Wellesley, Mass. - States are constantly on the lookout for savings opportunities-but there are not many that improve healthcare and clinical outcomes for clients and save money at the same time.

A medical service enhancement program focused on Medicaid custodial dual-eligibles promises to do just that, but states have been slow to jump on the bandwagon.

The concept is basically providing better medical management for people in nursing homes together with a federal waiver so that states get all the savings.

According to recent testimony by the National Governors Assn., of all Medicaid beneficiaries, 17% are dually eligible for Medicare and Medicaid. While only a small portion of Medicaid beneficiaries, the dual eligibles account for 35% of Medicaid expenditures.

"Medicaid pays for Medicare premiums and copays for dual eligibles," says Darlene Collins, management consultant, political consultant and expert advisor to states and private sector clients.

"Dual eligibles also are eligible to receive Medicaid's long-term care and prescription drug benefits," Collins says. " This population often is in poor health and uses a high proportion of long-term care and prescription services, neither of which are available under the Medicare program."

Chronic disease is the most prevalent, costly and preventable of all health problems. By 2020, market analysts predict 50% of the U.S. population will live with at least one chronic condition, driving 78% of all medical care spending including 80% of all Medicaid expenditures.

Baby steps

States are still in the early-but accelerating-stages of development and implementation of DM in public-sponsored health programs, specifically state Medicaid.

"There are real, but solvable, obstacles for DM to hit the savings mark and for states to be aggressive to realize the full potential of disease management programs among target populations such as the poor, elderly and disabled who make up two-thirds of Medicaid spending in a state," says Collins, who is based in Albuquerque, N.M. Difficulties Collins cites include resistance by aggressive political groups and constituents and oversight issues including how to enhance provider awareness of patients with chronic illness in their panel responsibility.

"Despite the lack of 'clear' evidence, more and more states and state policy makers do embrace the logic and assumptions behind the promise of disease management," Collins says. "The next four years will see momentum built to adopt DM principles into Medicaid programs, benefit design and performance expectations for vendors."

The next wave

While the Disease Management Purchasing Consortium has assisted states such as Washington in disease management efforts, Consortium Executive Director Al Lewis believes that states are missing by far the larger opportunity. "Despite the total lack of risk, the self-evident quality improvement and the better service for the aged, almost no states are participating; It's me, one state and one social HMO," says Lewis.

The concept has been slow to catch on, similar to the way disease management contracting was seven years ago, Lewis says.

"Skeptics are actually more wrong now than they were then. There is about 2% of the entire state Medicaid budget for the average state guaranteed-savable through management of custodial duals, with no fees payable until savings are realized," he says. "That's more than straight DM, with an easier reconciliation and no fees until the end."

Medicare HMOs aren't quite as skeptical, however, Lewis says. "Several are looking hard, but once again, what's amazing is that more aren't," he says. "There is at least $3 per member, per month (PMPM) guaranteed, with as much as $8 PMPM available. Still, it's $3 that would take all of a month to contract for."

Cases in point

The state of Washington is moving quickly to implement the program, and it has taken almost a year from the legislation being passed to the first client enrolled, says Alice Lind, section manager, care coordination, medical assistance administration, State of Washington Department of Social and Health Services.

"We are connecting Medicaid clients with chronic illnesses to nurses who can assess their condition and treatment, provide education that reinforces their medical treatment plan in between visits to their physicians, and offer a 24-hour availability to call for help and advice," Lind says. "These are clients who are in a fee-for-service billing environment, where they might seek care from multiple providers who do not know that these clients are getting treatment, prescriptions and case management from a number of sources."

New Mexico is taking a close look at this program, Collins says.

"This administration sought out experts and reviewed models such as [this one], along with a review of activities in other states," she says. "New Mexico leadership appears committed to disease management and care management principles as a unique opportunity to save money by providing better care and avoiding cuts that severely impact low-income, chronically ill beneficiaries."

In Wisconsin, where 404,000 citizens are enrolled in Medicaid, the state's Health and Family Services Dept. currently is bidding on Medicaid disease management programs, according to Republican state Rep. Steve Wieckert.

"I like the idea of the win-win situation where patients with chronic diseases are treated more aggressively and monitored much more closely, and as a result their health conditions improve," Wieckert says. "They're happier, healthier and medical costs decrease."