for managed care plans and generated a positive return on investment (RoI). Some models showed financial returns well in excess of 100 percent.

However, they must be well targeted to those who can really benefit from care management. Otherwise the cost of implementing the programs will not be offset by lower use of medical treatment.

It is important to remember that none of the care transitions programs provide long-term supports and services. They may direct patients and their families to that assistance, but so far at least MA plans do not pay for it.

That’s the next step. Today, demonstration projects in several states are experimenting with the idea of paying managed care firm firms a fixed monthly fee to provide the full continuum of care to people with disabilities who are eligible for both Medicare and Medicaid ( the dual eligibles). We’ll soon learn whether those programs can also reduce hospitalizations, save money, and improve health outcomes.

But, for now, the Avalere study is new evidence that there is a strong business case for insurers who better identify their high-risk members by looking at their social needs and then use case management to help them navigate the complex medical system.

 

 

 

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