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Prevention and Wellness Savings for Medicare

By August 7, 2009November 2nd, 2009Commentary

One of the more controversial aspects of current proposed reform legislation has been whether enhanced prevention and wellness efforts will save money.  The Congressional Budget Office has been reluctant to attribute substantial savings to these programs.  Now Healthways, a large wellness and disease management firm, has released a study done in conjunction with Ingenix, the research and information division of UnitedHealth Group, indicating that Medicare could save a very large amount of money if beneficiaries entered the program in better health and if they maintained good health for a longer period once in the program.  (Healthways Study)

The study is based on an actuarial model which categorized beneficiaries into risk strata, looked at the historical costs associated with beneficiaries in the various risk buckets and then analyzed potential savings if more beneficiaries were in and stayed in lower risk categories.  The beneficiaries would be in a lower risk category because of more widespread use of prevention, wellness and chronic disease management programs.  About 54% of beneficiaries are low risk when they enroll in Medicare.  Raising that number to 65% and preventing 10% of upward risk category movements would save Medicare about $65 billion a year.  Having 75% of Medicare enrollees in the low risk category and preventing 50% of upward risk adjustments would save $140 billion a year.

There is no reason to question the savings that are posited in the study.  But the issue isn’t the potential for savings; the issue is how to get a very large population engaged in prevention, wellness and disease management programs, what does that effort cost and how long does it take to actually see the effects.  It is doubtful that anyone would suggest that such a massive implementation could be rapid and the payoff seen in the next couple of years.  This appears to be the crux of CBO’s reticence to give high savings scores to these programs over the next few years.

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