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Medicare Chronic Disease Management Direction? It’s Anybody’s Guess.

by Vince Kuraitis

David, thanks for asking your question below. I’ll limit this post to providing a snapshot of Medicare chronic disease management (DM) innovation.

Professor Gerard Andersen of Johns Hopkins describes the big picture of changing health system needs:

  • 1900 to 1950 — Infectious diseases
  • 1950 to 2000 — Episodic care
  • 2000 to 2050 — Chronic care

About 6 or 7 years ago the light bulbs went on at Medicare — they recognized the upcoming challenges of baby boomers aging, increasing chronicity, and out of control costs.  Medicare beneficiaries with chronic conditions incur health care expenses highly disproportionately; the more chronic conditions, the higher the costs.

Medicare has been conducting a wide range of demonstration/pilot projects, several of which deal directly with chronic disease management.  The two most substantial DM related projects are the Medicare Coordinated Care Demonstration and Medicare Health Support (MHS).

Both of these projects are stumbling.  On my own blog, an April 5 entry discusses the Medicare Coordinated Care Demonstration and an April 7 entry discusses latest news about Medicare Health Support.

Medicare Health Support has by far been the most visible project.  Six months ago just about everyone in the DM field would have said that Medicare’s approach to MHS looked like the heir apparent for wider adoption in Medicare.  MHS was authorized by the Medicare Modernization Act of 2003 and contains language requiring national expansion if successful. The awardees of MHS contracts are private disease management companies and large health plans.

Among the 8 MHS awardees, Lifemasters formally announced withdrawal from their project on October 25 of last year. McKesson and Healthways have acknowledged that they are missing financial targets (5% guaranteed savings to Medicare, under penalty of having to pay back up to 100% of fees).  The other vendors are either private companies or very large health plans whose earnings would not be materially affected by MHS, so that’s all the “official” news to date. However the buzz around the DM industry is not optimistic and the other MHS awardees don’t have smiles on their faces; an “official” report will be presented to Congress later in the year.

The plot thickens as physicians have recently taken an active interest in conducting and being paid for care coordination activities.  Last December (in the dead of the night as adjournment was imminent) Congress passed legislation authorizing the Medical Home Demonstration Project. The medical home model is primary care physicians’ proposal toward reimbursement and primary care reform; in March, four physician associations representing 330,000 doctors announced agreement on Joint Principles of a Patient Centered Medical Home. 

Finally, there are many other Medicare demonstration projects underway which also propose innovative solutions toward chronic care, e.g, the Physician Group Practice (PGP) demo, the Care Management for High Cost Beneficiaries (CMHCB) demo, the Special Needs Plans (SNP), and others.

So while MHS looked like the favorite, today’s it’s anybody’s guess where Medicare is going to go with chronic disease management innovation.  Given the large number of demo/pilot projects still in early stages, I think it will be at least 3 years before we get a clear sense of direction from Medicare.


[…] I interest you in a 2 minute summary of DM in Medicare?  Please read my posting Medicare Chronic Disease Management Direction? It’s Anybody’s Guess on the World Health Care […]

  Howard Rosen wrote @ April 12th, 2007 at 3:33 pm

Thanks Vince, always wonderfully concise and fascinating.

As an observation, it seems that the problem lies in the nature of the innovation. Is it in the gadgets created? or is it in the programs around them? Is it in the payment system? or is it all of the above? I think that sometimes we all tend to put the cart before the horse. In some cases I have seen wonderfuI and innovative management systems in search of patients, in other cases I have seen great business models but not product. It seems clear that Medicare is interested but they want to see savings to justify the expense and if the way to do that is to get patients to manage their healthcare better, than the key would be to finding tools, application, gadgets that would be as user friendly as possible. In this instance I would define such ‘user friendliness’ as finding ways to integrate into patients existing lifestyles as easyily and seemlessly as possible. Don Jones (SVP, Qualcomm) describes the 7 ‘C’s that are required to satisfy User needs, one of them being Confidentiality; being where a user can manage their healthcare wherever, whenever they wanted and anyone around would not be aware of any health issue. And on the other side of the coin, such approach should also be designed to involve the physician side on an ‘as need’ basis as aopposed to many existing approaches which are more of the ‘always on’ mode. This is where I think the Holy Grail may lie.

Using Vince’s examples above, there certainly seems to be interest on the Medicare side, but they want savings. The law of averages shows that the more people involved, the greater the number using it, resulting in greater gross savings to the ’system’. So the it can easily integrate into a patients life, the greater the useability and acceptance.

Anyway, that’s my 2 minute thought on a 2 minute summary

Howard Rosen

  Vince Kuraitis wrote @ April 14th, 2007 at 1:04 pm


Thanks so much for your perspectives. I’ll offer 3 follow up thoughts:

1) It’s not about the technology itself, it’s about the information provided from the technology and the actions that can be taken by patients, clinicians, and other caregivers. The technology is the means, not the end.
2) The current DM model is not scaleable. Nurses and other people in call centers and counseling patients one-on-one is very expensive. This is cost effective for the sickest patients where evidence clearly shows short-term cost avoidance of ER visits and hospitalizations, but will not diffuse to longer term DM opportunities, prevention, wellness, and productivity enhancement applications.
3) However, many DM technologies will bring us days back to the early days of Internet economics. The cost will be in up front development, and the marginal costs of deploying the applications (once developed) will be close to zero — how much does a “hit” on a website or an outgoing reminder SMS message cost?


[…] that Medicare’s future direction for chronic care management has become murky,  I’ve started to pay more attention to the many other demonstration/pilot projects […]

[…] Medicare Chronic Disease Management Direction? It’s Anybody’s Guess […]

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