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Constrained Innovation in Managing Care for High-Risk Seniors in Medicare + Choice Risk Plans

Publication Date
Dec 31, 2001

Craig Thornton, Sheldon Retchin, Kenneth D. Smith, Peter D. Fox, William Black and Rita Stapulonis

Mathematica Policy Research, Inc.

January 2002

This report was prepared under contract #HHS-100-96-0017 between the U.S. Department of Health and Human Services (HHS), Office of Disability, Aging and Long-Term Care Policy (DALTCP) and Mathematica Policy Research. For additional information about this subject, you can visit the DALTCP home page at or contact the ASPE Project Officer, Jennie Harvell, at HHS/ASPE/DALTCP, Room 424E, H.H. Humphrey Building, 200 Independence Avenue, S.W., Washington, D.C. 20201. Her e-mail address is:


This case study of four well-regarded managed care organizations (MCOs) found that they made numerous innovations to improve care delivery for elderly Medicare beneficiaries with chronic illnesses and disabilities. These MCOs used the flexibility provided by capitation to add new services, including (1) screening and other programs to identify high-risk seniors; (2) care management and disease management; (3) network credentialing; (4) occasional provision of off-policy benefits; and (5) better coordination and flexibility in the delivery of inpatient, subacute, and home health services. Yet their innovations were constrained by the Medicare + Choice contracts and the lack of clear evidence about the cost-saving potential of many services. The MCOs’ contracts focus on the primarily medical services covered by Medicare and do not obligate (or pay) the MCOs to address seniors’ needs for long-term support services, housing, transportation to routine care, or the myriad other types of nonmedical assistance high-risk seniors may need to maintain their functioning and independence. Also, it remains unclear whether these types of services, even the services that the MCOs did provide, will generate sufficient savings to cover their extra costs. Thus, while their innovations appear to have improved care and produced high levels of satisfaction among high-risk seniors, some unmet needs remain. Development of more comprehensive or intensive methods to address the full spectrum of needs will require more expansive contracts, new payment strategies, and stronger evidence of effectiveness.


Improving Delivery of High-Risk Seniors’ Organizationally Complex Care Is an Important Policy Goal

The high costs and potential problems involved in delivering organizationally complex care to high-risk seniors will require better methods for managing care delivery. These seniors not only tend to have multiple chronic conditions that demand ongoing care, but they also may develop acute illnesses. In addition, they receive care from many providers in several different settings, including physicians’ offices, skilled nursing facilities, hospitals, and their own homes. They often use multiple medications that may be prescribed by several physicians who may not coordinate their efforts. Many may also need long-term custodial or hospice care.

This care is expensive. Seniors with disabilities and chronic conditions, particularly those whose treatment involves multiple hospitalizations, account for a disproportionate share of medical costs. Furthermore, they often face serious health risks when needed care is inappropriate, delayed, deficient, or uncoordinated. Over the next decades, the number of high-risk seniors will increase dramatically, as will costs and adverse outcomes if better methods are not found to improve care delivery and effectiveness.

Efforts to increase the quality and efficiency of the organizational complex care used by high-risk seniors must address three broad characteristics that can be organized with the acronym VIP: Variability, Impairments, and Providers. Population variability encompasses differences in conditions, functioning, and attitudes among individuals and over time. Impairments can limit seniors’ ability to access care and, in the most severe cases, can limit their ability to care for themselves or even to live independently. Provider issues are important because high risk seniors’ use of multiple providers can make it difficult to coordinate care and may lead to duplicative or missed services.


Medicare Managed Care Offers a Constrained Opportunity to Address the Challenge of Delivering Organizationally Complex Care to High-Risk Seniors

