Insurance giant Wellpoint is the latest carrier making a big bet on managing care for those seniors and adults with disabilities who are eligible for both Medicare and Medicaid. About 9 million people, called “dual eligibles” receive benefits from both programs. They are both very poor and very sick and often have significant needs for personal assistance.
Medicaid alone spends $145 billion a year to care for them—most for long-term care services—while Medicare spends $175 billion on medical care for this population. The frail elderly, who have both multiple chronic diseases and personal care needs, are both the most expensive and the most difficult to care for.
To expand its presence in the Medicaid managed care market, Wellpoint this week announced the purchase of another managed care firm, Amerigroup, for nearly $4.5 billion. Earlier this year, Cigna jumped into the Medicare and Medicaid managed care business by purchasing Healthspring for $3.8 billion.
Both firms are betting on a growing trend by states to move their Medicaid patients from fee-for-service Medicaid to managed care. In many of these systems, states pay insurers a fixed fee, or capitated rate, to provide all care for enrollees. If the firm can provide care for lower costs than the state fee, it can keep the difference. If not, it is at-risk for the loss.
Nearly all states have moved young families who receive health care through Medicaid to managed care. But in recent years, at least 11 states have turned some or all of their long-term care supports and services to private insurers though such capitated systems. They range from Blue states such as New York, Washington, and Hawaii to Red states such as Texas, Arizona and Florida. In addition, two dozen states have applied for demonstration grants to provide experimental coordinated care programs for their elderly and disabled populations.
Many consumers fear managed care for seniors will lower quality, as insurers try to save money by skimping on needed care. But insurers insist that by coordinating care, they can both save money by curbing unnecessary hospitalizations and tests and improve quality. One key to good systems will be excellent care managers who can organize complex care from many providers for those with multiple chronic diseases.
For now, there is little evidence on how well this will work. Because the state programs are so different, we’ll learn a lot in the next few years about which practices succeed and which do not. States will have to keep a close eye on quality since many dual eligibles are too frail to advocate for themselves.
There is little doubt the managed care trend is rapidly gathering speed. Not just insurance companies but providers such as large health systems are increasingly willing to accept the financial risk of caring for patients. And cash strapped-states are increasingly willing to turn over this care to them.
As I have written before, this trend creates another opportunity. If insurers (or big health systems) are able to boost quality and save money by linking long-term care services with medical care for the dual eligibles, there is no reason such a model could not work with Medicare managed care or even the commercial health care market. And if it can, that creates an opportunity to rethink long-term care insurance as a health care product, and not a life product.
[…] wants to do a better job coordinating care for the frail elderly and younger adults with disabilities who have extensive medical and personal […]