Beyond the Water's Edge: Charting the Course of Managed Care for People with Disabilities - Conference Resource Book. A Managed Care Program for Working-Age Persons with Physical Disabilities


Andrew I. Batavia, J.D., M.S.; Gerben DeJong, Ph.D.; Thomas J. Burns, M.A.; Quentin W. Smith, M.S.; Sigrid Melus, M.P.A.; and Dennis Butler, B.A.
January 31, 1989


This report presents the findings of a study funded by The Robert Wood Johnson Foundation (RWJF) and conducted by the Research Program of the National Rehabilitation Hospital (NRH) to determine the feasibility of developing a managed health care program for working-aged persons with physical disabilities in the Washington, DC, metropolitan area. Members of the physically disabled population tend to be highly vulnerable to such conditions as decubitus ulcers, scoliosis, acute urinary tract infections, and lower respiratory tract infections. They have substantially higher rates of hospitalization than persons who are not disabled. The proposed program is intended to provide access to affordable comprehensive health care services for physically disabled persons aged 18-65. Its objective is to prevent the escalation of minor health concerns to major problems that require hospitalization or other forms of institutionalization.

The feasibility study was conducted by a Research Team consisting of specialists in rehabilitation and health services research, and was reviewed by an Oversight Committee consisting of representatives from local government, the insurance industry, disability organizations, and the provider community. The study had four parts, which are as follows:

  1. Analysis of the appropriate conceptual model on which to base the proposed program, and determination of the program's general parameters;
  2. Identification and survey of members of the target population to determine whether they would benefit from, and be interested in, the program;
  3. Assessment of the prospects for offering the program to members of the target population through public and private sector payors of health care; and
  4. Analysis of the financial feasibility of the program through projections of likely cost savings to payors as a result of the program.

Based on these analyses, the researchers conclude that the proposed program is feasible, and recommend that it be developed and implemented. A summary of the results of each analysis and the overall conclusions of the study are provided below.

Analysis of Managed Care Models

As initially conceived, the proposed program was to be based on the health maintenance organization (HMO) model of managed care. Under the HMO model, the provider is placed "at risk" financially for providing all covered services needed by its enrolled population during the period of enrollment. The program was to be offered through the disabled individual's underlying health insurance, such as Medicaid, Medicare, Blue Cross/Blue Shield, or other private health insurance plan. The insurer would pay the program a capitation payment to provide a comprehensive set of health care services, as needed, to one of its beneficiaries during the enrollment period.

However, this initial conceptualization changed as a result of the findings of the feasibility study. The HMO model was abandoned due to:

  • insufficient cost and utilization data, based on the actual claims experience of the target population, for the accurate calculation of capitation rates;
  • concerns about financial viability of a program based on the HMO model (due to the high risks of the target population and lack of adequate claims data on which to base capitation rates);
  • the relatively small number of persons likely to be enrolled in the program as compared to the number of enrollees typically required for a viable HMO;
  • the unlikelihood that the program would be able to secure affordable reinsurance; and
  • concerns by the disabled community over the strong cost-containment incentives of capitation financing and problems in replicating a program for disabled persons based on the HMO model.

Under the revised conceptualization of the program, it would be based on the preferred provider arrangement (PPA) model of managed care. Under the PPA model, the disabled person's insurer would negotiate preferred provider rates with the program for each type of service offered to its disabled beneficiaries, and the program would provide such services as needed. As compared to the HMO model, the PPA model is (a) less financially risky for providers because they do not bear the responsibility of providing the comprehensive care of their enrollees for a single capitation payment; (b) somewhat less dependent on accurate cost data, large enrollment, and reimbursement; (c) less likely to result in conflicts of interest between providers and patients, due to its somewhat weaker incentives for cost containment; and (d) more readily replicable in other areas of the country, including small urban areas.

The Proposed Program

The program would provide a comprehensive set of inpatient and outpatient services to its enrolled population. These would include outpatient primary care services, inpatient hospital services, medical specialty services, home visits by nurse practitioners, and emergency attendant care. It would address the health care needs of persons aged 18-65 who reside in the Washington, DC, Standard Metropolitan Area (SMA) and who have any of the following diagnosed disabilities:

  • amputation
  • cerebral palsy
  • cystic fibrosis
  • head injury
  • multiple sclerosis
  • muscular dystrophy
  • post-polio
  • spina bifida
  • spinal cord injury
  • stroke.

The program would be offered through a variety of public and private sector insurance programs to their beneficiaries who qualify under the program as members of the target population. Enrollment in the program would be entirely voluntary on the part of the beneficiary, though disabled persons who choose to enroll in the program would "lock themselves in" for the annual enrollment period. The program, as currently envisioned, would have a small administrative and clinical staff, and would be based in an outpatient facility. It would also contract on a preferred provider basis with hospitals and practitioners in the Washington, DC, area to provide services to the enrolled population.