The opportunity stems from the flexibility and financial incentives capitation creates to increase the delivery of preventive care and to coordinate care delivered by multiple providers. Furthermore, managed care offers the promise of cost savings that could be shared between seniors, Medicare, and health plans. At the same time, capitation may also constrain the ability of managed care to achieve its potential. Some of these constraints are inherent in the use of financial incentives to control costs. Specifically, there has been substantial concern that, in an attempt to control costs, capitation may lead plans to overly limit seniors’ access to specialty care. It may also create incentives for plans to focus only on types of preventive care that can be expected to generate substantial short-term benefits. Constraints also emerge from the way capitation is implemented in Medicare. This includes the constraints imposed by the current Medicare benefit package which predominantly focuses on medical care and excludes most medications, personal support services, and long- term custodial services many high-risk seniors need. It also includes constraints created by the lack of an effective way of adjusting capitation payments to reflect the greater-than- average needs of high-risk seniors. Fully adjusted payments could provide a greater incentive to develop cost-effective care programs and to attract beneficiaries who could benefit from those programs. Finally, efforts to improve care for seniors are constrained by the fragmentation in the health care and service delivery systems and by the general lack of strong evidence of the effectiveness of alternative service strategies. Thus, the mix of opportunities and constraints creates a situation where we see some innovations, but where additional efforts are likely to require steps to address the constraints.


This Case Study Focused on Innovative MCOs and Selected Groups of High-Risk Seniors

The four case-study MCOs include three managed care plans with capitated Medicare + Choice contracts and one large multispecialty provider group with a history of accepting capitation to care for elderly Medicare beneficiaries. These MCOs had held Medicare risk contracts for several years when we selected them in 1997, and they were responsible for the care of between 13,000 and 100,000 beneficiaries. The plans reflect a mix of characteristics, including organizational structure, Medicare + Choice payment level, profit/nonprofit status, and geographic location.

Once we selected the MCOs, we focused on three “risk groups” of seniors who had severe limitations or multiple chronic conditions and whose risk status or conditions were known to their MCO. These groups include elderly beneficiaries being served by the MCOs’ care management programs, those who had attained advanced age (more than 84 years old), and those who had experienced a recent hip fracture or stroke. While these three groups do not constitute or represent all high-risk seniors, they provide a convenient way of illustrating the experiences of seniors whose high-risk status is known to their MCO.

We collected information about these MCOs and seniors through site visits and focus groups conducted from October 1997 through January 1998. We also surveyed representative samples of high-risk seniors at three of the case study MCOs. These surveys included 1,657 beneficiaries and were conducted from March 1999 through July 2000.


The Case-Study MCOs Produced High Satisfaction Among High-Risk Seniors

The high-risk seniors in our study generally held very favorable opinions about their MCOs. Overall, 93 percent indicated that they would recommend their MCO to another person with similar health conditions. This figure is much higher than the overall satisfaction level previously reported for a national sample of high-risk groups in Medicare + Choice plans (Nelson et al. 1996). In that study, only 74 percent said that they would recommend their plan to someone with a serious or chronic health problem. In addition, the overall level of satisfaction we observed for our sample of high-risk seniors is approximately equal to the level reported by the largely unimpaired general Medicare population in Medicare + Choice plans.

This high level of satisfaction is evidence of the potential of managed care to serve high-risk populations well. It also establishes a goal for the Medicare + Choice system as a whole to produce equally high levels of satisfaction among beneficiaries with both high- and low-risk for adverse health outcomes.


A Substantial Fraction of Our Sample of High-Risk Seniors Seemed Unsure of How to Resolve Problems with Care

While the seniors in our sample were generally satisfied with their choice of plans, about a third had no concrete plan for addressing dissatisfaction with medical care or coverage decisions, possibly because of their generally high satisfaction levels: seniors who are happy with their care and coverage may not bother to learn how to complain effectively. Nevertheless, to the extent that these groups represent a broader population in all Medicare + Choice programs, policymakers should consider cost-effective ways to promote their access to information and their ability to act on it.


Care Management Was an Important Extra Service Made Available to High-Risk Seniors in the Case-Study MCOs

Care management was a key innovation fielded by the four case-study MCOs. In general, the MCOs used their care management programs to assess the needs and capabilities of seniors at high risk for adverse health and functioning outcomes. The assessments often included home visits to assess seniors’ needs and living arrangements. The assessments were followed by efforts to coordinate care delivered by the MCO network and to educate seniors about their conditions and treatments. Care managers also referred seniors to community-based social service agencies when they needed assistance and services beyond what was covered in the MCO’s Medicare benefit package. In making referrals, the care managers typically followed up to see that seniors had met with the service agencies and that efforts to meet their needs were underway.

