Strategy 8: Managing Health Care Better

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Description of the Strategy

Almost every state has some Medicaid recipients in managed care. Now that initial saving opportunities have been exhausted, many are building on their experience and seeking more effective strategies for managing Medicaid beneficiaries' care. There are two approaches to managing health care: through health plans (in primary care case management or conventional managed care), (1) and through various care management programs (care coordination, case management and disease management). Care management can be used in conjunction with either form of health plan or as a stand-alone program in a fee-for-service environment. A state's ability to contain costs using any of these mechanisms depends on the state's capacity to introduce these new strategies into its existing care management system.

Primary Care Case Management (PCCM). At the simplest end of the continuum, states may contract with individual primary care physicians who agree to provide and coordinate medical services to a group of Medicaid beneficiaries. Under this system of primary care case management, physicians typically are paid a monthly case management fee in addition to usual fee-for-service reimbursements. (2) In states where care has not yet been widely managed, or for areas of a state where there is little managed care penetration, a PCCM approach may be a starting point for coordinating services. In 1999, 17 percent of Medicaid enrollees receiving managed care were in PCCM systems. (3)
Conventional Managed Care. In conventional managed care, the state contracts with managed care organizations (MCOs), rather than directly with providers. Typically an MCO (which may be either a commercial MCO or one that specializes in Medicaid) receives a capitated payment to give the Medicaid beneficiary all medically necessary services through a network of physicians providing cost-effective medical and preventive care. As with PCCM, most MCOs use primary care physicians as gatekeepers to control the utilization of services and specialty physicians. MCOs have sometimes been accused of emphasizing financial over medical criteria for managing care. In 1999, roughly 83 percent of Medicaid managed care enrollees were in traditional managed care plans. (4)

The Next Generation: Care Coordination, Case Management and Disease Management. States are beginning to contract with care management and disease management firms that claim they will be able to reduce costs through targeted intervention for the relatively small number of very ill patients whose care is a major share of Medicaid spending. The new generation of managed care shifts from broad strategies that manage care for entire populations to more targeted management, focusing either on identified high-risk, high-using individuals (care coordination/case management), or targeted high-cost conditions (disease management). These strategies are expensive to carry out; however, because they focus on individuals with high medical needs they are expected to yield a proportionate pay-off for the investment in care. Targeted management techniques can be applied through a PCCM or traditional managed care arrangement, or may be a stand-alone part of a state-managed program. (5)

Care coordination and care management are terms often used interchangeably by states. This strategy targets certain high-risk populations-such as children with special needs-whose social and medical needs are particularly complex. Care coordination emphasizes coordinating treatment and communication among specialists treating patients with complex conditions. It often focuses on problem-solving to help individuals gain access to both medical and social support services. It may supplement conventional managed care by helping enrollees gain access to and coordinate a variety of covered and noncovered services-for example, managing social support, arranging for transportation to and from physician visits, or telephoning an elderly patient who needs daily reminders to take medication.
Disease management focuses on conditions rather than individuals. It uses clinical protocols to manage the care of individuals with chronic, treatable illnesses where focused interventions have potentially high pay-offs in averted costs. Commonly managed diseases include asthma, congestive heart failure and diabetes. A common criticism of disease management, which case management addresses, is that patients tend to have multiple problems.

Pros and Cons

Pros

Coordinating medical services may result in improved quality of care. Without a primary care physician to guide the patient, Medicaid beneficiaries may receive the wrong care, care too late, unnecessary care, or costly duplication of care.
Improving managed care is not an all-or-nothing strategy. A state may do a full-scale change (such as switching from a PCCM arrangement to contracting with a managed care organization) or may start a smaller program and expand or contract it when results are known (disease management for Medicaid beneficiaries with a specific treatable, high-cost condition). Beginning a care management program does not necessarily require a large-scale change in the existing reimbursement system. Care can be coordinated with either a capitated payment structure (MCO) or a fee-for-service system (PCCM).

