Cost containment in health care: 5 strategies to help plans save

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The pursuit of cost containment in health care never waivers. Medicare and Medicaid plans leverage various strategies, resources and tools to improve the quality of care while reducing costs. Even with a myriad of practices in place, the reality is that the US spends more on health care as a share of the economy than any other country yet has made little progress in improving outcomes. According to the Centers for Medicare and Medicaid Services (CMS), spending was $4.1 trillion in 2020, accounting for 19.7% of the nation’s Gross Domestic Product (GDP). 

With spending on an upward trend, plans should prioritize new or improved strategies for cost containment. However, many factors contribute to this, making it an even more complex objective. For plans to make a significant impact with cost containment, they’ll need to:

  • Reduce readmissions.
  • Focus on the quality and setting of care while decreasing costs.
  • Improve medication adherence.
  • Minimize utilization of low-value care.
  • Understand why some members are overutilizers and engage them in new ways.

Let’s break down each of these categories to uncover cost containment strategies:

1. Reduce readmissions.

Readmissions are costly and often avoidable. The topic is complex with many factors affecting outcomes such as the type of treatment and social determinants of health (SDOH). Although you can’t prevent every readmission, a study found that at least 26.9% of them were avoidable. 

As a plan, you can support members post-discharge with interventions to reduce the risk of readmissions:

  • Educate members about their care plans and provide documentation of the associated instructions as “reminders” about what to do when they get home.
  • Use data to identify those at the highest risk of readmission based on SDOH screening and medical history. Most plans have resources and funding available to address both treatment and SDOH needs. For example,  Care Coordinators from the plan reviewing discharge instructions with the member to ensure they understand them; have the medications prescribed and food and other needs in the home; and provide transportation to the pharmacy and follow-up appointments can reduce the risk of readmission. 
  • Understand and address other reasons for readmission, including concepts like loneliness and social isolation. 

Learn how Pyx Health can help your Dual Eligible Special Needs Plan members  overcome loneliness and improve health outcomes.

2. Focus on the quality and setting of care while decreasing costs.

Higher quality care can mean different things, but much of it revolves around receiving the right care at the right time and in the right setting. For example, care received in the emergency department (ED) is not as optimal as the care received from a provider who knows a patient’s history. Care quality also depends upon a member being active in their health journey and receiving preventative care. 

Your plan can emphasize the importance of having a primary care physician and incentivize annual checkups and screenings. Another concern about quality care is a lack of access to specialists in underserved areas. Telemedicine and telehealth for physical and behavioral conditions is often available through the health plan and the provider network as another option to getting care at the right time and right setting.

3. Improve medication adherence.

Individuals who fail to take prescriptions per their doctor’s instructions can suffer adverse outcomes and drive up costs. A study from 2016 revealed that morbidity and mortality associated with medication nonadherence cost $528.4 billion annually and has continued to grow.

The reasons for nonadherence often relate to affordability, access and overall health literacy. Medicare and Medicaid plans can step in with these strategies: 

  • Work with providers to find covered medications.
  • Provide resources for mail-order prescriptions so access is no longer a barrier.
  • Communicate with members in multiple channels about the importance of taking medication as directed and the consequences of non-adherence. 
  • Encourage the use of patient portals. A study published in the “Journal of the American Geriatrics Society (AGS)” proved this to be effective. It found that the availability of clinical notes in the patient or member portal hosted by the plan or the provider led to higher engagement and reminded them of their care plan and the need to take prescriptions. Researchers discovered that patients with two chronic conditions were more likely to report that reading notes kept them engaged in their health than those with one or no chronic conditions. 

4. Minimize the utilization of low-value care.

Low-value care isn’t good for members or plans. This type of care offers no benefit or less benefit than the overall cost. As a result, it can lead to needless spending and patient harm. How big of a problem is low-value care? The Alliance of Community Health Plans estimates that low-value care costs the health care system $340 billion annually

It can be hard to pinpoint low-value care. What’s necessary for one patient might not be for another, even if they have the same diagnosis when viewed through a health equity lens.  Low-value care generally falls into categories of overuse of imaging, diagnostic tests and unnecessary procedures and ER visits.

The Choosing Wisely initiative provides parameters for defining “low-value care.” Additionally, several states have started programs to educate and incentivize providers to reduce low-value care. 

As a plan, your approach could be to analyze claim data to find the most common occurrences of low-value care. These findings could support provider decisions to reduce their usage of low-value care options. Another good practice is to reward and encourage accountable care organizations that coordinate high-value care while supporting cost containment. 

5. Understand and engage overutilizers.

The final strategy overlaps with all the others. It’s an approach that seeks to understand why some people overutilize health care services particularly the Emergency Department. Often, overutilizers are more likely to be nonadherent to medication regimens and treatment plans, be at elevated risk of readmission and receive low-value care. 

So what’s behind overutilization and disengagement? Many things drive these issues, but one that’s become a focus for plans is chronic loneliness. This condition impacts physical and mental health along with the ability to engage. Chronically lonely members use the healthcare system differently than their peers and lack social connections. 

Programs that include friendly technology and human connection to screen for and address loneliness can provide cost containment wins. If successful, members are more likely to use plans and community resources. Medicaid plans that deployed a solution for chronic loneliness as a health care condition saved $846 per member per month (PMPM) in emergency department and inpatient costs. Medicare plans had strong results, too, with a 61% decrease in ED and inpatient costs PMPM.

Develop cost containment strategies with new tools and approaches.

Some of these strategies will require new initiatives. Others will offer you insights on how to improve existing initiatives. Throughout all the causes and solutions, there is a thread of the role of loneliness. That thread is even more apparent with Dual Eligible Special Needs Plan (DSNP) enrollees. They have greater social risk factors and are often emergency department overutilizers. You can learn more about the effects of loneliness and the costs associated with it in our DSNP report

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