While there were many similarities, there were also some important differences among the care management programs of the MCOs. In particular, care management at the two group- model MCOs took advantage of their clinic-based approach to primary care. Care managers at these organizations were located in the clinics, where they could interact with physicians and patients on a face-to-fact basis, as well as by telephone. They relied on the clinic physicians as the primary source of referrals for care management and enrolled about three percent of their Medicare beneficiaries in care management. In contrast, the IPA-model care managers relied more on telephone contact and had higher caseloads, although they could order home health visits to assess seniors’ home situations and deliver some medical social work services. The IPAs drew on their extensive data systems, new-member screening surveys, and tracking of hospital admissions to identify high-risk cases who could benefit from care management and enrolled approximately five percent of their Medicare beneficiaries in care management.

These care management efforts went beyond the basic Medicare benefit package, but were more limited than the efforts that are often recommended for assisting high-risk seniors (Chen et al. 2000). For example, the MCOs offered some patient education and advocacy, but these efforts were limited by the general short-term nature of the programs. In contrast, many prior care management demonstrations and the literature on best practices include on-going advocacy and monitoring as part of their service package (Chen et al. 2000).


The MCOs’ Care Management Programs Focused on Short-Term Issues, an Emphasis the Participating Seniors Recognized

Many Seniors Were Unaware That They Had Been Enrolled in Care Management

Many seniors in our care management sample seemed to be unaware that they were indeed in care management. Even though this sample of seniors was selected from MCO-provided lists of members in care management, only 21 percent knew that they had a care manager from their MCO. Even if we include seniors who reported a care manager from outside their plan, a total of only 28 percent said they had someone to work with them and their physicians to help get the care they needed and to resolve any problems.

Of course, the lack of salience does not meant that the care management failed to benefit the seniors or to make care delivery more efficient for the MCO. The care managers appear to have delivered substantial services, but may nevertheless have had a difficult time standing out from all the other providers who work with high-risk seniors. These seniors interact with primary care physician, specialists, therapists, nurses, community-agency staff, and the office staffs of these providers. All care managers at the case study MCOs were nurses, so seniors may have assumed their care manager to be just another nurse who was working with their physician. This suggests that it can be hard to make care management salient among high-risk seniors unless the care managers have the time to build a personal relationship with their patients. In our focus groups with seniors in care management, many remembered getting help from a nurse and often associated that nurse with the MCO. However, most did not perceive that nurse as someone who could provide ongoing help or as someone to call if they had a problem with care coordination or access.

The low apparent level of saliency for care management among seniors also reflects several other factors. Most notably, the MCOs implemented care management that was generally time-limited and focused primarily on working with primary care physicians to stabilize high- risk seniors and refer them to appropriate community services. This focused nature of the care management means that many of the seniors in our survey sample may have received the bulk of their care management services well before we interviewed them, and they may not have remembered the earlier services, although those services might have been salient while they were being delivered. In addition, low salience may be consistent with the desire to provide seamless integration of care. The care managers may work to ensure that seniors obtain other highly-salient support services. Seniors may therefore remember the support services while forgetting about the assessments and referrals that got them to those services.

Seniors Who Knew They Were in Care Management Were Satisfied with It

Among those seniors who knew they had a care manager from their plan, most were satisfied with the help they got, and generally agreed that their care manager knew enough about them to plan care effectively. At the same time, fewer than half of these seniors knew the name of their care manager, a measure we used to capture the closeness of their relationship. Furthermore, only four percent would contact their care manager if dissatisfied with medical care or with their MCO’s benefit coverage decisions. Thus, from the perspective of the seniors, care management appears to have been useful but not an effective source of ongoing monitoring, education, or advocacy.


The Case-Study MCOs Fielded Several Programs to Improve Care of High-Risk Seniors

We noted numerous ways in which the four case-study organizations sought to improve care for high-risk seniors relative to the fee-for-service sector. In addition to care management, the MCOs’ innovations include disease-management programs, enhanced monitoring and care coordination of seniors in subacute and custodial nursing homes, and disease- prevention programs targeted to high-risk seniors. The organizations also worked to improve care by requiring facilities in their networks to meet quality standards that were higher than those imposed by Medicare.


