Prevention, Incentives and Medicare Costs

By Nalini K Pande, JD

A little over a year ago at my previous consulting job, I served as the project director for a very interesting prevention project.   The project was for the Bipartisan Policy Center’s (BPC) Health Care Cost Containment Initiative¹.   BPC had asked us to develop a financial model of the costs and benefits of a diabetes Type 2 prevention program.  Our report illustrated how the financial incentives for three different payors  (commercial plans, Medicare, and ACOs) vary given different assumptions of who would pay for these prevention services and the age at which individuals would first receive prevention services. We chose to model Type 2 diabetes prevention services given that Type 2 diabetes is reversible and given the tremendous amount that the US spends on Type 2 diabetes² .   What we learned was fascinating.

Prevention Efforts Can Yield Cost Savings

The key finding from our report was that a diabetes prevention program “can produce overall cost savings which increase over time for an individual.” Given this, why wouldn’t we roll out these prevention programs on a widespread basis?  Well, the answer may surprise you.  To delve into this, you will need to understand three key issues:

• - First, who pays for the diabetes prevention program? 
• - Second, who benefits?
• - Third, when do the savings kick in?

Our report showed that if private commercial plans bear the cost of the diabetes prevention program, they may not reap all the benefits.  This is because of two reasons.  First, if individuals switch health plans over time, another plan would reap the benefits – allowing for only small benefits for the plan that implemented the prevention program.  Second, if you’re 55 or older, there is no incentive for a private commercial plan to cover your participation in a diabetes prevention program.  Simply put, by the time the cost savings would kick in (10 years), you would be on Medicare and Medicare, not the plan, would reap the benefits. 

So, what if Medicare paid private plans to cover these diabetes prevention programs?  Perhaps, then, we would all win.  Those with private commercial plans would benefit from diabetes prevention services and Medicare would benefit from healthier beneficiaries who save the program money. Our report found that while the Government does recoup savings when it pays for the program, it only did so for those who are near 60.  In fact, the Government receives very little savings from a younger population who would stay with the private sector and continue to be with a commercial plan during the timeframe when most of the savings would be realized over a 25-year period.

Where does this leave us?

In essence, what we have is a scenario where payors are reluctant to pay for prevention services since they won’t benefit completely.  Has our patchwork system of health care created disincentives around prevention?  Not quite.  Our study found that if patients could join an ACO when they are under 65 (as a commercial ACO) and then stay in the same ACO when they are over 65 (as a Medicare ACO with shared savings between the ACO and Medicare), perhaps the ACO would get the best of both worlds.  In this scenario, an ACO could invest in its patients through prevention programs and recoup the benefits, assuming limited plan switching.

Investing in prevention appears to be a game of “what’s in it for me?” How do we change it to a “win-win” scenario? The answer is simple.  We do so by utilizing new systems like ACOs that allow payors to reap long-term savings. 

Nalini Pande, Managing Director, Sappho Health Strategies has nearly 20 years of experience in healthcare policy and reform.  She has considerable experience in Medicare and Medicaid, prevention, population health, and emerging payment models including accountable care organizations and patient-centered medical homes. Ms. Pande also has strong expertise in dual eligibles and the specific issues facing this unique population.  Ms. Pande is a graduate of Harvard Law School and Princeton's Woodrow Wilson School of Public and International Affairs.


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¹ Under the leadership of former Senate Majority Leaders Tom Daschle (D-SD) and Bill Frist (R-TN), former Senator Pete Domenici (R-NM), and former White House and Congressional Budget Office Director Dr. Alice Rivlin, BPC’s Health Care Cost Containment Initiative  “explored and evaluated strategies to contain health care cost growth on a system-wide basis, while enhancing health care quality and value.” 
 ² In Appendix D of our report, we noted a study by Dall and colleagues that estimated the costs associated with Type 2 diabetes as $105 billion for medical costs (along with $54 billion for non-medical costs such as lost work days).  

Dual Eligibles and ACOs: A Blueprint for Success

By: Nalini K Pande, JD

Background:  Why Duals Need Stronger Focus and Attention

You may notice that when we talk about health reform, most health policy experts tend to bring the conversation back to the dual eligibles.  These beneficiaries are covered under both the Medicare and Medicaid programs and are generally sicker and costlier than Medicare and Medicaid beneficiaries as a whole.  Thus, it is no surprise that duals have been the focus of those trying to bend the cost curve.


ACOs May Be Uniquely Situated to Address Key Duals Issues

How do we improve the care of these beneficiaries while also working to reduce costs?  Accountable Care Organizations (ACOs) that take on dual eligibles, are uniquely positioned to provide effective solutions. An ACO is a group of coordinated providers in which provider reimbursements are linked to quality metrics and reductions in the total cost of care for an assigned population of patients. Given their emphasis on patient-centered, integrated care and coordinated Medicare and Medicaid benefits and funding streams, ACOs could facilitate greater quality improvements and reduce cost-shifting between programs as well as overall costs. Yet, the fundamental question still remains:  What is the blueprint for success?