The Market Analysis and Survey

A market survey was needed to identify physically disabled persons of working age in the Washington, DC, metropolitan area, and to assess their unmet health care needs and their desire for the proposed program. The market area for the survey was defined as the Washington, DC, SMA. To identify members of the target population, an initial screening survey was developed by the researchers and distributed to members of 18 disability organizations in the market area. To be included in the study group, a respondent to the screening survey had to be:

  • 18 to 65 years of age;
  • a resident of the market area; and
  • a person who has at least one of the ten
  • diagnosed disabilities included in the target population for the program.

The main survey questionnaire was sent to 993 persons who indicated through the screening survey that they are members of the target population. There were 607 usable responses to the main survey questionnaire (a response rate of 61 percent).

The information objectives of the survey were to develop a demographic profile of the members of the target population; to describe their health and functional status; to evaluate their use of inpatient and outpatient health care services; to determine their level of satisfaction with their current health care services; to examine the extent to which they are covered by health insurance from the public and/or private sectors; and to ascertain their preferences for a managed health care approach to meeting their health care needs. The survey results most pertinent to determining the feasibility of the proposed program are summarized below.

Demographic Profile

Overall, the study group is predominantly white (85 percent), male (56 percent), well-educated, and not currently employed (59 percent). Only 12 percent of the respondents did not complete high school. Some 37 percent have either a college or graduate degree. Only 41 percent of the study group are working full- or part-time. Some 16 percent are unemployed and seeking work. About a third of the members of the study group have an annual household income of less than $10,000. Almost a quarter of the study group have an annual household income of more than $50,000. Slightly over half of the members of the study group receive Social Security Disability Insurance (SSDI), Supplemental Security Income (SSI) or both.

Health and Functional Status

About three-quarters of the study group rate their own health as either "good" or "excellent." Some 55 percent of the study group use either a manual or a power wheelchair. About two-thirds of the study group take care of their own personal needs; the remaining third obtain help on a regular basis from another person. Some 12 percent of the entire study group use a paid attendant to meet their personal care needs. Overall, the group consists of a relatively large number of persons with substantial functional limitations.

Health Care Utilization

About a quarter (26 percent) of the study group were hospitalized at least once during the 12 months prior to receiving the survey. Some 37 percent of all respondents hospitalized in the previous 12 months were hospitalized two or more times during that period. Because some had multiple admissions, the entire study group averaged 45 hospitalizations per 100 respondents during the previous 12 months. Of those hospitalized, half were hospitalized for a week or less; half were hospitalized for a week or more. Some 16 percent were hospitalized for more than two weeks. The average length of stay for the most recent hospitalization was 13 days.

Those who were hospitalized in the previous 12 months were asked how many of their hospitalizations could have been averted if they had received early treatment by a doctor or other health care provider knowledgeable about their disability. Of those who responded to this question, 23 percent indicated that at least one hospitalization could have been averted. Some 28 percent of the study group had difficulty in the past year finding a physician who was knowledgeable about the particular health care needs related to their disabilities.

Health Insurance Coverage

About 96 percent of survey respondents have some form of health insurance coverage: 27 percent have only public sector coverage; 43 percent have only private sector coverage; and 26 percent have a combination of both public and private sector coverage. Some 17 percent of respondents receive health benefits under Medicaid; 20 percent of respondents receive benefits under Medicare; and an additional eight percent receive both Medicare and Medicaid. Of those who have some form of private coverage, most have traditional private health insurance (77 percent). A minority of those with private coverage use a private HMO (13 percent).

Preference for a Managed Care Program

Members of the study group were asked to rank their preferences for three specified types of health care plans. About half (52 percent) of the survey respondents indicated that their first choice would be a managed care plan in which choice of provider is limited to a group of practitioners who are knowledgeable of their disability-related problems, but in which patients would have considerable control over the coordination of their own care. This plan is rated third by only four percent of the respondents. Preference for this type of plan is strong across all disabilities except among respondents with cerebral palsy.

Some 29 percent of the study group indicated that their first choice would be a plan in which choice of provider is limited to practitioners specifically knowledgeable of disability-related problems, but in which the plan is responsible for coordinating the patient's care. Almost half (49 percent) indicated that this type of plan would be their third choice. Some 31 percent of the group indicated that they prefer a traditional health plan in which choice of provider is not limited and the patients are responsible for coordinating their care.

The Payor Analysis

Under the proposed program, health care payors such as Medicaid, Medicare, Blue Cross/Blue Shield, other commercial insurers, and self-insured corporations would pay the program negotiated rates per service for providing health care services to their disabled beneficiaries. For this reason, third-party payor involvement is essential to the success of the program. A central component of the feasibility study was to determine whether the various public and private sector payors in the Washington, DC, area would be interested in offering the program to their beneficiaries with disabilities. Throughout the study, members of the Research Team met with public and private sector payors.

The researchers determined that Medicaid participation in the proposed program would be essential to its feasibility, because it is believed that physically disabled Medicaid recipients comprise the single largest pool of potential enrollees for the program. The District of Columbia Office of Health Care Financing (DCOHCF), which administers the District's Medicaid program, indicated that it would be willing to participate in the program if it can obtain "waivers" necessary for federal Medicaid funding of the program from the U.S. Health Care Financing Administration (HCFA). It is expected that HCFA will approve the Medicaid waiver request prepared by the Research Team on behalf of DCOHCF, and the program will be able to receive funding under DC Medicaid. Once approved, similar waiver requests will be prepared for the program on behalf of Maryland and Virginia.

