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Medicare Shows Difficulties Of Reducing Costs

Armen Hareyan's picture

The preliminary results ofa three-year pilot project that sought to reduce costs for Medicare indicate"how difficult it can be, politically and practically, to make fundamentalchanges in the sprawling $400 billion" program, the NewYork Timesreports. Medicare Health Support, which began in mid-2005, sought toreduce the number of Medicare beneficiaries who require hospitalization forchronic conditions.

Under the project, companies seek to better manage the care of beneficiarieswith chronic health conditions like congestive heart failure and diabetes. Amongthe steps taken, nurses every few weeks called Medicare beneficiaries withchronic conditions to ensure that they took their medications and visited theproper physicians to prevent complications. Medicare paid eight companies about$360 million to administer the project.

CMS has not determined whether the projectimproved the health of Medicare beneficiaries with chronic conditions, but thepreliminary results indicate that the project failed to meet a target of a 5%reduction in costs for the program. Final results of the project likely willbecome available next year.


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According to the Times,experts maintain that "Medicare and the companies alike were toooptimistic about how easy it would be to prevent costly complications andhospital visits by patients who are very sick." The companies argue thatMedicare "signed up patients who were much sicker than they hadexpected" and "failed to make good on its promise to give them timelyinformation about the use of prescription drugs ... or lab results that wouldhave allowed them to help direct the patients' care." However, CMSmaintains that "it had worked extensively with the companies to addresstheir concerns and that its final analysis would take into account how sick thepatients initially were," the Times reports.

CMS officials said that they cannot continue the project after December withoutevidence of budget neutrality. Herb Kuhn, acting deputy administrator for CMS,said, "We're not giving up on this stuff," adding, "Wedefinitely want these programs to work."

Arnold Milstein, chief physician for the consulting firm Mercer Health and Benefits, said, "Medicare is doing exactly what we should want Medicare todo -- to test different life forms of disease management and see what worksbest," adding, "This particular form of disease management is notlooking promising."

George Bennett -- CEO of Health Dialog, one of the companies involved withthe project -- said, "Medicare actually has the possibility of saving $20billion to $30 billion if they undergo what is being done in the privatesector."

Some lawmakers, such as Sens. Lamar Alexander (R-Tenn.) and John Kerry(D-Mass.), have lobbied to have CMS continue the project. Health Dialog islocated in Tennessee, and Healthways, also one of the companies involved with theproject, is located in Massachusetts (Abelson, New York Times, 4/7).

Reprintedwith permission from kaisernetwork.org. You can view the entire Kaiser Daily Health Policy Report, search the archives, and sign upfor email delivery at kaisernetwork.org/email . The Kaiser Daily Health PolicyReport is published for kaisernetwork.org, a free service of The Henry J.Kaiser Family Foundation.