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Policy makers have a once-in-a-generation chance to remake the U.S. health care system to meet the needs of an aging population while saving billions of dollars in Medicare spending and keeping the program solvent.

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The Medicare Modernization Act of 2003 includes provisions that begin to transform the program's approach to chronic conditions, which are the biggest drivers of health care spending. Property implemented, chronic care improvement programs can improve the health and quality of life of Medicare beneficiaries with chronic illness particularly high-risk patients such as 8 million Medicare beneficiaries with five or more chronic conditions who account for over two-thirds of the program's $302 billion in 2004 spending.' Many of these patients are hospitalized at a huge cost and suffer because their conditions are allowed to deteriorate to the point where they reach a crisis.

The prevalence of chronic illness will only increase amid the aging of the population and rising levels of obesity, which can lead to diabetes and heart disease. Many chronic conditions such as heart failure and chronic obstructive pulmonary disease disproportionately affect Medicare beneficiaries age 65 and older, whose numbers are projected to double by 2030. At the same time, public health officials are becoming increasingly concerned about the rising numbers of obese and overweight Americans. The federal Centers for Disease Control recently released figures indicating that poor diet and physical inactivity in 2000 caused 16.6 percent of all deaths, up from 14 percent in 1990. Obesity is poised to pass smoking as the leading preventable cause of death." "Obesity has got to be job No. 1 for us in terms of chronic diseases," Dr. Julie Gerberding. CDC'S director, told the Associated Press.


Chronic care improvement programs orient doctors and hospitals to working proactively with patients to maintain their health and keep them out of the hospital. For example, the Department of Veterans Affairs has instituted a model of chronic care that integrates care coordination services with daily in-home monitoring and clinical information tools, and has reported a 60 percent reduction in hospital admissions.? If Medicare could achieve similar results with similar patients, the program could save over $30 billion a year. The federal government would also fuel technological innovation for chronic care improvement that would serve a growing need globally.

The costs of chronic illness to the U.S. are enormous, accounting for at least 78 percent of all health care spending, or well over a trillion dollars per year. The following table outlines the prevalence and inpatient costs to Medicare, the government's insurance program for the elderly and disabled, of seven of the most costly chronic conditions:

The Need for Chronic Care Improvement

The nation's most costly chronic conditions include coronary artery disease, heart failure, chronic obstructive pulmonary disease, mental-health disorders, diabetes mellitus, hypertension, and asthma. Chronic illness


Dr. Gerard Anderson, Partnership for Solutions, "Medicare and Medicaid Are Programs for People with Chronic Illness ... But Do Not Know it," presentation to General Accounting Office, February 5, 2004; Partnership for Solutions, Chronic Conditions: Making the Case for Ongoing Care, December 2002: Medicare spending data from U.S. Department of Health and Human Services. ?M. Meyer, R. Kobb, P. Ryan, "Virtually Healthy: Chronic Disease Management in the Home," Disease Management, 2002;5(2):87-94.

Wu, Shin-Yi, and Green, Anthony, "Projection of Chronic lilness Prevalence and Cost Inflation," RAND Corporation, October 2000.

Centers for Disease Control, "Fact Sheet: Actual Causes of Death in the United States, 2000."

Associated Press, "CDC: Obesity gains on tobacco as top death factor," March 10, 2004. Partnership for Solutions, op. cit.


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8.6 million .6 million

$8.2 billion
4 million $ 16,000

$6.2 billion Mental health disorders 20.4 million 1.0 million $11.4 billion .2 million $16,000

$3.9 billion Diabetes 17.6 million

.5 million
$7.4 billion
2 million $20,000

$3.8 billion Hypertension 51.1 million

2 million
$4.6 billion

.1 million $22,000 $3.2 billion Asthma 20,7 million

4 million
$3.3 billion .07 million $13,000

$1 billion TOTAL

(a) 5.5 million(b) $94.3 billion(b) 2.8 million(b) $21,000(0) $58.8 billion() Percentage of 2004 Medicare spending

19% Source: estimates based on 2001 hospital discharge and cost data from the Agency for Health Quality Research, Healthcare Cost and Utilization Project' (a) Number of afflicted does not total due to co-morbid conditions. (6) May not total due to rounding.

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What the statistics mask is the amount of human suffering that chronic illness causes particularly under the nation's current model of episodic, crisis-driven care. The health care system is currently geared toward attempting to "fix" patients when they develop a problem. This works well when people have car accidents or other kinds of traumatic episodes, or come down with a severe case of the flu. The system is not well optimized for the huge and growing burden of chronic illness.

Chronic diseases are often preventable through proper health management, such as maintaining healthy weight and avoiding smoking or excessive alcohol consumption. Once they develop, chronic illnesses represent ongoing conditions that require daily self-care and management, as

well as coordination of and collaboration among health care providers.

