Concentration in Children’s Health Spending

By October 1, 2009November 2nd, 2009Commentary

Researchers have analyzed where Medicaid and CHIPS spending on children goes.  (Health Affairs Article) Spending is highly concentrated on a few children; even more concentrated than in Medicare or private health plans.  The top decile of children account for 72% of spending.  For part-year enrollees, it is even higher, at 80%.   These children in the top decile are disproportionately white and more likely to be teenagers.  They are twice as likely to have a chronic condition and much more likely to have a functional limitation or special need.  High spending tends to persist; 38% who were in the top decile in a year were also in it the following year.

As interesting as the high-spending group is the fact that 20% of full year enrollees have no Medicaid spending.  This group is more likely to be African-American, poor and younger children.  They tend to be in better health and less likely to have a chronic health condition.  Eighty-four percent have a usual source of care, which makes the lack of spending even more surprising.

Two implications stand out.  One is that there should be a great opportunity to focus on managing the care of the top decile to both ensure appropriateness of care and reduce costs.  The study did not examine differences between managed care Medicaid and fee-for-service.  Since 50% or more of Medicaid enrollees are in managed care it would be useful to see differences in spending or lack of spending between the two groups.  It may be that managed care Medicaid plans are already doing a better job of managing care, or they may be stinting on needed care.  Having 20% of children essentially get no care is alarming, particularly since it indicates that many preventive and well-care services are being missed.  That can cause more spending later.  It is likely that home environment factors are responsible for much of this missed care, along with the difficulty of finding providers in low-income areas.

Overall, it is unclear if the opportunity to better manage care among the high-spending decile would exceed the costs of delivering appropriate care to the lower-spending groups.  That is a general problem with projections of overall savings by better managing the care of expensive patients–there is a lot of needed care that is not being delivered to other populations.  If everyone was getting appropriate care, overall savings might not result.

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