Mr. President, Use the Scalpel

Les Masterson, for HealthLeaders Media, March 4, 2009

During his successful presidential campaign, candidate Barack Obama famously said federal leaders needed to use a scalpel—rather than a hatchet—to make budget cuts.

Now, less than two months into the Obama administration, the Illinois Democrat has set aside an instrument usually found on ER for one that stars on Ax Men. In the president's first budget proposal, Obama took aim at Medicare Advantage overpayments. That's not a surprise.

Obama and the Democrats are not fans of the Republican-backed program that costs about 14% more on average than Medicare fee-for-service beneficiaries.

However, by using a chainsaw on Medicare Advantage, the president is also slashing payments to a subset of plans called special needs plans (SNPs). SNPs were created under the Medicare Modernization Act of 2003 as a way to bring managed care to seriously chronically ill beneficiaries who are institutionalized, dually eligible, and suffer from severe and disabling chronic conditions. Congress has since established specific chronic condition SNPs that focus on such high-cost ailments as end-stage renal disease, chronic heart failure, dementia, cancer, HIV/AIDS, stroke, and chronic lung diseases.

SNPs are under the Medicare Advantage umbrella because the plans feature private entities (health insurers and disease management companies) that provide care coordination for chronically ill Medicare beneficiaries. One of the largest providers of SNPs is XLHealth, a disease management company based in Baltimore. XLHealth's Care Improvement Plus offers SNPs to chronically ill beneficiaries with diabetes, heart failure, chronic obstructive pulmonary disease, and end-stage renal disease.

Once a vendor that delivered DM services, XLHealth now offers SNPs exclusively. With experience in the Medicare population, XLHealth entered the SNP space because the company believed it had the system capabilities and understood how to care for chronically ill people, says Paul Serini, executive vice president at XLHealth.

Through its SNP programs, XLHealth combines its technology platform called XLCare, which aggregates data obtained through claims, pharmacy, face-to-face interactions, nurse calls, and visits with social workers, nurses, and doctors, with its regular outreach that helps care for beneficiaries medically, socially, and emotionally.

Now, after three years of providing SNPs, XLHealth faces an uncertain future under Obama's budget plan. Serini says company officials have spoken with CMS and Congress about the need to not lump SNPs in with Medicare Advantage cuts because reducing payments to Medicare fee-for-service levels would harm SNPs.

Serini says XLHealth isn't opposed to getting paid at the same level as fee-for-service providers, but CMS needs to rework the payment system so those providing services to chronically ill patients receive the right reimbursement. Currently, providers and insurers are underpaid by 12% to 18% for seriously chronically ill beneficiaries, says Serini.

The Medicare Trust Fund faces bankruptcy within the next 10 years given the wave of chronic care and baby boomers. For this reason, policymakers shouldn't cut programs that help chronically ill Medicare beneficiaries, but should test myriad solutions to see which work best.

The XL executive says one possible solution is Medicare-managed care—such as SNPs—which is a perfect fit for chronically ill patients. He believes this because Medicare managed care coordinates care across multiple providers, offers care management support, stabilizes medications for patients moving in and out of the hospital, and does transitional care planning between hospitals and nursing homes. All of these programs create a medical home for chronically ill patients, says Serini.

"We do think that managed care, managed Medicare in particular, when applied to the frail and chronically ill, is probably the best way to manage the costs of the chronically ill in the Medicare system," says Serini.

SNPs have not been around long enough to tell us whether managed Medicare programs can lower costs and improve patient health status in the long run. By cutting payments to SNPs, which will lead to insurers leaving the program, the president is in effect decimating programs that could ultimately be the best way to care for the highest-cost beneficiaries.

As President Obama looks for programs to cut, he needs to take his own advice and pick up the scalpel.

Les Masterson is senior editor of Health Plan Insider. He can be reached at
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