The concept of chronic care improvement begins with the recognition that patients with chronic conditions can lead healthier, happier lives under a model of care based on coordinated and proactive daily monitoring, education, guidance, and management by health care providers. Diet, exercise, and medication adherence are well known factors that influence how chronic conditions progress. A key, often overlooked factor is whether doctors and patients identity and effectively deal with problems early, before they result in emergency room visits or hospital admissions, with the associated pain and expense. Proactive monitoring and management can also prevent a patient with one chronic disease from contracting additional conditions. The result: Saving lives and saving money.

Without such daily management or reinforcement of self-care behaviors, such as taking medicine or learning to identify early warning signs of trouble, patients' conditions can deteriorate to a point of crisis, landing them in an emergency room or a hospital bed with heart failure, a severe asthma attack, a heart attack, or severe depression. Many of these crises end in death. A poorly managed chronic condition can also lead to a range of other illnesses and complications. Diabetes

The Center for Medicare and Medicaid Services – the world's largest payer for health care services is beginning to recognize the need to reorient the health care system to deal successfully with chronic illness. The agency recently released a summary of chronic care improvement provisions in the Medicare Modernization Act of 2003 that said, "Treating chronic illness is different from treating acute

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episodes. The existing medical delivery in the control group.

.10 PacifiCare Behavioral system is not designed to effectively treat Health, a division of a large HMO, showed a chronically ill patients despite the best efforts 50 percent drop in hospitalizations, a 73 and intentions by providers." CMS has reduction in emergency room visits, and a 51 consistently referred to the Institute of percent reduction in inpatient costs in a Medicine's landmark 2001 report, Crossing the published study reviewing the results of a Quality Chasm, which noted the impact of the technology-based chronic care improvement fragmented nature of the

program for heart failure health care delivery system Many health caro experts

patients that incorporated a on the cost and quality of

similar model of daily care for people with chronic agree that current Medicaro


with conditions. "(T)here remains expenditure patterns are a patients. a dearth of clinical programs portrait of chronic illness with the infrastructure managed unsuccessfully.

While recognizing that the VA required to provide the full

and Medicare delivery complement of services

systems are different, if CMS needed by people with heart disease, were to implement a similar chronic care diabetes, asthma, and other common chronic improvement program that integrates in-home conditions," states the report's executive monitoring technologies and care coordination summary.

for its highest risk 4 million patients who are

similar to those patients enrolled in the VA Many health care experts agree that current chronic care program, Medicare could prevent Medicare expenditure patterns are a portrait of 1.7 million hospitalizations and produce net chronic illness managed unsuccessfully, which savings of over $30 billion in 2004. Other in turn is helping drive the Medicare Hospital studies have indicated that chronic care Insurance Trust Fund to insolvency as soon as improvement programs produce net savings of 2019.8 The federal government's Healthcare up to 30 percent of all costs of caring for the Cost and Utilization Project 2001 data shows chronically ill, including hospital, out-patient, that Medicare patients afflicted with one or and drug expenses. more of seven major chronic conditions account for about one quarter of Medicare related hospital discharges and costs – an Medicare Reform and Chronic Care estimated 2.8 million hospitalizations in 2004 Improvement at a projected cost of $59 billion, 19 percent of program spending.

The Medicare Modernization Act of 2003

commits the federal Centers for Medicare and The VA and other entities have demonstrated Medicaid Services to improving chronic care the effectiveness and savings that flow from a for senior citizens and other Medicare systematic approach to chronic care that beneficiaries: integrates clinical information tools, monitoring technologies, and care management. In one

Section 721, "Voluntary Chronic Care published study, the VA reported that patients

Improvement Under Traditional Feein its chronic care improvement program had

for-Service," mandates that chronic 60 percent fewer hospitalizations than patients

care improvement programs be offered as a benefit in the program's fee-for-service system, which covers

88 percent of Medicare recipients. 7

Center for Medicare and Medicaid Services, "Chronic Care Improvement in the new Medicare Modernization Act (MMA)", March 10, 2004; Institute of Medicine, Crossing the Quality Chasm, A New Health System for the 21"

M. Meyer, R. Kobb, P. Ryan, "Virtually Healthy: Chronic Century, National Academies Press, 2001:4.

Disease Management in the Home," op. cit. 2004 Report of the Boards of Trustees of the Federal

J. Vaccaro, J. Cherry, et al, "Utilization Reduction, Cost Hospital Insurance and Federal Supplementary Medical

Savings, and Return on Investment for the Pacificare Insurance Trust Funds

Chronic Heart Failure Program. Taking Charge of Your * Estimates for 2004 based on 2001 data from the Agency Heart Health," Disease Management, 2001;4(3):131-142. for Healthcare Research and Quality, Hospital Cost

Alan Adomeit, Axel Baur, Rainer Saufeld, "A New Model Utilization Project.



