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Managing Medicare's Costs

People with chronic conditions are living longer

A 78-year-old Minnesota woman wanted to buy a life insurance policy but didn’t know if anyone would sell her one. After all, she was a breast cancer survivor, had a bi-polar disorder, and her father had died of a heart attack in his 60s. When asked by the agent how much life insurance she wanted, she replied that she’d like a $20 million policy. Later, after her application was submitted to The Hartford, it was approved within 30 minutes, with the premium set at $1 million a year.

That incident, which occurred in 2010, is recounted in an article in the Wall Street Journal’s Smart Money magazine. As it turned out, The Hartford’s actuaries determined that, despite her health history, the 78-year-old woman would likely live to be 92. Her breast cancer had occurred 20 years earlier and was no longer considered a significant risk factor. And her father’s heart attack in his 60s was thought to be irrelevant for a woman her age.

The woman’s story illustrates a paradox: at the same time that chronic diseases are becoming more common among people 65 and older, they are living longer. A recent study, found that during an 11-year period that began in 1998, it was increasingly common for people with Medicare to have multiple chronic diseases. Yet the study also found that during this same period, seniors’ impairment and disability rates were stable. What’s more, during this 11-year period, the average remaining life expectancies for 65-year-olds grew by almost a full year.

Chronic diseases last for months, years, and sometimes decades. Typically they cannot be cured, only controlled or placed in remission. And they are responsible for much of the growth in Medicare’s costs over the past 20 years, according to an analysis in the journal Health Affairs. Among retirees, the two chronic diseases that have seen the sharpest increases are diabetes and hypertension, both of which are viewed as being largely preventable.

Medicare absorbs the brunt of the financial blows delivered by chronic diseases, but retirees also feel the impact through additional cost-sharing and higher premiums. One problem is that Medicare was initially designed to help retirees pay for medical treatments but not for prevention. Thus there are dozens of Medicare reimbursement codes for various treatments of diabetes, but virtually none for the nutritional counseling that sometimes keeps the disease from occurring.

That type of benefit design is now thought to be outmoded, and Congress has been slowly changing it. Over the past several years healthcare policy experts have been asked by Congressional sub-committees for suggestions about ways to lower healthcare costs. Frequently the experts have pointed out that perhaps three-fourths of Medicare dollars are spent on chronic diseases, many of which can be prevented. Over time, Congress responded with laws boosting preventive benefits and encouraging the formation of health plans that effectively coordinate care.

An initial step was to create Medicare Advantage Chronic Condition Special Needs Plans (SNP’s). These plans were introduced in 2006, and their objective is to focus on one or two specific diseases. Under Medicare’s rules, people cannot enroll in a chronic condition SNP unless they have been diagnosed with the disease that the plan focuses on. That means in order to enroll in a SNP that specializes in diabetes treatment, people must first have been diagnosed with diabetes. Although these plans provide a full range of medical services, they are required to coordinate care around the conditions they concentrate on. And the plans’ networks must have a minimum number of doctors who specialize in those conditions.

A study documenting the apparent success of the Care Improvement Plus plan, the country’s largest Advantage chronic condition SNP, appeared two months ago in Health Affairs. The Care Improvement Plus plan focuses on diabetes patients and has 79,000 enrollees in five states. The study’s authors examined the medical billing records of the 36,000 plan members who had been treated for diabetes at least once during 2010.

Then they compared those records to the records of 62,000 people living in the same geographic areas who were in fee-for-service Medicare and who also had at least one diabetes treatment during the year. After adjusting for people’s ages and health conditions, the study found that the SNP enrollees had substantially fewer hospital admissions and same-quarter re-admissions, fewer hospital outpatient visits, and more primary care visits.

Does a chronic condition SNP actually reduce healthcare costs, even while it improves care? The verdict is still out. An effective plan increases the initial investment in people’s health with the hope of a positive return through later savings. The Care Improvement Plus plan is a good example of the additional investment that’s needed. Its HouseCalls program sends physicians and nurse practitioners to enrollees’ homes, and 85% of its enrollees have at least one HouseCalls visit during the year.

Care Improvement Plus also develops a detailed health risk assessment for each enrollee within two months of enrollment, staffs a 24-hour nurse hotline and has a program called Pharmassist that makes sure that patients’ drugs are coordinated and with no p;ossible harmful drug interactions.

Whether chronic condition SNP’s survive over the longer term is questionable. They are authorized through the end of next year and at present they represent a tiny sliver of Medicare beneficiaries. Only 160,000 people were in chronic condition SNP’s in 2011, according to a Kaiser Family Foundation Data Spotlight (there are two other types of Advantage Special Needs Plans, one of which had enrollment of more than one million last year). Still, the number of chronic condition SNP’s is growing – from 92 plans last year to 113 this year. According to Kaiser Family Foundation data, 28 of these plans are focused on diabetes, another 47 on diabetes and heart disease, and 15 others on specific lung conditions.

Congress also taken further steps to reduce the cost of chronic diseases by including several provisions in the Health Reform law to encourage wellness efforts, preventive tests, and coordination of care/accountable care organizations. All recommended preventive tests, for example, are now fully covered by Medicare, as are yearly wellness visits.

Doubtless there will other Congressional actions to lower costs by improving health. And by modifying Medicare’s benefit design they will encourage retirees to do the three things that they can already do without legislative action: 1) practice healthy behaviors; 2) screen for diseases at recommended intervals in order to detect problems early; and, 3) enroll in healthcare plans that coordinate care. ◊◊

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