Medicare participation in the proposed program would also contribute importantly to the program's feasibility. Funding of the program by Medicare is somewhat less likely than is funding by Medicaid, though it is still very feasible. Medicare waivers for a research or demonstration project would be needed for Medicare participation in the program, but approval of such waiver requests by HCFA is more discretionary than approval of Medicaid waiver requests. Once the program has been applied to Medicaid recipients, the Research Team will be able to estimate program costs adequately to apply for a Medicare waiver. There is a reasonable probability that Medicare funding could be secured by the third year of the program.

The prospects for funding of the program by private sector payors such as Blue Cross/Blue Shield and other commercial insurers are least optimistic. Impediments to private sector participation include (a) difficulties for insurers in identifying disabled persons among their beneficiaries and in determining their costs; (b) high costs of negotiating for and operating a separate program for a relatively small number of disabled beneficiaries; and (c) difficulties in addressing the administrative complexities of paying for services under the program. Despite these impediments, private sector insurers have expressed interest in meeting the needs of their disabled beneficiaries, and it is likely that some private payors will cover services provided by the program.

The likelihood of obtaining reinsurance for the program at a premium that would permit the program to operate in a financially viable manner is small. It is expected that this will not preclude the program's feasibility, because the risk of extraordinary losses is substantially reduced due to the adoption of the preferred provider model for the program.

The Financial Analysis

The Research Team had initially proposed to RWJF to develop a series of income statements and cost projections for the proposed program, based on varying assumptions on program utilization and per capita rates. However, due to the lack of available cost data based on actual claims experience, and the modification of the proposed program from a capitation-financed program to a preferred provider program, such projections are too speculative at this time. Instead, the Research Team developed a set of projections as to likely cost savings by Medicaid as a result of the managed care program.

It is anticipated that annual cost savings to the Medicaid program would range between $25,000 (if only 250 Medicaid recipients enroll in the program) to $125,000 (if 500 recipients enroll). Projecting that 300 Medicaid recipients would enroll in the program by its third year, the Research Team believes that Medicaid is most likely to save $55,000 a year as a result of the managed care program. Cost savings are likely to be similar for Medicare and private sector insurers that offer the program, and to increase over time as hospital costs increase more rapidly than program costs.

In addition to reducing health care costs, the program would enhance access to high-quality care for persons with disabilities. It is through such enhanced access to managed care that the program is expected to reduce the number of avoidable hospitalizations and emergency room visits by disabled persons, and to increase the cost-effectiveness with which they receive health care services. The high rate of hospitalizations of disabled persons and their poor access to informed comprehensive care have resulted in substantial disruptions to their lives, including financial hardship and interference with their social and work responsibilities. The researchers believe that the program's expected ability to reduce such disruptions for disabled persons is as important as the modest cost savings expected for payors.


Based on the results of this study, the researchers recommend that the proposed program should be developed and implemented. There appears to be a strong interest in, and desire for, a managed care program among the target population of persons with physical disabilities in the Washington, DC, metropolitan area. A majority (70 to 80 percent) of the members of the study group prefer some type of managed health care program over a traditional health care program. These respondents, and other members of the target population they represent, are likely to consider enrolling in the proposed program if it is offered to them.

Almost all persons (96 percent) surveyed have some form of health insurance that could potentially offer the program to their beneficiaries with disabilities. There appears to be considerable interest among the payor community in the program, and a substantial likelihood that the program would be financially viable. The DC Medicaid Program is very likely to be willing and able to offer the program to its recipients. Similarly, there is reason to believe that the Virginia and Maryland Medicaid programs will be willing to participate. Medicare and the private sector insurers may also participate once the program has been implemented.

This study further confirms the findings of other studies that have found a high rate of hospitalizations among the disabled population. It is noteworthy that 23 percent of the respondents who had been hospitalized at least once in the previous 12 months indicated that they believe at least one hospitalization could have been averted if they had access to early preventive care. These results suggest that the proposed program, which would provide prevention and early detection of disability-related health problems, would help to reduce unnecessary hospitalizations and thereby reduce the health care costs of the disabled population. However, even if such cost savings do not result, the program is still very likely to enhance access to care and quality of services for disabled persons without increasing costs.

The specific form that the program should take must be decided during a technical design and development stage of this project. Results from the market analysis suggest that the target population includes many sophisticated health care consumers who would prefer to retain substantial control over their own health care within a managed care system, as well as a significant number of persons who would prefer that health care professionals maintain primary control. One implication of this finding is that the program should consider offering enrollees two options, one in which the staff would coordinate their care and another in which enrollees would coordinate their own care. In either case, care would be provided by a limited number of practitioners specifically knowledgeable of the health care needs of working-age persons with physical disabilities.

This study was sponsored by the Robert Wood Johnson Foundation.

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