Two core frameworks will need to be developed as part of a blueprint for success:
   • ROI Framework
   • Measurement Plan

Certainly additional key components will be necessary.  However, two critical components of the blueprint for ACO success are ROI (return-on-investment) and Measurement frameworks. First and foremost, a successful ROI framework is needed to ensure financial viability of the ACO structure: (e.g, hospitalization costs must be significantly reduced to pay for increased expenses in care coordination, care transitions, and care management). 

Second, a measurement framework will be needed to test improvements in quality.  Key measures should include patient-reported outcome measures, beneficiary experience, care coordination measures, utilization and cost measures, etc.

As part of this blueprint, the ACO must consider the barriers and challenges to changing the current system. How can the ACO overcome these barriers?  This will depend on whether the ACO can achieve a true culture change at three levels:

• • at the governing level with a stronger focus on clear and attainable management goals and benchmarks with diverse stakeholder input
• • at the clinical level with team-oriented care in order to improve care coordination and
• • at the community level with a focus on population health and collaboration with community organizations.

Can ACOs that take on duals bend the cost curve and improve quality? This has yet to be seen.  Setting ACOs up with a blueprint for success may be just what the doctor ordered.

Nalini Pande, Managing Director, Sappho Health Strategies has nearly 20 years of experience in healthcare policy and reform.  She has considerable experience in Medicare and Medicaid, and emerging payment models including accountable care organizations and patient-centered medical homes. Ms. Pande also has strong expertise in dual eligibles and the specific issues facing this unique population.  Ms. Pande is a graduate of Harvard Law School and Princeton's Woodrow Wilson School of Public and International Affairs.

Follow @nalinipande

The Medicare Congress Brochure is Now Available | Register Now to Save $600

The 12th Annual Medicare Congress was designed with you and your team in mind—covering Medicare and Dual Eligibles from A-Z. Make sure you join us this February 3-5 in New Orleans!


Let us help you navigate through the evolving landscape so you can increase reimbursement with stronger Star ratings, build relationships with provider networks to improve quality of care, meet the clinical needs of dual eligibles to attract and retain new members— and much more!

What’s new at Medicare Congress 2015:
• C-Level Sound Off
• Patient Advocacy Group Panel
• Think Tank Roundtable Luncheon
• Town Hall Round-up
• And more!

Download the 2015 Brochure Here.

Register now and SAVE $500 but use the code XP2007BLOG and take an extra $100 off – total savings of $600! Register here.

PLUS! Dual Forum and Stars University are back by popular demand. Click here to learn more.

Which Medicare topic areas are most important to you?

Over the past couple weeks, I've had research calls with dozens of your peers: some of which have attended the Medicare Congress, some who have spoken at the Medicare Congress, and some who didn't know what the Medicare Congress was until I told them about it. As always, some are feeling positive about the industry, some are feeling not-so-positive, and EVERYONE had insight into what matters most in the Medicare industry.

One of my favorite parts of being a conference producer is getting to translate all of this feedback into a tangible program that attracts high level, provocative speakers, which in turn attracts a larger audience. I’m just starting to put together a loose agenda, and although I'm not quite ready to show all of my cards, I can tell you that we’re planning on adding a few full day summits to the mix, in order to provide you with deeper insight into the areas that matter most (and are the most lucrative).

We'd love to hear from you! Which topic areas would you like us to cover for next year's event?

Does the dual eligibles population make financial sense for your plan?

The dual eligibles population comprises 24% of Medicare enrollees, but accounts for almost 35% percent of Medicare expenditures. With healthcare expenditures increasing at an alarming pace across the board, managing the care (and finances) for serving duals is now more important than ever.

At the Annual Medicare Congress, taking place on February 11 – 13 in Phoenix, you’ll hear best practices to determine if providing coverage for dual eligibles makes sense for your health plan. Panelists will share their insight on evaluating the financials of providing care to duals, predicting utilization patterns and how to overcome marketing barriers.

Evaluate if Dual Eligibles Make Financial Sense for Your Plan Tuesday, February 12, 2013 at 11:45am:

• - John Gorman, Founder and Chairman, Gorman Health Group
• - Rhys W. Jones, MPH, Vice President, Medicare Policy and Market Development, Specialty Products Group, Amerigroup Corporation 
• - Jeff Flick,National Vice President, Government Programs, HealthCare Partners 
• - Austin Ifedirah, Vice President of Medicare

To view the 2013 program, download the agenda.

As a reader of the Medicare Congress blog, you get a 15% discount off the standard rate when you register to join us and when using code XP1807BLOG. If you have any questions about the agenda or event, please contact Kate Devery at  or visit our webpage here.

Have a safe and happy Thanksgiving!
The Medicare Congress Team

Could a bipartisan plan lead to a breakthrough in Medicare sustainability?

Last week, Democratic senator, Ron Wyden of Oregon, and a Republican member of the House, Paul D. Ryan of Wisconsin, proposed a new plan for Medicare that could help solve the problem of the system that is unsustainable for the US Government as it stands.

In the new plan, specifically created by members from both parties, this new plan looks to implement significant structural changes and limit the current open-ended commitment to sustaining the system from the government.  A health insurance exchange would b created for the beneficiaries, and growth would be capped.  The governmental would not be required to pay more the rate of the economy plus 1%.  The government would also cut payments to those beneficiaries who typically overspend.  For a more in-depth look at the proposed changes, visit the New York Times article.

