The chronic disease quagmire

The Congressional Budget Office (CBO) issued a disappointing report on the result of 10 Medicare demonstration projects designed to save money on chronic disease management. Chronic diseases account for about 75 percent of U.S. health-care costs. Six demonstrations centered on disease management and care coordination. Four used value-based payment by offering financial incentives to improve quality.

The CBO essentially said fee-for-service incentives to deliver high-volume care – and the lack of incentives for care coordination and system fragmentation – overwhelmed attempts at innovation.

Effective chronic-disease management is labor-intensive. Chronic disease hits hardest those people who are dually eligible for Medicare and Medicaid. These 7 million people have two of the greatest risk factors for ill health: being old and poor. They account for 42 percent of Medicaid costs and 25 percent of Medicare costs. Of the most expensive 1 percent of Medicaid enrollees, 83 percent have three or more chronic conditions, and about 60 percent have five or more. However, government reimbursement rates are inadequate to support disease management. The continually strapped Medicaid programs generally do not invest in these kinds of services unless they can provide immediate cost savings.

Previously, thirteen out of 15 Medicare pilot programs for management of chronic illness failed to reduce hospitalizations, which is a key aim of any such effort. The few successful programs had substantial in-person contact, which is expensive for the health-care provider and is generally not reimbursed well. Politicians become discouraged by so little success. Providers are equally discouraged by the effort’s expense.

Ultimately, solving chronic-disease management is a necessary – but not sufficient – requirement of getting health-care inflation under control.