Over the next 30 years, the Medicare program is expected almost to double in size, covering 38 million more people than it does today. At the same time, the future of the Medicare + Choice program has become uncertain. During the early 1990s, enrollment in Medicare + Choice plans grew rapidly. Spurred by the attractive additional benefits many risk plans offered--such as coverage of prescription drugs and competitive premiums relative to those for traditional Medicare-supplemental coverage--enrollment tripled between 1993 and 1997 (Lamphere et al. 1997; and Nelson et al. 1996). Enrollment peaked in 1999 at 6.3 million beneficiaries (out of a total of almost 40 million beneficiaries overall). Enrollment is now in decline, as some plans withdrew from the Medicare managed care market or reduced their service areas.
Nevertheless, managed care remains an important option for many high-risk Medicare beneficiaries. In October 2001, approximately 15 percent of Medicare beneficiaries were enrolled in a Medicare + Choice plan. Of those, statistics from earlier beneficiary surveys suggest that more than 25 percent need help with basic ADLs, such as bathing (Health Care Financing Administration 2001). Furthermore, Medicare managed care is a source of ideas and methods for improving the delivery of care to groups at high risk for hospitalization or adverse health outcomes (Boult et al. 2000; Fox et al. 1998; Christianson 1998; and Chen et al. 2000).
Regardless of participation in Medicare + Choice plans, high-risk seniors tend to have greater-than-average difficulties obtaining adequate care (Nelson et al. 1996; and Manton et al. 1993). As Wagner et al. (1996) note, “usual medical care, regardless of organizational and financial arrangements, confronts chronically ill patients and their providers with a set of formidable obstacles to achieving effective clinical care and self-management.” These obstacles often lead to unmet needs. For instance, approximately one-third of all disabled elderly people now have an unmet need for assistance with at least one ADL (Institute for Health and Aging 1996). These unmet needs can lead to adverse consequences such as falls, difficulty with toileting, inability to have prescriptions filled, missed medical appointments, and preventable institutionalization (Allen and Mor 1997; and Stone et al. 1987). In addition, the Medicare benefit package focuses on medical care, to the general exclusion of long-term nursing home care, personal assistance and other services oriented toward promoting functional independence (Moon 1996). High-risk beneficiaries must therefore look to Medicaid and other programs outside Medicare to meet those types of needs, as well as to obtain help with their often substantial costs for medications. This fragmentation of financing complicates efforts to coordinate medical care with social and custodial supports.
At the same time, it is not clear whether high-risk seniors in Medicare + Choice plans fare better or worse than those in fee-for-service. Although the structure of managed care offers theoretical advantages over the fee-for-service system, empirical studies provide mixed evidence about the different care processes and outcomes of the two systems (see, for example, Retchin et al. 1997; Miller and Luft 1997; Kramer 1996; Ware et al. 1996; Greenfield et al. 1995; Brown et al. 1993; and Retchin et al. 1992).
The most comprehensive comparison of Medicare fee-for-service and capitated managed care systems concluded that Medicare risk-contracting HMOs provide care comparable to that delivered by fee-for-service providers but use fewer health care resources (Brown et al. 1993). HMOs shortened the average hospital stay by 16.8 percent relative to the Medicare fee-for-service sector. They also increased the use of some services by beneficiaries whose health was poorest, while reducing the intensity of services more for this group than for other groups. For example, people in HMOs had a higher probability of hospitalization, but they also had the largest average reduction in hospital days and home health visits. Furthermore, the evaluation suggested that the reductions were more likely a result of better care delivery and the elimination of unnecessary services than of restricted access to health care.
Other studies suggest that care for high-risk seniors and others with chronic illness or disability may be worse in managed care than it is in the fee-for-service system. Ware et al. (1996) found that, over a four-year period, elderly patients in HMOs were almost twice as likely as their counterparts to experience a decline in physical health in a fee-for-service system. Shaugnessy et al. (1995 and 1994) provided data suggesting that lower use of home health care among HMO members may contribute to worse health outcomes.
The heterogeneity among managed care plans further complicates analysis of the effects of managed care. Each plan responds differently to its competition, its regulators, the general practice patterns in its service area, and its own experiences and existing systems. Although competition among plans can lead them to offer products with similar features, it seems likely that substantial diversity will remain with respect to specialized efforts targeted to high- risk seniors or other population subgroups. Thus, efforts to assess how well Medicare managed care serves high-risk seniors must explicitly recognize this diversity and avoid broad generalizations about the effects of managed care.
The future role of Medicare + Choice plans will be shaped by the availability of evidence about whether specific services such as care management will lower overall costs or improve care quality for high-risk seniors. A substantial body of literature has evolved over the past 15 years on the cost-effectiveness of alternative approaches to caring for high-risk seniors. In many cases, no evidence of cost savings has been found (Kemper 1988; Weinberger et al. 1996; Fitzgerald et al. 1994; and Schore et al. 1999), and additional research is needed to form a consensus about many approaches that have not been evaluated (Boult et al. 2000). The future role of Medicare + Choice plans could also be shaped by altering the Medicare benefit package, regulations, or payment system to encourage plans to develop new programs for high-risk seniors.
In addition to efforts by Medicare + Choice plans, a number of demonstration programs have evaluated the effectiveness of new models of financing care for high-risk seniors. These demonstrations have been sponsored by CMS and have included (1) the Program for All-Inclusive Care (PACE), which offers a comprehensive array of acute and long term care services for high-risk senior Medicare beneficiaries; (2) the Social HMO (S/HMO), which is a hybrid of a Medicare risk plan and a modest long term care community insurance plan; (3) EverCare, a demonstration program that pairs physicians and geriatric nurse practitioners to manage the care of nursing home residents more effectively; and (4) several state programs, such as Minnesota’s Senior Health Options program, which integrates care and financing for dual eligibles, people simultaneously enrolled in Medicare and Medicaid (Wooldridge et al. 1999; and ASPE’s Disabilities and Managed Care Web site 2000).
Although none of these kinds of MCOs are included among those we analyze for this report, they have changed the mix of services available to high-risk seniors. For example, PACE, which was found to reduce hospitalizations and nursing home entry, has recently become a program under Medicare + Choice and currently operates in 25 sites nationally (Burstein et al. 1996; and Wooldridge et al. 2000). The S/HMOs screen and assess seniors to determine those that could benefit from expanded community care services to help them avoid nursing home admissions and reduce the risk of complications from their chronic conditions. However, there is no consistent evidence that S/HMOs improve beneficiary outcomes relative to Medicare risk plans that do not receive the extra payments (Wooldridge et al. 2001).