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for Disease Management," McKinsey Quarterly, 2001

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Medicare's initiatives would help beneficiaries with chronic conditions and their providers understand, monitor, and manage their conditions, and guide patients in seeking appropriate services that can keep their illnesses stable. Patients with multiple chronic illnesses would receive care coordination services that would prevent redundant testing. other duplication of services, and overprescribing of medications.

Section 722, "Medicare Advantage Quality Improvement Programs," requires that chronic care improvement programs be offered in Medicare Advantage, Medicare's newly redesigned managed-care program. Section 723, "Chronically ill Medicare Beneficiary Research, Data, Demonstration Strategy," commits the Secretary of Health and Human Services to developing and implementing a plan for improving the quality and lowering the cost of care for Medicare enrollees with chronic conditions. "The plan will utilize existing data and identify data gaps, develop research initiatives, and propose intervention demonstration programs to provide better health care for chronically il Medicare beneficiaries," the legislation states. Section 649, "Medicare Care Management

Pertormance Demonstration," authorizes demonstration of technology-based chronic care improvement programs targeting small and medium-sized medical practices, with physicians to be paid for their performance in using information technology to achieve quality and cost-savings goals in chronic care. Section 101, "Prescription Drug Benefit," establishes a medicationmanagement program embracing chronic care improvement principles for every Medicare beneficiary with multiple prescriptions for multiple chronic conditions, starting in 2006.

Under Section 721, the Centers for Medicare and Medicaid Services would roll out chronic care improvement programs for Medicare feefor-service beneficiaries in geographic areas that contain 10 percent of the Medicare population. Chronic care improvement programs would be expanded to the rest of the U.S. and become a permanent benefit if goals are met for quality improvement, patient satisfaction, and cost savings.


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Medicare reform recognizes that the chronically ill need monitoring, education, and care management to become empowered consumers of health care services. "Chronic care improvement programs are generally a set of interventions designed to improve the health of individuals who live with chronic illness by working more directly with them and their physicians to help them adhere to evidence-based treatment plans regarding diet, medicine schedules, and other selfmanagement techniques," CMS said in its recent summary of the chronic care


The law requires that a care-management plan be created for each Medicare beneficiary who enrolls in a chronic care improvement


CMS, op. cit.

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conditions, will ensure the success of Section 721 chronic care improvement programs.

program. Section 721 (3) (e) (2) of the law requires that care-management plans include the following elements, "to the extent appropriate":




the characteristics of transformational, technology-based chronic care improvement program?

"(A) A designated point of contact responsible for communications with the beneficiary and for facilitating communications with other providers under the plan. "(8) Self-care education for the beneficiary (through approaches such as disease management or medical nutrition therapy) and education for primary caregivers and family members. "(C) Education for physicians and other providers and collaboration to enhance communication of relevant clinical information. "(D)

The use of monitoring technologies that enable patient guidance through the exchange of pertinent clinical information, such as vital signs, symptomatic information, and health self-assessment. "(E) The provision of information about hospice care, pain and palliative care, and end-of-life care."

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Frequent communication for individuals living with chronic disease is vital. For patients at high risk of hospitalization, whose health status can change from one day to the next, or whose daily behavior has an impact on the outcome, "the extent appropriate" should be daily communication. This includes all patients with chronic heart failure and chronic obstructive pulmonary disease, and any diabetes patient with emerging complications or poor glucose control. The communication should be able to provide the disease management professional with information about the health of the Medicare beneficiary and provide a vehicle for the professional to give feedback to that beneficiary. An integrated technology solution that relies on modern electronic or Internet-based tools will enable frequent

and reliable communication between caregiver and patient. Personalized patient guidance and education. Transformational chronic care improvement programs have an effective, personalized, and timely education component. Technologies exist that can easily guide patients and enable self-assessment, and selfcare education. For example, inhome communication devices or Internet-based applications can be integrated with the mandated clinical information databases to allow for personalization of patient guidance and self-care education to further enhance patient compliance with chronic care improvement programs and therefore outcomes. Coordination of care. Coordinating care for individuals living with chronic diseases is complex. The level of complexity for individuals living with five or more chronic conditions, as 8 million Medicare beneficiaries are, is

The success of chronic care improvement programs Medicare fee-for-service rests on the interpretation and application of the words "to the extent appropriate". This is particularly true with respect to promoting a systematic approach to chronic care that integrates required elements, including monitoring and communication systems that enable patient guidance and education, clinical information databases, and decision-support tools. This systematic approach is certainly appropriate and necessary for Medicare beneficiaries who have been hospitalized or are at risk of being hospitalized for an acute exacerbation of a chronic illness. This includes many of the 8 million Medicare beneficiaries with five or more chronic illnesses. Defining an integrated technology solution as appropriate, particularly for high-risk patients with chronic

Estimates based on data provided by Partnership for Solutions, op. cit.

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