Cons

Coordination of medical services can be costly and may not result in immediate savings. Effective monitoring may require additional data collection. Significant improvements to the state's data collection system may be necessary to target a viable population for coordination of care or to evaluate medical and cost outcomes.
Even if a state decides to contract out a care management function, it is necessary to have staff with expertise in the Medicaid office to monitor the outside firm.
Coordination may not result in cost savings if existing patterns of care cannot be modified. This points to the importance of accurately targeting populations that can have potential cost savings.

State Experience

Florida has the most ambitious Medicaid disease management program in the country. In 1997, the Legislature specified nine diseases to be managed statewide, but as of March 2001, only six diseases (asthma, diabetes, hemophilia, HIV/AIDS, end-stage renal disease, congestive heart failure) were covered and only two of those programs (diabetes and hemophilia) are statewide. The state has had implementation problems related to contracting with multiple disease management organizations and failure to establish an explicit evaluation methodology. The Legislature has cut the Medicaid budget by $113 million since 1997 in anticipation of cost savings. As of yet, there are no health outcome or cost saving data from Florida's disease management program and administrative costs for the program have exceeded $24 million.

Virginia has run a disease management program since 1995 for Medicaid recipients with moderate to severe asthma. Emergency room visits have been reduced by 25 percent for this population and the program has achieved substantial cost savings over traditional Medicaid.

In Mississippi, pharmacists play a role in disease management by monitoring patient compliance and medication interactions. Pharmacists complete coursework and pass an examination on diabetes, asthma, hyperlipidemia, and coagulation disorders. Patients have 15- to 30-minute (or longer) sessions with their pharmacists up to 12 times per year. Using pharmacists rather than physicians in disease management may be particularly useful in states with a shortage of health care professionals.

Design and Policy Issues

What opportunities exist for savings and improved health outcomes? A state needs detailed information about current use of services to identify groups, individuals or intervention-sensitive conditions where efforts should be focused.
Should the state coordinate care for the entire Medicaid population, targeted groups, or a combination of the two? If a state has limited experience in care management, a PCCM or traditional managed care system may result in cost savings. If those approaches already have been used, a state then may look into more targeted approaches. Particular groups that could potentially be targeted include people with a certain chronic condition, special needs children, and HIV/AIDS patients.
Does the Medicaid agency have the expertise to run or oversee a care coordination program? Even if many of these tasks are done through public private partnership, the Medicaid agency will be responsible for ensuring that management is effective, while guaranteeing that patients get the care they need.
Is the provider community willing and able to implement the proposed program? Provider involvement-or resistance-can make or break the focused management of clinical care.
How will the state determine realistic clinical and fiscal objectives? How does it propose to measure costs and health consequences avoided as a result of the management?

Federal and State Involvement/Constraints

One potential area of concern is patient privacy. To the extent that patient files are reviewed by disease management organizations or other third parties, privacy must be ensured.

Notes

(1) To find the Medicaid managed care delivery system being used in a particular state, or national statistics, please visit the Kaiser Family Foundation's State Health Facts database at http://www.statehealthfacts.kff.org

(2) U.S. Department of Health and Human Services, Profile of Medicaid: Chartbook 2000, Health Care Financing Administration, Sept. 2000, accessed on Oct. 16, 2001, at p. 52. http://www.statehealthfacts.org

(3) U.S. Department of Health and Human Services, "Penetration Rates from 1996-2000" in 2000 Medicaid Managed Care Enrollment Report, accessed on Oct. 16, 2001, at http://www.statehealthfacts.org

(4) Ibid.

(5) Margo Rosenbach and Cheryl Young, "Care Coordination and Medicaid Managed Care: Emerging Issues for States and Managed Care Organizations," See http://www.mathematica-mpr.com/PDFs/caresum.pdf

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Strategy 8: Managing Health Care Better

BACK TO REPORT

Description of the Strategy

Pros and Cons

Pros

Cons

State Experience

Design and Policy Issues

Federal and State Involvement/Constraints

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Notes

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