At The Medicare Congress 2012, Fred Barnes, Executive Editor, The Weekly Standard and Commentator, FOX News will be on hand to present 2012 Election Outlook – Examine Today’s Headlines to
Find the Real Signals and Implications for ACA.  In addition to uncertainty of the unsustainability of the system, elections take place next year, leading to more uncertainty of who will be in power to make the decisions to make the changes needed to fix the Medicare system. As a reader of this blog, when you register to join us in Orlando from February 6-8, 2012, and mention code XP1706BLOG, you receive a 25% discount off the standard rate! 

Do you see this as a plan that could lead to the sustainability of the Medicare System?  What would hold back from Congress members?

Medicare claims database to open up for examination

For the first time, the Medicare claims can now be accessed by providers, employers, insurance companies and consumer groups in order to make more educated choices when it comes to choosing their doctors for Medicare.  After analyization, this will allow consumers to see which doctors have preformed these procedures with ease as well as preventable complications that have arisen in the past and how they can be prevented.

According to the San Francisco Gate, this is a huge step forward for the Medicare system, as it allows as the system becomes more transparent while increasing competition and accountability while lowering costs.

At the The Medicare Congress this February in Orlando,Karol Attaway, Vice President of Operations, HealthCare Partners, to present "Stratify Risk by Predicting the Financial Cost of Seriously Ill Patients". This situation could benefit from an open database which asses the care coming from doctors.

What do you think of this new Medicare option?  Will it help patients in the future?

Humana and Walmart pair up for Medicare Part D Plan

AdvanceWeb.com looks at the new plan Humana and Walmart have put together for Medicare Part D for 2010. Through working together, the two have come up with a low monthly premium, which is $14.80. This is the lowest in the nation.

According to William Fleming, PharmD, vice president of Humana Pharmacy Solutions,
"One of the primary goals of health care reform is to make health coverage more affordable -- and that's what we're doing with the introduction of this low-cost Medicare Part D plan. People are more likely to take the medications prescribed for them when they can afford those medications. And adhering to prescription-drug regimens can enable people to be healthier and prevent future illness. We know every dollar counts, especially when you live on a fixed income. We believe no one should have to choose between buying their groceries or their medications," said John Agwunobi, MD, president of Walmart's Health and Wellness division. "Financial health is a fundamental part of a person's well-being...[W]e are committed to doing everything we can to ensure seniors have access to the medications they need at a price they can afford."

Is it likely that many Americans will take note of this plan? Will the price bring them in to change their Medicare Part D plans in 2011?

Seniors will see a gap closing in the doughnut hole

The Seattle Times notes that seniors will see a slight increase in premiums for their Medicare Drug Plans. Even though the costs will be increasing, seniors will see the improvements in their plans by the beginning of the closing of the doughnut hole.

Poll: Where would you like to see The Medicare Congress 2011?

You chose by voting below!

A look at the healthcare proposals

Fox 43 of Harrisburg, PA, recently broke down the main differences between the two bills being proposed by the House and Senate when it comes to healthcare reform.

Watch the video below:


Are there any key concepts that the House and the Senate are forgetting? What key changes could make for a better national healthcare plan?

Insurance companies bracing for change in healthcare reimbursement

At Modern Healthcare, they look at how new legislation implementing universal healthcare will affect how insurance companies are going to be affected when the new plan roles out, which many believe could be as soon as 2011. In addition to the abundance of regulations that are sure to follow, insurance companies will have to change the way they evaluate hospitals. They could begin paying for care based on performance and begin listening to independent patient advisory boards. They could also change they way they reimburse hospitals when it comes to re admissions for certain ailments. Read the full article here.

Senate produces another healthcare plan

The Democrats have introduced their proposal for the new healthcare system that would be available to all Americans. Their proposed plan would insure 31 million more Americans while reducing the budget. The total cost for the overhaul would be $848 billion, but also decrease the deficit by $130 billion.

The goals they've outlined for the plan would:
-Impose new regulations on insurers
-Cover 31 million extra Americans
-Introduce new benefits for Medicare

Republicans are opposed to the idea and see it as a way to increase taxes and insurance costs. Read the full New York Times article here.

Senate introduces opt-out bill for state healthcare

According to Salon.com, the Harry Reid announced today that the Senate's bill for healthcare reform includes the option for states to opt out of public insurance. Many believe this is one of the keys for the healthcare reform to survive the legislative process. The House still has to introduce their bill, is still weighing their options, which includes one that pays doctors and hospitals on a fee schedule based on Medicare rates, or one that negotiates directly to set its own prices, much like private insurers do. Read more about the current healthcare reform situation here.

Cost of healthcare package expected to be released today

According to Fox News, the Senate Finance Committee is waiting on a cost projection from Congressional Budget Office for the official numbers on how much the current health care package awaiting vote in the Senate would cost. Tax experts believe the bill will cost $121 billion over the next few years, which is $29 billion more than originally thought. Read the full article here.