How Care Management, Risk Stratification Cuts Medicaid Spending

September 17, 2019 - Better care management and risk stratification can help state Medicaid agencies cut spending on high-cost patients, according to a recent report from the Government Accountability Office (GAO).

Looking at four states with Medicaid programs that historically treat high-cost populations, the GAO report outlined key strategies each state used to cut expenses. The deep dive into Medicaid programs in Pennsylvania, South Dakota, Vermont, and Washington revealed that risk stratification and managed care programs can be helpful in addressing high-risk patient populations.

These four states had 50 to 59.9 percent federal matching (FMAP) income, meaning they were among the states with the lowest amount of federal matching for their Medicaid programs, according to a Kaiser Family Foundation (KFF) analysis.

Although they had such low federal matching, Pennsylvania and Vermont experienced high costs of care for full-benefit individual enrollees, averaging $7,500 to $10,500 or more in fiscal year (FY) 2014. South Dakota and Washington spent on average between $5,300 and $6,200 on each full-benefit enrollee.

Each state identified high-cost enrollees and sought to manage their costs of care in distinct ways.

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Pennsylvania anticipated high-expenditure Medicaid beneficiaries by identifying statistical outliers for high utilization rates, looking at diagnoses associated with high-cost treatments, and relying on clinical judgements from providers, caregivers, and self-referrals.

The state offered an intensive case management program which facilitated care management for fee-for-service beneficiaries.

Pennsylvania also invested $10 million in payment incentives through its integrated care plan program. The program addressed high-cost physical and behavioral healthcare treatments in managed care organizations (MCOs).

To participate, MCOs had to create an integrated care plan for one of the specified conditions and were required to meet certain standards in emergency department utilization, medication adherence, hospitalizations, and other criterion. The state also initiated a risk-sharing arrangement with MCOs to control hepatitis C treatment costs.

Medicaid officials in Pennsylvania highlighted their integrated care plan program as especially successful. The program served patients with high cost mental healthcare needs. The integrated care plan led to better utilization and fewer inpatient hospitalizations and readmissions.

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South Dakota Medicaid was one Medicaid program surveyed that did not use a managed care organization, although the program still used a managed care approach to tackle high costs.

The state determined potentially high-cost beneficiaries through risk score assessments and diagnoses.

South Dakota’s health home program worked with primary care providers, community organizations, and Indian Health Service locations to provide fee-for-service care management to high-cost beneficiaries.

As a result, in 2018, 5,800 beneficiaries were segmented into four tiers based on cost of treatment and received care at over 100 health home clinics. Each clinic had a coordinator who arranged and ensured coordinated care for qualifying beneficiaries.

South Dakota officials found the program to be successful.

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The state’s Medicaid program saved $204 per month on health home beneficiaries compared to the control group. The health home program saw eight percent fewer emergency room visits, whereas the control group that did not join a health home and after 27 months there was a $7.7 million cost difference between the two groups.

Vermont relied on risk scores to identify high-cost beneficiaries.

The Green Mountain State’s care management program, rooted in the state’s value-based, all-payer accountable care organization (ACO) and episode-of-care models, successfully diminished unnecessary utilization. For those who were enrolled in the state’s care management program, hospitalizations fell from 600 in every 1,000 patients to 393 in every thousand and emergency room visits dropped from 1,536 to 1,003 per 1,000 patients.

Washington evaluated potentially high-expenditure beneficiaries using risk scores, statistical outliers, diagnoses, and clinical judgements.

The state’s health home program coordinated care through community organizations such as the Area Agencies on Aging. Through these organizations, the state established coordinated care networks for primary care, mental healthcare, long-term care, and more to support high-cost beneficiaries.

By implementing this strategy, Washington’s health homes program saved $107 million in Medicare spending in three and a half years for dually eligible beneficiaries.

The report also included interviews with and data from an accountable care organization (ACO) and five MCOs. These organizations had to report to the states on high-expenditure beneficiaries and meet certain requirements in interacting with these patients.

Indiana’s MCO stratified beneficiaries based on clinical conditions and had a different program for each.

South Carolina’s MCO had overall models for high-cost beneficiaries’ care management but required clinical departments to establish a care manager within the department and to add their own specifics based on their treatments.

Vermont’s ACO, the only one interviewed, paid providers already included in their network to act as care managers for high-cost beneficiaries. The beneficiaries had the power to choose a “lead care coordinator” whom they trusted and who coordinated their team of providers.

The states identified several challenges to handling high-cost beneficiaries. Beneficiaries could be difficult to contact, social determinants of health were sometimes challenging to assess and address, and lack of sufficient staff, particularly in rural regions, were the major concerns.