Constrained Innovation in Managing Care for High-Risk Seniors in Medicare + Choice Risk Plans. D. Fostering Further Innovation


The basic finding from this case study is that MCOs in the Medicare + Choice risk program who invest in programs for frail elders can produce high levels of satisfaction among their elderly high-risk members. More than 90 percent of the high-risk seniors in our set of innovative MCOs said that they would recommend their plan to someone with a similar level of health. This satisfaction level is comparable to that found for the general population of Medicare beneficiaries in managed care, and substantially above the approximately 75 percent level previously found for a national sample of beneficiaries with disabilities or advanced age (Nelson et al. 1996).

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. If the general level of satisfaction among high-risk seniors could be raised from approximately 75 percent to the 93 percent level observed in our study, it would generate substantial benefits to a particularly vulnerable group of Medicare beneficiaries. Such a change seems feasible because the MCOs included in our study represent a fairly broad mix of organizations. There are group and IPA models; some operate with relatively high Medicare + Choice payments, others get low payments; some are fairly new to managed care for Medicare beneficiaries, others have been doing it for decades. Thus, their success suggests that similar results could be obtained by other MCOs. While it may take other MCOs awhile to achieve the success of these case-study organizations, it seems reasonable to expect them to take steps in that direction.

Although the case study suggests that it is possible to produce high levels of satisfaction, it does not indicate specific steps to achieve that level. Each of the case study MCOs developed its own programs, designing them in ways that worked for the plan. Each of the efforts shared common elements, particularly the core elements of the I-CAN approach: 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 education seniors scheduled for joint replacement surgery. The IPA models also offered seniors a relatively large network.

Our case study identified several factors that may have promoted innovation at the four MCOs:

  • Innovation was fostered by a culture of experimentation (Peters and Waterman 1982). 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 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 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 the MCOs’ Medicare + Choice contracts. While there were some waiting lists, directors of the Area Agencies on Aging in these communities indicate that services generally were available for seniors who could pay for them and were often available for seniors who needed subsidized care. It seems plausible that these community supports, assisted by the referral efforts of the MCOs, may have been partly responsible for the satisfaction levels we observed. It cannot be determined from our case study whether similar satisfaction levels could be produced in areas that lacked community support services.

  • Innovation was facilitated by having a critical number of high-risk seniors. The challenge is having enough high-risk seniors with similar needs to support a special intervention. While the overall number of high-risk seniors is growing, they are likely to continue to represent a fairly small part of an MCO’s overall business (including both Medicare + Choice and commercial products). Furthermore, high-risk seniors are heterogeneous and will often require individualized education and intervention. These aspects of the population mean that it will often be difficult to identify a sufficient number of people whose needs can be addressed efficiently within a specialized program. Innovation therefore requires the ability to identify seniors with similar needs and to find ways to meet those needs through programs that operate at an efficient scale.

In addition, it appeared that the group models offer several advantages. In particular, the clinic-based approach these types of MCOs use to delivery primary care meant they could assemble a sufficient number of high-risk seniors to support targeted programs. In the IPAs, the MCO typically did not have enough high-risk seniors in one physician’s practice to support targeted on-site programs. In addition, it appeared that physicians associated with the group model organizations had a stronger commitment to pre-paid care, which made them more likely to develop and support new care delivery and coordination approaches for high-risk seniors. The challenge facing the IPAs, with respect to innovation, appeared to be the relative difficulty in building physician loyalty and making their programs salient to their network providers. Often, an IPA’s, members constitute a small fraction of the practice of most network physicians, who must deal with multiple plans having differing administrative and care management requirements. Nevertheless, the IPAs made a number of innovations regarding care management, disease management, pre-surgery home visits to help patients and their families plan for recovery, as well as development and dissemination of best- practice guidelines.

Although the findings from the Medicare + Choice plans we studied generally were positive, there is still room for improvement. For example, the level of unmet need appears lower than would be found in the general fee-for-service (Allen and Mor 1997), but several seniors in our sample, still experienced problems due to the unmet needs for assistance.

In addition, the innovation we saw was often constrained, in the sense that it did not address the full range of care issues facing high-risk seniors. For example, the care management delivered by the MCOs tended to emphasize short-term interventions and generally did not include longer-term efforts to educate and monitor patients beyond what was done by the primary care physicians. The constraints stem from many sources. One is the lack of clear evidence that many, more ambitious interventions would be cost-effective. Without such evidence, MCOs are likely to be hesitant before making a substantial investment in new services or approaches. Another constraint came from the Medicare + Choice contract, 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 MCO’s to address needs for these non-Medicare services. Lastly, the MCOs had to find the resources for targeted programs within the Medicare + Choice capitation payments. There are many demands on the portion of those payments that does not go to care delivery. These include marketing, internal data and financial systems, monitoring compliance with Medicare regulations, and any special efforts to provide extra services to high-risk seniors. This internal competition for resources constrains the special efforts, particularly in the absence of evidence that they generate savings.

While the case study MCOs show that it is feasible to achieve high satisfaction levels, how likely is it that this can be replicated in a broader set of plans? The findings from our study provide both encouragement and some cautions. The fact that the plans we studied were diverse suggests that improve performance can be achieved by a broad range of plans. But, we found, translating potential into action also requires corporate commitment, the active involvement of physicians, and a culture of experimentation that may not exist in all plans.

Our discussions with MCOs, physicians, and seniors, identified several factors that might encourage plans to invest more heavily in the kinds of programs we studied. They stressed four key factors:

  1. Stabilizing the financial and regulatory environment faced by Medicare + Choice plans. We came away from our visits with a sense that 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 are likely to proceed piecemeal in an incremental fashion.

  2. Reducing expectations of improvements in care combined with cost savings. There is substantial evidence that it may not be possible to improve care for high-rise seniors while saving money at the same time (for example, Kemper 1988). 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.

  3. Risk-adjusted capitation payments. One way to ensure 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. CMS has already taken some steps in this direction. A possible further step could be use of the individualized, annual screening and risk adjustment payment process used in the second-generation Social Health Maintenance Organizations (S/HMO). That payment system appears to be operationally feasible and to offer a potential model for tailoring payments to the actual risk levels of an MCO’s members (Wooldridge et al. 2001). However, only one plan has agreed to be paid under this system; so its wider applicability remains uncertain.

  4. Better cost-effectiveness analysis for mandated services. Medicare + Choice regulations have mandated that plans provide several services intended to help high-risk seniors. These services include new member screening, assessments, and care coordination. 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 (Gold 2001). 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 or 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 that the Medicare + Choice program remains, the key challenge for policymakers will be to decide how to provide incentives for a more broad-scale adoption of the innovations managed care makes possible, without adding to the regulatory requirements and instability that threaten the program. One promising step currently underway at CMS involves efforts to improve performance measurement (via HEDIS and CAHPS) so that it focuses more heavily on MCO performance for frail elders, then using performance information to inform beneficiary choice. Performance measures specific to high-risk seniors could also be used to revise the payment system, both through enhanced payment and a more adequate risk adjuster that compensates plans seeking to invest in care for the most vulnerable Medicare beneficiaries.

Finally, the Medicare program itself can constrain the ability to coordinate all the medical and other services high-risk seniors may require in order 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.

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