The Growth of Managed Long-Term Care

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As Medicaid budget pressures grow, more states are turning long-term care over to private managed care companies. USA Today reports that six states now require both frail elderly and younger adults with disabilities to enroll in insurance-run Medicaid managed care plans. Another 10 states are planning to either create or expand these programs, according to the story.

The reason, of course: money. States pay the insurance plans a fixed amount to care for these patients. And the private insurers say they can provide quality care for less cost through their use of care coordinators and by keeping many people at home. 

Tennessee, for instance, pays private insurers an average of $4,400 per patient per month to provide Medicaid long-term care services. Under this system, if the insurer can provide care for less, it makes a profit. If its costs are higher, the insurer is at risk for the difference. This is a big incentive to create a care plan built around home care, which for many beneficiaries can be far less costly than a skilled nursing facility.

USA Today reported that one Tennessee insurer, Amerigroup, spent about $3,000 per month to care for one patient at home. The cost for this patient in a nursing facility would have been almost $4,600 per month and a money-loser for the insurer.     

Medicaid managed care isn't new. States have been using it for acute care beneficiaires (mostly low income mothers and kids) for years. But long-term care patients are a very different challenge.

One one hand, more than any other population, the frail elderly need to have their care coordinated. They have complex medical needs, often suffer from multiple chronic diseases, and frequently take many medications. If a mix of care managers, personal assistance, nursing, and other services and supports can help them get the care they need at home for less money, that is great.

This flat fee, or capitated, payment model works well with programs such as hospice and PACE, for instance.   

On the other hand, many insurance companies badly damaged their reputations in the 1980s and '90s with managed care plans that seemed more intent on maximizing profits than care. It will be important to put protections in place to be sure that the frail elderly, who are often unable to advocate for themselves, are getting the care they require.

The other problem with Medicaid managed care is that these beneficiaries often receive their physician and hospital care through Medicare, not Medicaid. Because these two programs are so poorly coordinated, seniors who transition from, say, home to hospital to rehab and back to home may not get proper care as they cross settings.

This lack of coordination between Medicare and Medicaid also creates some perverse and dangerous incentives. If, for instance, a Mediciad managed care patient winds up in the hospital as a result of poor care, neither Medicaid nor the managed care firm is on the hook. The bill, instead, is paid by Medicare.

If managed care is going to work well, there will have to be much closer delivery and financial relationships between these two payers, as there is with successful programs such as PACE or through provider-based managed care mechanisms such as Accountable Care Organizations.           

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What is needed is more personal care or assisted living facilities. Many elderly do not need the level of care provided by a nursing home but really aren't adequately cared for alone at home. Certainly some people would prefer living in their own home or apartment, but others would choose a facility with amenities they find appealing. My husband's mother is in assisted living and it costs less than $3,000 a month (perhaps because it's non-profit). We simply must come to grips with the fact that more and more people are living to become frail elderly and that remaining home alone may be unworkable while living with family may be impractical for any number of reasons.

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About this Entry

This page contains a single entry by Howard Gleckman published on February 23, 2011 9:55 AM.

Tough Times for Federal Assistance for Seniors was the previous entry in this blog.

Medicaid Block Grants Would Cripple Long-Term Care is the next entry in this blog.

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