Cost Savings: An Insurer Weighs In

There are at least two reports out over the last week regarding health care costs that are worth reading and reflecting upon.  I’ll cover one today, and the other in my next posting.


United Health Care has inaugurated a new Center on Health Care Reform and Modernization, and issued a white paper suggesting 15 efforts that could lead to about a half trillion in Medicare savings over 10 years, starting next year.  Five of these represent three quarters of the proposed savings. These are:


1.      Nurse practioners in nursing homes to prevent hospital admissions ($166 billion). United’s Evercare division has pioneered an NP delivery model in nursing homes –and has shown substantial decrease in hospital admissions.   Considering that few Americans want to be in the hospital, this is great news. There is little detail behind the dollar savings statement; I am doubtful that this could be implemented starting in 2010 (there is a a huge NP shortage), and I wonder if the substitute costs of this program are fully considered.

2.      “Integrating medical management” ($102 billion)    This is extrapolating the cost savings of United’s Medicare Advantage compared to indemnity Medicare. It entails a combination of medical management and benefit design changes.  It’s a head-scratcher, since MedPAC consistently says that Medicare Advantage plans cost more,  not less, then “original Medicare” for a risk-adjusted population.

3.      Claims edits ($57 billion)  United states that preadjudication review of claims can lead to savings of 3-6% in its experience.  Certainly this preadjudication review can lead to decreased fraud. On the other hand, it also delays payment for some legitimate services, and ultimately leads to higher administrative expense on the payer and the provider side.

4.      Programs to prevent hospital readmissions.  ( $55  billion)  There is a big opportunity here – see my posting from 2 months ago on this topic

5.      Incentives for patients to get care from higher value providers ($37 billion)  United has a program to provide incentives for seniors to go to lower cost and higher quality providers – as measured by its Ingenix subsidiary.    The white paper says that UHC has extrapolated the impact of extending this program to all Medicare beneficiaries.  It’s possible that this could drive more provider system energy toward increasing quality and efficiency – so this might be a winner.  This only works if it changes physician behavior of those docs not on the “high value” list – since the highest value physicians often don’t have capacity for incremental patients.


It’s interesting that a number of the UHC proposed interventions are not associated with especially large projected savings:


·        Transplant centers of excellence (less than a billion over 10 years – surprising from a company with a highly regarded transplant center of excellence program, United Resource Network)

·        Gaps in Care program (less than 2 billion over 10 years).  These are software programs that identify departures from evidence-based care and communicate with doctors or directly with patients to increase adherence to evidence based care.

·        End of life care and congestive heart failure disease management each yield under $20 billion in proposed savings over ten years as well


Advamed   has presented a series of backup documents to its previous assertion that insurers, providers and unions will band together to save $2 trillion over 10 years.   This is a hodgepodge , with separate letters from the AMA, the American Hospital Association,  AHIP (insurance lobby) PhARMA, SEIU, and Advamed itself (device manufacturers. )  I’ll cover this in my next post.