Group Model Organizations Had Advantages for Implementing Innovations

While it is difficult to draw strong conclusions from our sample of four MCOs, we did note several instances where the structure of the group model organizations facilitated the implementation of new service delivery and coordination methods. The two group MCOs in our study included a traditional group practice Health Maintenance Organization and a large multispecialty group practice with a history of accepting capitation. The advantages we saw at these groups seemed to stem from several factors. The group MCOs tended to foster close collaboration between physicians and MCO administrators. They also tended to attract a mix of physicians who are comfortable within managed care. They delivered primary care through clinics where primary care physicians and care managers could be located together and where there were more likely to be enough high-risk patients to support special initiatives. Last, the group models’ networks limited their skilled nursing facilities to a small number that were felt to provide especially high-quality care. This network limitation also enabled the MCOs to work closely with the facilities to monitor patients and develop improved and more efficient care systems.

The IPA models also introduced a number of innovations, including care management and disease management programs. In addition, they provided their members with more choices of providers and more locations from which to obtain care. There were also several instances where IPAs contracted with large multispecialty medical groups and thereby offered their members the option of receiving care from a group model. Thus, it is possible that group-based approaches can continue to be made available to many high-risk seniors, even though the number of group- and staff-model risk plans in the Medicare + Choice program has been declining.1


Common Features of the Case Study MCOs Can Guide Efforts to Improve Care for High- Risk Seniors

While the case study suggests that it is possible to produce high levels of satisfaction, it does not indicate specific steps to achieve such a level. Each of the case study MCOs developed its own programs, designing them in ways that worked for the plan. The MCOs’ approaches shared common elements that can be organized with the acronym I-CAN: Identification and assessment, Care management, Assistance programs, and Network credentialing and support. These core elements enable the MCOs to identify high-risk seniors and to then deliver and coordinate necessary medical care and social supports. At the same time, each MCO developed programs that took advantage of opportunities provided by it structure and community. For example, the group model MCOs built on their clinic-based primary care deliver system to foster communication between care managers, physicians, and the care- managed seniors. The IPA models used their data systems to identify high-risk seniors. This enabled them to provide targeted services ranging from care management to pre- admission home visits to assess and educate seniors scheduled for joint replacement surgery. The IPA models also offered seniors a relatively large network.

While the case study was able to document the success of the four MCOs, it was much harder to determine why such success occurred. What led these organizations to field a broad range of programs targeted to high-risk seniors? What elements of their structure and management fostered experimentation and innovation? Such questions cannot be answered entirely based on the information gathered in our case study. Nevertheless, several possible factors did seem to emerge:

  • Innovation was fostered by a culture of experimentation. All of the case study MCOs exhibited an interest in trying new approaches to coordinating and delivering care. Care management, group clinics, disease management, and other programs were fielded and monitored. Operations were then modified and possibly expanded if the pilot seemed to produce favorable results. Not every idea worked, but that did not seem to stop the MCOs from continuing to try new things and assessing how those new approaches might improve care and help to control costs.

  • Innovation was supported by senior officials in the MCOs. In all cases, there were senior officials in the MCO who encouraged innovation and who often were instrumental in the development and implementation of new approaches.

  • The MCOs found ways to draw on community resources. All of the case study MCOs were in areas that had a wide array of community support services available. The MCOs referred high-risk seniors to these service providers in order to meet their needs for services that were outside of the MCOs’ Medicare + Choice contracts.

The innovation we saw was often constrained by several factors. One is the lack of clear evidence that more ambitious interventions would be cost-effective. Without such evidence MCOs will be hesitant before making a substantial investment in new services or approaches. Another constraint came from the Medicare benefit package which focuses primarily on medical care and excludes most personal assistance, nutrition, housing, and long-term nursing home care as well as supports for families and other unpaid caregivers. It does not require or pay for MCOs to address needs for these non-Medicare services.

