Disease Management in Medicare:
The Solution to Escalating Costs?

According to the Congressional Budget Office, Medicare spending will more than double by 2030 due to two compounding factors -- the aging baby-boom generation and health care inflating rising faster than the economy. Additionally, the Medicare trustees have revised estimates on the solvency of the Hospital Insurance Trust Fund. They predict that it will now be spent down by 2026, not 2030, as predicted last year. Many consider that reforming Medicare to control costs is a high priority, not only to address the financial crisis but also to address an out-of-date benefits package with limited prescription drug coverage.

In a January 2003 Health Affairs Web exclusive on chronic care management in Medicare, Robert A. Berenson, M.D., and Jane Horvath assert that chronically ill beneficiaries, who account for almost 80 percent of program enrollment, are not well-served by the program because it does not reimburse for care coordination. In recent testimony, CBO Director Dan Crippen stated that "the disease management industry has developed programs that claim to improve the quality of health care services and reduce their costs." However, "because of the limited number of available studies and the methodological issues they raise, it is not yet clear whether those programs can improve health outcomes, much less produce long-term cost savings."

The HCFO program and other AcademyHealth initiatives provide decision-makers with insights into the potential for disease management to rein in costs and improve outcomes.

Background

Disease management (DM) includes activities that coordinate care across providers, ensure that patients comply with treatment regimens, and encourage adherence to evidence-based treatment guidelines. Disease management programs focus on treating patients with prevalent and relatively well-defined chronic illnesses. The programs often apply standardized approaches to the similar needs of their enrollees.

In his testimony, Crippen notes the following methodological problems that hinder research on the efficacy of disease management:

• A time lag exists in evidence supporting health improvement or cost reduction.
  
• Disease management effects are likely to be indirect, because disease management programs influence how care is delivered, which indirectly affects outcomes.
  
• Good studies are hard to design due to selection issues.
  
• Generalizability to the rest of the Medicare program has not been tested.
• Most research has looked at younger patients.
  
• Duration of enrollment is also an issue: private plans focus on short term costs and savings. Medicare savings at one time could be offset by spending on other conditions suffered later in life, while still enrolled in the program.
  
• A lack of a Medicare drug benefit renders it difficult to identify potential participants in disease management programs.

Links to AcademyHealth work on disease management

Several AcademyHealth publications examining disease management in other settings inform the debate about disease management in Medicare. For example, in a May 2002 National Health Care Purchasing Institute Executive Brief, Robert Mechanic states that many disease management companies have entered the market, listing 28 such disease management and support service companies. He reports that although some of these programs have demonstrated positive results with respect to cost savings, evidence is limited. In a December 2002 State Coverage Initiatives (SCI) Issue Brief, Benjamin Wheatley reviews selected literature on eight states and finds mixed results. Some disease management programs are cost-effective and others are not.

HCFO-funded grants relevant to DM in Medicare

Title: Evaluating Florida's Medicaid Provider Service Network Demonstration Project
Institution: Florida Agency for Health Care Administration
Time: 4/1/2000-3/31/2003
Co-PI: Bob Sharpe, sharpeb@fdhc.state.fl.us
Co-PI: R. Paul Duncan, Ph.D., rpd@hpe.ufl.edu

Researchers at the University of Florida, with support from Florida's Agency for Health Care Administration (AHCA), are evaluating a Florida demonstration project examining the effects that enrollment in provider service networks (PSNs) has on Medicaid providers, costs to the program, and care quality and outcomes for beneficiaries. The demonstration under evaluation was mandated by the Florida legislature in order to respond to growing Medicaid expenditures and examine an alternate approach to providing health care to Florida's Medicaid enrollees, and includes mandated initiatives in the area of disease management. Currently, one PSN is operational in Florida's populous southeast coastal area (South Florida Community Care Network) and under evaluation.

The researchers have reported that, "benefits of the PSN model include increased collaboration among three of the state's largest safety net providers." In key informant interviews, officials in the PSN report immediate success in the state's provider-developed disease state management initiatives in the clinical areas of diabetes, asthma, and high-risk pregnancy. The specific areas of improvement cited most frequently include the value of care managers in enhancing communication between physicians and patients.