Understanding

and Addressing Hot Spots Critical to Bending the Medicaid Cost Curve May 2012 Realizing cost savings in Medicaid has become increasingly important as budget pressures increase at the state and federal levels and the 2014 Medicaid expansion under the Affordable Care Act rapidly approaches. Successfully managing costs hinges on understanding what is driving those costs and how to address cost drivers effectively. The fact that Medicaid costs are highly concentrated about 5 percent of Medicaid beneficiaries account for more than half of Medicaid spending1 presents a significant opportunity for lowering costs by strategically targeting programs that focus on improving care delivery for a small group of high-cost individuals. Medicaids Highly Concentrated Spending Medicaid covers a diverse population, including low-income children, parents and pregnant women, working disabled and severely disabled adults and children living in the community, and elderly and disabled individuals living in institutions. Across each of these different eligibility groups, a small portion of enrollees account for a large share of Medicaid spending. For example, among children served by both Medicaid and the Childrens Health Insurance Program (CHIP), 10 percent of enrollees (two-thirds of whom have a chronic condition) account for 72 percent of the spending.2 In fact, spending for children in Medicaid and CHIP is more highly concentrated than for children in Medicaid in general or for adult Medicaid enrollees. Overall, ranked by spending, a mere 5 percent of Medicaid enrollees account for 54 percent of Medicaid spending and the top 10 percent account for 68 percent of spending.3 In contrast, the enrollees at the bottom half of Medicaid spending account for only 5 percent of total costs. Even among people dually eligible for Medicare and Medicaid, a population receiving significant policy attention, costs are highly concentrated among a few dually eligible beneficiaries but with significant differences among sub-populations.4 These facts demonstrate the need for carefully tailored reform efforts for these highly vulnerable populations.
1

Cindy Mann, CMS Deputy Administrator, Center for Medicaid, CHIP and Survey & Certification, Medicaid and CHIP: On the Road to Reform, Presentation to the Alliance for Health Reform/Kaiser Family Foundation March 4, 2011. Available online at www.allhealth.org/briefingmaterials/KFFAlliance_FINAL-1971.ppt. 2 G Kenney, J Ruhter, and T Selden, Containing Costs and Improving Care for Children in Medicaid and CHIP, Health Affairs 2009; 28(6):w1012-w1036 web exclusive. 3 Cindy Mann, JD, CMS Deputy Director, Center for Medicaid, CHIP and Survey Certification, Centers for Medicare and Medicaid Services, presentation to Alliance for Health Reform/Kaiser Family Foundation, Mar. 4, 2011. Based on Medicaid Statistical Information System Claims Data for FY2008. 4 T Coughlin, et al., Among Dual Eligibles, Identifying the Highest-Cost Individuals Could Help in Crafting More Targeted and Effective Responses, Health Affairs, April 2012.

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Concentra@on of Medicaid Spending

100% 80% 60% 40% 20% 0% 25% 25% 1% 5% 10% 5% % Spending % Enrollees 54% 50% 50% % Enrollees % Spending 68% 85% 95%

Enrollees ranked by spending

Source: Cindy Mann, JD, CMS Deputy Director, Center for Medicaid, CHIP and Survey Certification, Centers for Medicare and Medicaid Services, presentation to Alliance for Health Reform/Kaiser Family Foundation, Mar. 4, 2011. Based on Medicaid Statistical Information System Claims Data for FY2008.

This concentration of spending among enrollees presents opportunities for targeted, well-designed interventions particularly when these high costs persist over time with the same individuals to allow for an intervention to have an effect. Studies on the persistence of costs show that a significant share of people generating high costs in a given year will be among the highest cost utilizers in subsequent years.5 Within Medicaid, research shows a high degree of persistence with almost 60 percent of those who were among the top 10 percent of spenders in one year remaining among the top 10 percent for the two subsequent years.6

S Cohen and W Yu. The Concentration and Persistence in the Level of Health Expenditures over Time: Estimates for the U.S. Population, 2005-2006, Statistical Brief #236. Feb. 2009. Agency for Healthcare Research and Quality. Available online at http://meps.ahrq.gov/mepsweb/data_files/publications/st236/stat236.pdf. 6 T Coughlin and S Long. Health Care Spending and Service Use among High-Cost Medicaid Beneficiaries, 2002-2004, Inquiry. 2009/2010:46(4); 405-17.

