Meeting health-care test
Providing health insurance for the poor who grow elderly calls for innovation in a bid to save costs
From the Times Union by Cathleen F. Crowley
When Massachusetts officials launched an experiment to manage the health care of its most challenging and expensive citizens, they tapped a long-time health leader in the Capital Region.
John W. Baackes, formerly president of Community Health Plan Inc. in Latham and the Northeast Division of Kaiser Permanente, took the reins of Senior Whole Health after it became a private, for-profit company offering health care plans for low-income senior citizens.
Senior Whole Health, which now is also available in New York and Connecticut, was named over the summer by INC magazine as one of the country's 500 fastest growing companies.
Q: Explain what Senior Whole Health does.
A: We are health plan for people who are already covered by Medicare and Medicaid and Part D.
Q: They are referred to as dual-eligibles?
A: Yes, because they are eligible for both Medicare (a government health program for the elderly) and Medicaid (a government health plan for the poor), and because they are in Part D at no cost. That's the prescription drug program. What we do is take those three plans and consolidate them into one plan so that it is still comprehensive, but it's more comprehensible.
Instead of having three ID cards in their wallet, they have one. We add a nurse care manager who becomes the patient's advocate in figuring out what they need to have, the services they are entitled to, so they can remain high functioning and as independent as possible, and hopefully avoid nursing home placement.
Q: What is your business model?
A: The business model is an insurance plan so we take financial risk from the government. We accept a fixed payment from the state or the Feds and we are responsible for everything after that. We treat that as an insurance premium and we build reserves, like an insurance company, and we are regulated in states like we are insurance company.
It's really a model similar to a health maintenance organization. We have a network of providers that we contract with to provide services to our members at predetermined rates. There are no out-of-pocket costs for the members because these are services they are entitled to.
Q: Doesn't that create an incentive for Senior Whole Health to not provide those services?
A: The way we are paid is known as a risk-adjusted payment, so if we enroll someone who has a set of chronic conditions already, we are going to get a higher payment for them.
The reimbursement has become much more sophisticated so that we are not encouraged to cherry-pick just the healthiest people. What we are trying to do is avoid the high-cost services, which is nursing home care or repeated acute-care hospitalizations.
Q: Have you been successful at keeping people out of nursing homes?
A: There's been a study here in Massachusetts by an independent consulting firm engaged by the state, which found that people enrolled in this plan, they had a 40 percent less chance at being admitted into a nursing home for long-term care than if they were in the fee-for-service system.
Q: Did the study measure how healthy the patients say they feel?
A: We have less than one-half of 1 percent voluntary disenrollment. We find that once people are in the program, they are in for life. The more frail they are, the more likely they are to have a caregiver involved and that caregiver is most likely a family member and 90 percent of the time it's an adult daughter and they love it because they now have someone to share the burden with.
These are poor people who have gotten old, not people who are old that got poor, so they find that the level of attention they get in this program is something they haven't experienced before. They feel better just having someone call them up every once and awhile to see how they are doing.
Q: Are you saving the government money?
A: The government is paying us capitation that is based on what they would have spent if the person stayed in the fee-for-service system. Where we are saving the government money is by keeping them out of the nursing homes and having less acute care hospitals. The cost for nursing home care for this population would be a minimum of $50,000 to $60,000 a year, and if they get sick and go to the hospital, those charges are on top of it.
If we can keep them at home and we can probably keep them at home at less than half of the cost of what it costs to put them in a nursing home then yes, the government saves money by avoiding that cost. That's really the secret of what makes this program a good idea.
Q: What is your profit margin?
A: We need a critical mass of people to make this work. In Massachusetts, we got to that at about 1,500 members and we now are at 5,300. In New York, we think the number is going to be a tad higher, around 1,800, and we are at 700 and growing. And then we think the margin for us is in the neighborhood of 5 percent.
Q: The presidential election raised a lot of attention about universal health care and a single-payer system. What do you think about universal health care?
A: As a citizen, I think it would be a great idea to have universal health care and a single-payer system. I would say that companies like ours would still have a role because even with Medicare and Medicaid, the government doesn't have a warehouse of people somewhere paying claims. They basically contract that work out to private companies, so I think what we do is an added value and I think we would still have a role.
Q: Baby boomers are coming, medical technology and treatments are improving, and people are living longer. Your industry is poised to grow, but will the government ever reduce costs in this area?
A: It is going to continue to grow because the population is aging and there will be poor people as they age. This dual-eligible population will go on. You know, only 7.5 million people in the United States fall into this cohort of dual-eligible out of a population of 300 million. So it's only 2.5 percent of the population, but we will spend between Medicaid and Medicare and Part D in 2008 about $300 billion on this population.
That's a lot of dough. We think that what we are doing is a way not necessarily to reverse it, but to slow it down because we will provide more of that care in home settings as opposed to institutional settings, so we think that is the value added.
Last modified: 09/15/2010