Although the future of Medicare managed care has become uncertain, there is no doubt that effective ways must be found for managing the delivery of care for elderly Medicare beneficiaries with disabilities and chronic illnesses. This is illustrated by the case of a senior who, in a surprisingly lighthearted manner, related his case:
I had a bypass in 1984, a four-way. And then in 1989, I had a six-way. And I had a broken hip. They set it wrong and I had to have another break. And I had knee surgery. I was getting along fine, but infection set in. So they had to take the prosthesis out. After knee surgery, they put a rod in my leg at the last surgery. Then I had a stroke.
Like many other seniors, this man requires organizationally complex care. That is, he has multiple chronic conditions that demand ongoing care, and he may also develop occasional acute illnesses. In addition, he receives care from many providers in several different settings, including physicians’ offices, skilled nursing facilities, hospitals, and his home. He may also eventually need long-term custodial care or hospice care.
This care will be expensive. Seniors with functional limitations and chronic conditions, particularly those whose treatment involves multiple hospitalizations, account for a disproportionate share of medical costs. Even if we exclude those beneficiaries who reside in nursing homes, the personal health care expenditures for community-resident beneficiaries with a limitation in at least one activity of daily living (ADL) are more than four times greater than for those with no limitation (Centers for Medicare & Medicaid Services 2001). Correspondingly, beneficiaries with functional limitations account for a disproportionate share of expenditures. In 1996, beneficiaries with limitations in ADLs accounted for 20 percent of all Medicare beneficiaries and almost 40 percent of all personal health care expenditures. Overall, health care for beneficiaries with limitations cost approximately $94 billion in 1996.
The man’s care may also be risky, since seniors with disabilities and chronic illnesses often face serious health risks when needed care is inappropriate, delayed, deficient, or uncoordinated. Problems may arise because one provider’s efforts to treat a condition weaken the effectiveness of treatments for other conditions. Medications prescribed by different physicians could interact adversely. Insufficient attention might be paid to preventive care that could help stave off future illnesses or to rehabilitation that would improve the ability to live independently. Seniors may not understand their chronic conditions well enough to engage in appropriate self-care.
The high costs and potential problems of delivering organizationally complex care mean that better methods for managing care delivery must be developed. The Medicare program, providers, managed care plans, and seniors are all interested in finding ways to deliver care in ways that reduce costs and improve outcomes. This interest can be seen in funding by the Centers for Medicare & Medicaid Services (CMS)2 of the PACE and Social Health Maintenance Organization (S/HMO) programs that seek to promote better care for frail elderly beneficiaries, in funding for demonstrations to improve care coordination and integrated service delivery for chronically ill seniors (Schore et al. 1999; Chen et al. 2000; and Brown et al. 2001), in the Medicare regulations that require managed care plans to screen new members to identify those at high risk for hospitalization and adverse health outcomes (Health Care Financing Administration 1999), and in the efforts of advocates to make care more responsive to consumer needs.
Medicare, including the Medicare + Choice program, will play a central role in meeting this challenge. Virtually all of the growing number of seniors will be eligible for Medicare, and many will enroll in Medicare + Choice plans despite the recent decline in managed care enrollments. Many of those seniors who enroll in managed care will have chronic illnesses or functional limitations that put them at high risk for adverse health outcomes. Thus, the Medicare + Choice program will serve a substantial number of high-risk seniors and must find effective ways to care for these seniors. In 1998, there were more than 1.6 million Medicare beneficiaries who needed help with at least one basic activity of daily living (ADL) (such as bathing or eating) enrolled in Medicare + Choice risk plans (Health Care Financing Administration 2001).
This participation in managed care offers an opportunity to address the challenge of delivering organizationally complex care. It also raises some potential risks. Managed care has financial incentives to increase the delivery of preventive care and to coordinate care delivered by several providers. It also offers the promise of cost savings that could be shared between seniors, Medicare, and the health plans. At the same time, there are financial incentives and operational barriers that may limit the extent to which Medicare managed care achieves its full potential. For example, plans have incentives to focus on preventive care that can improve outcomes or create savings quickly than on preventive programs, such as smoking cessation, whose benefits are not realized until much later. The balancing of these competing incentives is particularly important to seniors with disabilities and chronic illnesses (Gold et al. 1998).
The challenge of delivering organizationally complex care will become even greater as the population ages. In the next 20 years, the overall number of people with chronic conditions is expected to increase by 28 percent, and their direct medical costs are likely to increase by 36 percent (Institute for Health and Aging 1996). Technological developments will continue to change the way care is delivered and will present new and complex choices to seniors. Hospital stays may become even shorter, with more care delivered in skilled nursing facilities and in seniors’ homes. Medical tests will be more complex, and more drugs will be available for treating chronic illnesses. Also, providers such as advanced practice nurses, therapists, nutritionists, and care managers will play an increasingly large role in helping seniors live healthier lives.
To help the Medicare program meet this challenge, the Office of the Assistant Secretary for Planning and Evaluation in the U.S. Department of Health and Human Services funded this study, which examines a selected group of beneficiaries with disabilities and chronic illnesses in four managed care organizations (MCOs). The study includes interviews with a broad mix of those beneficiaries, as well as reviews of the systems and methods the MCOs have established for serving them. These organizations do not represent all Medicare + Choice plans, but their experiences and those of their enrollees provide a sense of the challenges inherent in serving high-risk seniors in Medicare, and suggest some of the ways MCOs can meet those challenges.
We focus on elderly Medicare beneficiaries with disabilities or chronic illnesses, whom we will call high-risk seniors. This group is important to policymakers because of their vulnerability to adverse outcomes, their generally high medical costs, and the expectation that this group will grow markedly over the next 30 years. There has been a particular concern over vulnerable populations within managed care systems, as evidenced by Medicare regulations that require Medicare managed care plans to screen new members and identify those at high risk for adverse outcomes. High-risk seniors also serve as a sentinel population that is particularly sensitive to the ways in which care is organized and delivered (Patterson et al. 1998). While many seniors face risks, we have focused on those who already have chronic conditions or disabilities and on those who are most likely to experience additional illnesses, impairments, hospitalizations, or loss of functioning and independence. While important, the study of people who face milder risk is quite difficult, because measurable outcomes occur less frequently, and the risk levels are often hard to influence.
In our site visits, focus groups, and surveys, we found considerable evidence of the extensive care needs of high-risk seniors and the organizationally complex care they receive. We also found innovation, attention to preventive care, and cost-consciousness among the four MCOs. These MCOs used the flexibility provided by capitation to add new services, including screening and other programs to identify high-risk seniors; care management and disease management; network credentialing; occasional provision of off-policy benefits; and 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 non-medical assistance, high-risk seniors may need to maintain their functioning and independence. Also, it remains unclear whether these non-medical services, even the services the MCOs did provide, will generate sufficient savings to cover their extra costs. Thus, while their innovations appear to improve care and did produce 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 better evidence of cost-effective service delivery.
In presenting these findings, we start with an overview of the policies that are shaping Medicare managed care and an analytical framework for thinking about that program and how it serves beneficiaries with disabilities or chronic illnesses. We then describe our data and methods. In Chapter III, we examine the special features of high-risk seniors that will challenge care systems that seek to serve them. In Chapter IV, we review the processes and structures the four MCOs have developed for serving high-risk seniors. Chapter V provides more details about the experiences of a sample of high-risk seniors in three of the case-study MCOs, specifically, their satisfaction with their providers and plans and their perceptions of care management. Chapter VI looks at a particularly vulnerable group, elderly beneficiaries with a recent hip fracture or stroke. Finally, Chapter VII lays out some recommendations that emerge from this case study.