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Chronic Disease and High Costs Closely Tied Eighty-four percent of healthcare spending in the United States is associated with people with chronic conditions,7 making the linkages between poor health status and higher medical spending predictable. In fact, studies that analyze the concentration of health care spending confirm that individuals reporting very good health status are predominately among the lower half of spenders.8 Those reporting fair or poor health status were disproportionately represented among the top 10 percent of health care spenders. Not surprisingly, health care spending for people with one or more chronic conditions is much higher than spending for someone without a chronic condition. Specifically, expenses for people with one chronic condition were twice as great as for those with no chronic condition, and spending for people with five or more chronic conditions was about 14 times higher.9 Just looking at acute care, among the most expensive one percent of Medicaid beneficiaries, almost 83 percent have at least three chronic conditions, and more than 60 percent have five or more. 10 Analysis of the commonly occurring co-morbid chronic conditions shows mental health issues are almost always present among Medicaids highest-cost, most frequently hospitalized beneficiaries. Likewise, the presence of mental health conditions and/or drug and alcohol disorders is linked with much higher per capita costs and hospitalization rates.11 Most of these enrollees also remain in unmanaged fee-for- service systems12 that lack care coordination and services integration shown to both improve health outcomes and lower costs. Potential for Significant Savings At the intersection of chronic diseases and a fragmented care delivery system is a group of Medicaid enrollees for whom a significant share the high costs experienced are avoidable. Between 10 and 30 percent of patients experience extreme uncoordinated care identifiable by claims data indicating visits to multiple providers and pharmacies, accessing emergency departments (ED) for primary care,
7

G Anderson, Chronic Care: Making the Case for Ongoing Care, Robert Wood Johnson Foundation, 2010. Available online at http://www.rwjf.org/files/research/50968chronic.care.chartbook.pdf. 8 S Cohen and W Yu. The Concentration and Persistence in the Level of Health Expenditures over Time: Estimates for the U.S. Population, 2008-2009, Statistical Brief #354. AHRQ, Jan. 2012. Available online at http://meps.ahrq.gov/mepsweb/data_files/publications/st354/stat354.pdf. 9 AHRQ, The High Concentration of U.S. Health Care Expenditures, Research in Action, Issue 19. AHRQ Publication No. 06- 0060, June 2006. Available online at http://www.ahrq.gov/research/ria19/expendria.htm#ref6. 10 R Kronick, M Bella, et al., The Faces of Medicaid II: Recognizing the Care Needs of People with Multiple Chronic Conditions, Center for Health Care Strategies, Inc. Oct. 2007. Available online at http://www.chcs.org/usr_doc/Full_Report_Faces_II.PDF. 11 C Boyd, et al., Clarifying Multimorbidity Patterns to Improve Targeting and Delivery of Clinical Services for Medicaid Populations, Center for Health Care Strategies, Inc. Faces of Medicaid Data Brief, Dec. 2010. Available online at http://www.chcs.org/usr_doc/clarifying_multimorbidity_patterns.pdf. 12 RG Kronick, M Bella, et al., The Faces of Medicaid II: Recognizing the Care Needs of People with Multiple Chronic Conditions, Center for Health Care Strategies, Inc. Oct. 2007. Available online at http://www.chcs.org/usr_doc/Full_Report_Faces_II.PDF.

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avoidable ED visits and hospitalizations, duplicative medical services from various providers, inconsistencies in medication prescribing, usage, and adherence, and discrepancies between treatments and services provided and evidence-based guidelines for such care.13 When comparing overall costs for uncoordinated care patients to coordinated care patients in the same population, the average annual cost is over five times greater for uncoordinated care patients and the cost variances can be seen in every service category.14 These problems exist regardless of the level of health care spending and span from those uncoordinated patients with lower annual spending to those with higher annual spending representing opportunities for savings from better care across all cost groups, as the chart below illustrates. The portion of the bars shown in red represent $235 million out of the total annual medical costs ($673 million) generated by extreme uncoordinated care patients for this state with approximately $82M (35 percent) estimated as cost avoidable.15

13

The Healthcare Imperative: Lowering Costs and Improving Outcomes. The Institute of Medicine. 2010. Washington, DC: The National Academies Press. Owens, MK. Chapter 3: Inefficiently Delivered Services, Costs of Uncoordinated Care, pgs. 131-138. http://books.nap.edu/openbook.php?record_id=12750&page=131. 14 Ibid. 15 Ibid.

