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Report: Modernizing Medicare and Medicaid Could Improve Patient Health and Save $542 Billion Over Next Decade

New strategy adopts best practices as alternative to cutting benefits or provider payments (Jan. 9)

The federal government could save up to $542 billion in Medicare and Medicaid spending over the next 10 years through a proven “third strategy” for modernizing healthcare and improving patient outcomes, according to a new report from UnitedHealth Group, a healthcare management and consulting company based in Minnetonka, Minnesota.

The current national debate about Medicare and Medicaid has largely centered on either cutting patient benefits or cutting provider payments. The new report analyzes a third strategy: achieving savings by applying best practices for improved prevention, care coordination, and payment reform to Medicare and Medicaid. Approximately 75% of the nation’s roughly $1 trillion of Medicare and Medicaid annual spending still relies on outdated indemnity-style benefits and siloed fee-for-service provider reimbursement, the company notes.

The report provides a menu of individual savings options, as well as a combined estimate of net savings from comprehensive Medicare and Medicaid modernization. Proposed policy solutions and reforms include:

  • Making available to seniors in traditional Medicare the health programs and incentives similar to those used by large self-insured national employers: These include transparent information about high-quality and efficient providers, with opportunities and incentives for consumers to share in savings from making smart choices. The federal government could save $202 billion by providing care management services to seniors enrolled in traditional fee-for-service (FFS) Medicare who are not also Medicaid-eligible, the report claims. This approach would transform the traditional FFS Medicare program by adopting administrative support services similar to those used by many large self-insured employers.
  • Expand the use of coordinated care for dual-eligible Medicare and Medicaid beneficiaries: Full integration of Medicare and Medicaid benefits for the dual-eligible population could yield savings of $153 billion for the federal government, according to the report. Under this approach, all states would enroll their dual-eligible beneficiaries in managed health plans. A health plan or other similar entity (such as an accountable care organization) would receive two payment streams –– one from the federal government (Medicare) and one from the state (Medicaid) –– which would then be blended together.
  • Provide coordinated care for all Medicaid enrollees: The new report estimates that the federal government could save $30 billion if all states adopted comprehensive managed care for their fee-for-service Medicaid enrollees. Many states already have turned to Medicaid managed care and have realized significant savings and better outcomes, the report says.
  • Accelerate programs to improve health, particularly diabetes initiatives: By adopting innovations that already have been proven to prevent and control pre-diabetes and type 2 diabetes, the federal government could save an additional $53 billion, the report says. These solutions include interventions aimed at preventing type 2 diabetes among high-risk populations and providing greater support to help patients with type 2 diabetes control their weight and manage their disorder.

Source: UnitedHealth Group; January 9, 2013.

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