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UnitedHealth's Medicare, Medicaid Proposal could Save $3.5 Trillion over 25 Years

October 18, 2010
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WASHINGTON, D.C.Federal and state governments could save taxpayers about $3.5 trillion over the next 25 years by expanding the use of coordinated care programs in Medicare and Medicaid, according to new analysis by UnitedHealth Group Inc., the biggest U.S. health insurer by sales.

The report, “U.S. Deficit Reduction: The Medicare and Medicaid Modernization Opportunity,” argues the current fee-for-service indemnity payment system, which comprises more than three-quarters of Medicare and Medicaid spending, is one of the primary drivers of fragmented care and rising healthcare costs. The report sets out practical steps, based on UnitedHealth Group’s experience as the largest single provider of Medicare Advantage and Medicaid programs, to better coordinate care and provide holistic and proactive support for seniors and Medicaid beneficiaries.

“Expanding the use of coordinated care and integrating benefits and funding streams is a win-win for Medicare and Medicaid beneficiaries, and for federal and state budgets,” said Simon Stevens, executive vice president, UnitedHealth Group, and chairman of the UnitedHealth Center for Health Reform & Modernization. “These are practical options that can now be tested at scale under current law.”

Fee-for-service payments occur when healthcare providers are reimbursed for each service, such as a physician’s office visit, test, procedure or other healthcare service, regardless of health outcomes. Care can become fragmented when there is minimal communication and coordination among different healthcare professionals. The goal of coordinated care is to make health systems more proactive and responsive to individual patients’ healthcare needs, according to UnitedHealth Group.

The UnitedHealth Group report analyzes three approaches:

1. Provide coordinated care for Medicaid-eligible Americans to improve access to care and health outcomes. Over 25 years, savings are estimated at $580 billion, of which $350 billion are federal savings. During the initial 10 years—given transitional costs and phasing—potential savings are estimated at $103 billion, of which $63 billion are federal savings. Under this option, states would enroll most of their fee-for-service Medicaid population (who aren’t also receiving Medicare) in coordinated care programs, including people with long-term care needs.

2. Expand use of coordinated care for dual-eligible Medicare and Medicaid beneficiaries to support people with chronic conditions requiring intensive support and high-cost services. Over 25 years, savings are estimated at $1.62 trillion, including $1.27 trillion for the federal government. In the first 10 years, savings are estimated to be $250 billion, of which $206 billion are federal savings. Examples from the report’s recommendations include wider use of home- and community-based care programs to allow individuals to live longer in their own homes, better coordination between Medicare and Medicaid, and full integration of Medicare and Medicaid benefits. If current approaches do not change, spending on dual-eligible individuals—people who are eligible for both Medicare and Medicaid programs—is projected to reach about $5 trillion over the next decade, according to UnitedHealth Group.

3. Provide seniors in traditional Medicare with value-added, comprehensive care management services through the type of programs and approaches used by America’s largest and most innovative ‘self-insured’ employers. Over 25 years these savings—all accruing to the federal government—could be worth $1.9 trillion, of which $317 billion are estimated to arise in the first 10 years. Examples include adding high-quality provider networks, care coordination, and disease management and wellness programs, as well as consumer incentives, treatment decision support, and value-based benefit designs. (Approximately one-third of the savings from this option are included in Option Two given the overlap with ‘dual eligibles.’ The report also offers Options Four and Five, which are more limited alternatives to Option Three.)

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