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Analyzing claims data for extreme uncoordinated care provides a clear view of where there are ripe opportunities for care coordination and targeted care management services to bring costs down while improving health outcomes. The larger the variance between the actual costs incurred and the expected costs had the care had been coordinated and appropriate for the individual, the larger the opportunity for improvement. Overlaying geographic location of these enrollees and/or the providers involved provides a promising picture from which to target efforts. Understanding What Works Once a population is identified, there are a wide variety of evidence-based models working to make a difference. Stabilizing an individuals health to avoid preventable emergency department use and hospitalizations, given the costs involved, are common targets of these programs. For example, WellPoints affiliated health plan in Indiana participates in the states Right Choices program which identifies Medicaid enrollees for the program based on an analysis of patterns of emergency department utilization and use of controlled substances, the number and scope of prescribers, and abusive patterns from pharmacy claims. Members are contacted and enrolled in a medical home where a provider assesses patient needs and makes referrals as needed for complex case management, behavioral health case management, pain management, or social services. After the first six months of the program, emergency department utilization declined by 72 percent and controlled substance prescriptions declined 38 percent. Total paid claims dropped by 48 percent more than $200,000 overall over the six-month comparison period.16 Given close correlation between high Medicaid costs and mental and behavioral health challenges, models that work to better integrate mental and physical health services are also common areas of program focus. For example, Massachusetts developed a Additional Resources Child Psychiatry Access Project (MCPAP) to address the growing need for childrens mental health services, the The US Substance Abuse and Mental Health shortage of pediatric mental health professionals, and the Agency (SAMHSA) has issued guidance for states seeking to establish health homes for challenges for primary care providers in filling these needs. people with behavioral health disorders MCPAP provides pediatricians with timely phone access to http://www.samhsa.gov/healthReform/health childrens mental health consultations, including advice on Homes/index.aspx prescribing psychotropic medicines to pediatric patients. Missouri Medicaid has filed a State Plan Operated by the Massachusetts Behavioral Health Amendment incorporating these Partnership, MCPAP is available to any child with mental recommendations and seeking an enhanced health needs, regardless of insurance status at a cost of federal match rate about 2 cents per child per month. Arkansas, Illinois, Iowa, http://dmh.mo.gov/about/chiefclinicalofficer/ healthcarehome.htm Maine, New York, Ohio, Texas, Washington, and Wyoming
16

Medicaid Health Plans of America, 2011-2012 Best Practices Compendium (2012), pp. 86-88.

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have replicated the program and Connecticut, New Jersey and California are planning for implementation.17 Medicaid long-term care enrollees are less than 10 percent of the Medicaid population but account for more than half of all costs. Programs that help prevent or delay the need for long-term care, provide lower-cost community-based options, and better integrate long-term care, regular medical care, and community and public health services have significant potential to both lower costs and improve outcomes for long-term care recipients. For example, the GRACE program is an integrated care model providing in-home assessments by a nurse practitioner and a social worker for low-income seniors, including many dual eligibles. The assessments are used to develop, implement, and track progress on an individualized care plan by a multi-disciplinary team. Personalized care plans address medical, behavioral, and social care needs based on 12 evidence- based care protocols covering medication management, depression, mobility issues, vision concerns, and other common conditions. In a randomized control trial of 951 low-income seniors, GRACE participants experienced fewer emergency room visits, hospitalizations, and readmissions. The GRACE intervention was cost neutral in the first year as fewer hospitalizations covered program costs and generated saving of $1,500 per enrolled patient by the second year of enrollment. The model also holds potential in the prevention or delay of nursing home placement for patients at high risk for institutional long-term care.18 Managing the transitions that patients experience when transferring between care settings or providers has also proven to be a fruitful target for generating better outcomes and lowering costs. More than 600 health care organizations in 39 states, including Louisiana, are using the Care Transition Model shown to reduce the deterioration of health that leads to rehospitalizations. This self-management model matches patients with complex care needs and their family caregivers with a health coach to develop self-management skills to ensure needs are met during the transition from hospital to home. The program uses a dynamic patient-centered health record and focuses on medication self- management, timely medical care follow up, and knowledge of the red flags that indicate a problem and how to respond. Cost savings for a typical coach panel of 350 chronically ill adults with an initial hospitalization over 12 months is estimated at $300,000.19

17

The Catalyst Center, The Massachusetts Child Psychiatry Access Project: Combining Innovation and Collaboration to Enhance Childrens Mental Health Services in the Primary Care Setting, February 2011, http://hdwg.org/sites/default/files/MCPAP.pdf. 18 C Bielaszka-DuVernay, The GRACE Model: In-Home Assessments Lead to Better Care for Dual Eligibles, Health Affairs March 2011; 30(3): 431-34.
19

E Coleman, The Care Transitions Intervention, The Care Transitions Program: Health Care Services for Improving Quality and Safety During Care Hand-offs. Available online at http://www.caretransitions.org/documents/Evidence_and_Adoptions_2.pdf.

