Chronic Non-Chronic Blended Trending? A Word from Milliman about Medicare & Disease Management

Check out this interesting and highly readable report from Milliman and their health care actuaries. According to this analysis of Medicare fee-for-service claims from ’03 to ’06, the rate of increase (otherwise known as the ‘trend’) for persons with heart disease, diabetes, chronic obstructive pulmonary disease, chronic heart failure and asthma was lower than the trend for persons without those conditions.

That’s important because trend is arguably a more important metric for the success of disease management than cost. While it would be nice to ‘lower’ the cost of care for persons with chronic conditions, that begs the question of lower cost compared to what. Thanks to forces driving the overall cost of health care (for example, people are getting older, inflation is accelerating, technology is expanding), a successful disease management program may diminish the costs that are proportionally directly due to the chronic condition but still ‘look bad,’ thanks to the general cost drivers. Since costs are constantly increasing across the board, looking at the rate of increase is a good way to reconcile expected vs. observed costs. At least that's how the non-actuarially inclined Disease Management Care Blog thinks about it when its brain isn't getting full.

The art and science of separating costs/trends that are due to the chronic illness versus overall costs not only turns otherwise brainy, stoic, placid and mute health care actuaries into brainy, stoic, placid and murmuring actuaries but is also the stuff on which millions and millions dollars of disease management company performance guarantees depend. Guarantees may depend on comparison of observed trend to a calculated trend that ‘blends’ the non-chronic and chronic trends. If the ‘non-chronic’ general trend is higher than expected and the ‘chronic’ trend is already low without any disease management, the guarantees could be miscalculated. Big time.

This is all based on Medicare fee-for-service data, which doesn’t necessarily apply to the commercial insurance sector, which is where most disease management companies live. In fact, Medicare fee-for-service has no disease management programs to speak of. Milliman's analysis would need to be performed outside of Medicare to determine if it's generalizable.

However, the observation that rate of cost increases is higher for persons without chronic illness has big implications for health care policy. The Milliman report points out that wellness, preventive care, diagnostic services and elective procedures may be the more important drivers of health care costs in 2008. The folks at the Dartmouth Atlas, thanks to their perspective on variation and preference sensitive conditions, would probably agree. The report also asks if the current evidence-based medicine and quality improvement efforts that have been focused on chronic disease is paying off.

The report didn’t bring this up, but it begs another question: does Medicare FFS really need disease management? The answer may still be yes, but if this is all about the scary likelihood of depleting the Trust Fund by 2019, chronic illness may not be where President Willie Obama McCain Sutton should want to go. Maybe some parts of the current Demos directed at chronic illness were unable to show an impact because chronic illness trends were already down....

Food for thought. In the meantime, if you want to learn more about this chronic-non-chronic trend stuff, look here. The DMCB is going to read its copy one more time.