While the case study MCOs demonstrate that it is feasible to achieve high satisfaction levels among high-risk seniors, how likely is it that this can be replicated in a broader set of plans? How can policy foster the corporate commitment, active involvement of physicians, and a culture of experimentation that underlie much of the innovation we observed? Discussions with the MCOs, physicians, and seniors, identified four possible actions:

  • Stabilizing the financial and regulatory environment faced by Medicare + Choice plans. A MCO’s senior management will focus first on the overall performance of the organization and will focus on new care approaches for high-risk seniors only once the financial stability of the organization has been addressed. As a result, MCOs are not likely to pursue programs for high-risk seniors until they have some successful financial and operational experience with their Medicare + Choice risk plan. Outside factors that can affect basic performance, such as rapid growth or decline in enrollment, competition from new insurance products and plans, and mandates for new programs or services, will demand management attention and can divert attention for new innovations. As a result, uncertainty in the financial and regulatory environment can lead MCOs to address new approaches for high-risk seniors in an incremental, piecemeal fashion.

  • Reducing expectations of improvements in care combined with cost savings. There is substantial evidence that it is very difficult to both improve care for high-rise seniors while saving money at the same time. While the experience of the case-study MCOs suggests that marginal improvements are possible in the current Medicare + Choice program, more substantial improvements may require more money.

  • Risk-adjusted capitation payments. One way to ensure that there is sufficient funding for programs targeted to high-risk seniors is to implement a payment system that would explicitly recognize the higher costs incurred by such seniors.

  • Better cost-effectiveness analysis for mandated services. Medicare + Choice regulations have mandated that plans provide several services intended to help high-risk seniors. Yet the analytic support for whether the capitation payments are sufficient to support provision of these services remains unclear. The fact that the case-study MCOs fielded many of these services before they were mandated, suggests that at least those organizations believed such services were effective within the capitation system of the mid- to late-1990s. Without stronger research support for the cost-effectiveness of these services within the current capitation system, however, it will be difficult to convince MCOs to embrace the mandates and to find additional ways to improve care for high-risk seniors.

It is ironic, but perhaps fortuitous, that our study is raising these issues today at a time when the Medicare + Choice program is under substantial stress, with plans withdrawing, enrollment dropping, and policymakers debating the importance of stabilizing the program. Among options discussed to stabilize the program, payment levels and regulatory requirements factor heavily in the debate. Our study’s contribution to the debate on these issues arguably is to highlight how Medicare beneficiaries may be affected by the outcome of the resolution of this debate. We show that Medicare + Choice has the potential to enhance care for frail elders, an opportunity that might be lost if the program erodes. Assuming the Medicare + Choice program remains, the key challenge for policymakers will be to decide how to provide incentives for more broad-scale adoption of the innovations that managed care makes possible without adding to the regulatory requirements and instability that threaten the program. One promising step currently underway at the Centers for Medicare and Medicaid Services involves efforts to improve performance measurement (via HEDIS and CAHPS) so that it focuses more heavily on MCO performance for frail elders and then using performance information to inform beneficiary choice. Performance measures specific to high-risk seniors could also be used in to revise the payment system both through enhanced payment and a more adequate risk adjustor that compensates plans that seek to invest in care for the most vulnerable of Medicare beneficiaries.

Finally, the Medicare program itself can constrain the ability to coordinate all the medical and other services high-risk seniors may require to maintain their functioning and independence. Funding for such services comes from many sources in addition to Medicare and the full range of providers extends well beyond those who deliver medical care. Furthermore, the seniors, along with their families and friends, will continue to provide substantial care. Full integration and coordination of these services will require corresponding efforts to coordinate funding and to look beyond the Medicare program.

The experiences of the case-study MCOs suggest that future efforts to improve care for seniors with disabilities and chronic illnesses will have to take many forms. Each MCO will have to develop and adapt procedures to fit its own structure and processes. Furthermore, experience at the case-study organizations suggests that innovations are likely to be initiated and nurtured by highly motivated people with a special interest in care for high-risk seniors. These people must champion the new programs and approaches, and push their organizations to improve care. It will remain a challenge to identify and support such champions, particularly in the absence of mandated change. The examples provided by the case-study organizations can help guide the future, but rigorous evidence will also be needed on best practices and effective methods for disseminating new methods.



  1. From December 1998 to October 2001, the number of Medicare + Choice risk plans classified as group or staff models fell by 31 percent (to 74 plans), even though total enrollment in these types of plans remained essentially constant at approximately 2 million. During the same time period, the number of IPA plans fell by 57 percent to 101 plans with an enrollment in October 2001 of approximately 3.5 million.

Medicare Beneficiaries