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Wider replication of these and other effective programs within Medicaid require supportive public policy environments that encourage innovation and place an emphasis on evidence-based practices to improve the management of chronically ill Medicaid enrollees with complex needs. Policy Implications Supportive public policies enable states to deploy health information technology, analytics, predictive modeling, and delivery system reforms that both improve health for the individuals affected and manage costs for the system. Risk stratification and predictive modeling target interventions to identify the patients for whom an intervention holds the greatest promise. For these tools to achieve their potential, however, a fundamental shift is needed to foster innovation within Medicaid. Specifically, adopting a reform mindset that focuses on quality improvement to lessen preventable utilization is a critical first step. Traditional efforts to control costs such as increasing cost-sharing or other out-of- pocket costs and setting limits on the number of visits, services, or medications allowed per month present significant challenges to people living with chronic conditions. Given the concentration of costs among Medicaid enrollees with multiple chronic conditions, such cost-cutting efforts hit these populations particularly hard and can have the unintended effect of generating additional costs.20 Limiting the prescriptions to a certain number a month, for example, could leave an enrollee with diabetes, hypertension, and a psychiatric condition (about 7 percent of the adult Medicaid population under age 65)21 with the impossible choice of which medication she should not fill. Though states continue to serve as incubators for health care delivery innovations, within Medicaid the processes for testing and implementing models can be a difficult and lengthy process. State Medicaid waivers and state plan amendments, required for most Medicaid changes, are considered on an individual basis and take a significant amount of time and effort to negotiate. There is not a well- defined means to share best practices and facilitate states learning from each other. Greater state and federal collaboration is needed to support innovation and the dissemination and replication of best practices, to establish delivery system improvement goals for Medicaid that focus on the burdens chronic conditions present to the programs, and to clarify and add predictability to the business processes between state and federal governments. States also need the technology that enables data mining to identify and understand driving forces behind the hot spots in their Medicaid programs, to match effective interventions with the people most likely to benefit based on predictive modeling, and to measure and track progress. For providers, understanding what is expected, what is being measured, and receiving timely, actionable feedback on performance is critical to successfully implementing delivery system reforms to address preventable
20

SB Soumerai, at al., Effects of a limit on Medicaid drug-reimbursement benefits on the use of psychotropic agents and acute mental health services by patients with schizophrenia, N Engl J Med. 1994 Sep 8;331(10): 650-655; J Hsu, et al., Unintended Consequences of Caps on Medicare Drug Benefits, New Engl J Med 2006; 354:2349-2359. 21 Center for Health Care Strategies, Inc., Multimorbidity Pattern Analysis and Clinical Opportunities: Diabetes, Faces of Medicaid Data Series. Dec. 2010. Available online at http://www.chcs.org/usr_doc/Diabetes_final.pdf.

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high utilization. Making the necessary investments in the health information exchanges and technology and developing the technical expertise needed to build and deploy these services may require federal assistance for most states. For dually eligible populations, states must also depend upon the timely receipt of Medicare data in a readily usable form to evaluate and refine efforts. Though efforts to streamline the process and facilitate the use of Medicare data are in process, significant hurdles remain.22 More needs to be done to facilitate access to Medicare data and to provide states with the technical assistance required to maximize use of the data to identify opportunities for improvement and track results. Because of the complex needs of many Medicaid high utilizers, there are likely to be significant implications for other publicly funded services, including housing, mental and behavioral health, corrections and policing, transportation, HIV/AIDS services, and community and public health programs and services. States may find additional hot spots by comparing utilization across public resources to identify high utilization patterns. Policymakers could then design and implement programs that address the full extent of the problems confronting the individual and leading to high utilization.23 Analysis across state functions and collaboration on addressing the issues uncovered are critical and can yield additional savings opportunities. For example, the Chicago Housing for Health Partnership (CHHP) provided housing and case management services to homeless adults with chronic illness. An 18-month randomized control trial showed that having housing and health stability dramatically reduced the number of days these adults spent in the hospital and the number of emergency department visits they had. Specifically, these adults had 29 percent fewer hospitalizations and 24 percent fewer emergency department visits.24 Conclusion The concentration of costs within Medicaid lend itself to opportunities that pull costs out of the system without sacrificing, and in many cases improving, the quality of care provided and outcomes achieved. Many models demonstrate the potential for strategic delivery system reforms that provide the evidence base for developing and implementing patient-centric Medicaid reforms on a wider scale. Facilitating larger scale implementation, however, depends upon having supportive policy environments at both the state and federal level that enable and encourage innovation.
22

See, National Association of State Medicaid Directors, Advancing Medicare and Medicaid Integration: Policy and Operational Challenges for State Access to Medicare Data. Oct. 5, 2011. 23 See M Burt, et al., Medicaid and Permanent Supportive Housing for Chronically Homeless Individuals: Literature Synthesis and Environmental Scan, US Department of Health and Human Services, Jan. 6, 2011. Available online at http://aspe.hhs.gov/daltcp/reports/2011/ChrHomlr.htm. 24 LS Sadowski et al., Effect of a Housing and Case Management Program on Emergency Department Visits and Hospitalizations Among Chronically Ill Homeless Adults: A Randomized Trial, JAMA 2009;301(17):1771-1778. Available online at http://jama.jamanetwork.com/article.aspx?volume=301&issue=17&page=1771.

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