What Are Managed Care Plans Doing to Reduce the Cost of Medicaid?

December 21, 2018

Mary Beth Nierengarten

According to the Centers for Medicare & Medicaid Services’ 2016 National Health Expenditures report, the United States spends $3.3 trillion annually on health care. Based on our population, that breaks down to over $10,000 per person. Overall, health care spending accounts for 17.9% of the gross domestic product (GDP).

Among the major sources of funding is Medicaid, accounting for 17% of the overall spending—a percentage that has remained relatively stable since 2014. In 2016, Medicaid spending was $672.1 billion with state and local Medicaid expenditures seeing a 3.2% increase.

A report published in November 2018 by the National Association of State Budget Offices  highlighted that Medicaid continues to account for the majority of state federal funding. It also pointed out that growing state-spending of said federal funds is outpacing the revenue states are able to self-generate. The report showed that Medicaid was in the seven top state spending categories in 2018, making up 29.7% of total state expenditures.

For managed care plans, often which facilitate access to care for Medicaid enrollees, finding ways to reduce the cost of care while maintaining quality is an ongoing challenge. Over the years, a number of innovative strategies to accomplish this goal have been suggested, such as new alternative payment strategies for reimbursement of care, better coordination of care for high risk patients, and targeting specific populations of high cost among Medicaid enrollees.

According to a 2017 survey of managed care organizations, managed care plans are actively engaged in many of these strategies to reign in the costs of Medicaid while delivering high quality care. Published in October 2018, the “Inaugural Annual Medicaid Managed Care Survey,” by the Institute for Medicaid Innovation (IMI), established the first comprehensive effort to collect longitudinal data on Medicaid managed care organizations.

According to Jennifer E. Moore PhD, RN, founding executive director of IMI, and lead author of the report, the survey found that “managed care is actively engaged in all the key areas within Medicaid: high-risk coordination, value-based purchasing, pharmacy, women’s health, child and adolescent health, and social determinants of health.” 

Dr Moore continued, “This is a positive finding and one that is consistent across all types of health plans regardless of whether they were nonprofit, for profit, small/regional health plans, or big/national plans.” Among the strategies that Dr Moore highlighted as being a hallmark of Medicaid and managed care was high-risk coordination. 

High-Risk Coordination

The survey revealed several trends including that most Medicaid managed care organizations provided ways to implement comprehensive care coordination for high risk populations. Common core functions performed toward this goal were developing a plan of care for Medicaid enrollees, supporting adherence to a care plan, engaging a care team to address the needs of enrollees, and conducting risk assessments.

“High-risk coordination is a hallmark of Medicaid and managed care,” said Dr Moore, adding that this strategy adds value to containing cost by developing “high touch” interactions between enrollees and their families/caregivers, providers, and community-based services. “It’s this type of intense coordination that has the capacity to potentially reduce cost. This type of coordination could be for persons with chronic conditions, and even those with a history of trauma or history of substance abuse disorder.”

Dr Moore suggested, “It can be for someone who requires a higher level of engagement to support their health and well-being.” An example of those who might qualify for this sort of care are people with diabetes or prediabetes.

Diabetes Prevention

According to Sandeep Wadhwa, MD, chief health officer, Solera Health, one main focus in several states is to cover diabetes prevention for Medicaid enrollees similar to diabetes prevention programs already covered by commercial payers and by Medicare in 2018 for its beneficiaries.

“There is such a big difference in claims cost between people with and without diabetes,” Dr Wadhwa said. “What is exciting is that payers are covering this preventive service. We [already] cover flu shots, colorectal cancer screening, and breast mammography, and now states are putting the Diabetes Prevention Program on equal footing.”

Implementing a diabetes prevention program for Medicaid enrollees makes sense given that the prevalence of prediabetes is higher in lower income populations and people of color, emphasized Dr Wadhwa, who previously served as the state Medicaid director and chief medical officer of the Colorado Department of Health Care Policy and Financing.

According to Dr Wadhwa, along with previous diabetes prevention programs in Minnesota and Montana, Oregon and California are teed up to kick off implementation of their programs on January 1, 2019.The goal of the program is for individuals to lose 5% of their body weight if they are overweight. “Five percent loss of weight has a profound impact on reducing the development of diabetes in people with prediabetes,” he said.

Citing a 40% prevalence of prediabetes in adults in California, Dr Wadhwa said that he expects about 30% of the population would otherwise progress to type 2 diabetes but this rate can be cut by more than half with intervention. 

The cost benefit is illustrated in Medicare’s own data. “When Medicare analyzed the [preventative] program, they determined that it not only reduced the progression to diabetes but would be cost neutral,” he said. “To put it another way, they scored it as cost savings.”

Based on this data, Dr Wadhwa believes expanding coverage of the diabetes prevention program for Medicaid enrollees will “give states and Medicaid plans a healthier population, with a reduced disease burden, as well as bending the cost curve.”

Health information exchange: Improving Care Coordination Through Prevention

Another state program poised to reduce Medicaid cost by improving care coordination is currently utilized in Maryland and called CRISP (Chesapeake Regional Information System for our Patients.) The program uses data shared by hospitals with the state health information exchange to identify patients discharged from inpatient stays or emergency department visits and route them back to primary care at federally qualified health centers (FQHCs). 

According to Friso van Reesema, vice president of payer strategy at health care technology company, CipherHealth, the largest Medicaid managed care plan in Maryland that receives money from the state is choosing CRISP to identify persons to track and contact, ensuring they understand follow-up care and how to prevent costly and inconvenient re-hospitalization. Mr van Reesema said that using this automated technology engaged 70% of persons, whereas using manual follow up only successfully engaged 10% of persons. And as hoped, improving follow up as a preventive program is paying off. 

There was a case study on a FQHC in Maryland to determine the effectiveness of using the health information exchange to follow up with patients within 24 to 48 hours after their discharge from one of the 26 Maryland hospitals or emergency rooms. The study showed that an FQHC engages 7 times more patients than it did prior to implementation of the program in November 2015. The likelihood of readmission has dropped by 27% for patients engaged in the automated exchange compared with patients who did not engage.

“Now the state is seeing that coordination is reducing the amount of readmissions for higher cost health care that is within their budget,” said Mr van Reesema.

Maryland is going a step further and using this technology to identify risk scores and assessments of patients to focus on getting high-risk patients to primary care for preventive services. According to Mr van Reesema, the state is investing $150 per person to have them visit their primary care physician for a risk assessment. Catching a potentially costly problem early, such as chronic asthma, can make that $150 preventive investment pay off. “It is a small investment for a larger payback,” he said. 

“This technology is promoting value-based arrangements, and I think one of the big successes for Maryland is that you have this partnership between the health plan (the Medicaid organization) and the providers (the FQHCs),” Mr van Reesema emphasized, “These partnerships are really important to incentivize payers and providers the right way, as well as being able to track and monitor patients.”