Consumer Directed Healthcare Rescues Medicaid

Lisa M. Holland, RN, MBA and Gregory J. Hummer, MD

Apr 1, 2011

Consumer Directed Healthcare Rescues Medicaid

It is impossible to pick up a newspaper or log on to Google without reading about how many States are struggling to meet their budgets. Not surprisingly their State dollars are being consumed by healthcare costs and their representative Medicaid programs. States like California and New York must contemplate major healthcare decisions in order to slice their budgets and maintain State integrity. Many States are seeking interventions and attempting to develop innovative ideas to address the chronically ill components of their Medicaid programs when in fact, they should be addressing the acutely ill services which constitutes anywhere from 50-60% of the Medicaid healthcare spend. The reduction in the use of inappropriate acute care services holds the most immediate cost saving potential and could save State Medicaid programs billions of dollars in healthcare cost which could then be shifted to other Medicaid programs (i.e. nursing home programs), thus offsetting the escalating costs for caring for the chronically ill recipient. In the meantime, the recipients who have been misusing and/or inappropriately accessing the acute care services will be educated and informed about how to engage responsibly in the healthcare system. They will begin to improve or maintain their current health status and access quality care. The solution is simple, consumerism—an effective and efficient health benefit design that has been proven to reduce healthcare spend and actually change individual health behaviors by as much as 25%. In addition to healthcare savings, individuals learn how being healthy will actually save money and translate into personal wealth—money that can be used to pay for their medical care and retirement.

Medicaid is a State and Federal Government funded healthcare program that supports lower income families, children as well as disabled individuals and individuals in long-term care facilities (i.e. nursing homes).Medicaid systems do not empower individual users of the system to be accountable or responsible for the personal well-being, and thus inappropriate utilization of acute healthcare services continues to eat away at state and federal budgets which fund these programs. The Medicaid system is flawed because it lacks the following mechanisms that will ultimately control costs:

  • No incentives to drive personal well- being (Healthcare accountability and responsibility)
  • Lacks rewards for wellness behaviors
  • Lack of technology to reduce/eliminate administrative burdens
  • Does not drive engagement in preventive care services
  • Highly bureaucratic and administrative burden (unattractive to most providers)
  • Limited Provider access related to low reimbursements
  • Lacks educational tools/resources to reduce/eliminate dependency
  • Lacks fraud controls resulting in an estimated 9-10% of State budget per year resulting in billions of dollars in fraud.

The typical Medicaid “consumer” has learned to depend on the system to determine their medical course of action for themselves and their families with little regard for what is appropriate in terms of individual health needs. While we want these individuals to have access to quality care, we also want these individuals to understand their involvement in their personal care and that they have a responsibility to make appropriate healthcare choices that make the most sense and tha are cost effective and are evidence-based. 

The average Medicaid encounter from acute care service generally accounts for about 50-60% of Medicaid funds. For instance, in the State of California $18 billion dollars of State funds alone are spent on acute care services.  Lastly, the FBI estimates that about 9-10% of the money being spent on Medicaid is fraudulent and is unnecessary.

The Medicaid system is archaic and needs to be transformed into a program that educates and empowers the recipients’ of acute care services to become accountable and responsibly engage in the healthcare system to become long-term conscientious healthcare consumers . Through accountability and responsibility, the real acute care medical needs of families and children can be achieved, utilizing Medicaid funds more effectively and efficiently. Additionally, recipients are rewarded for responsible health behaviors resulting in an increase in preventive care services and lifestyle choices that promote optimal health and well- being. 

A Medicaid consumerism program is an innovative and bold move that will address the current misuse of the Medicaid acute care system. By  readdressing the way the acute care payments are deployed to recipients in such a way as to use an innovative point-of-service payment system that uses the Internet in conjunction with a consumer oriented approach and plan design that serves to build wealth for a portion of each State’s current Medicaid recipients.  A  Consumer Driven Healthcare Plan with a Health Savings Account will accomplish the following:

  • Greatly reduce fraud by at least 3% per state per year
  • Continue to reduce fraud by another 6-7% for ongoing programs
  • Introduce a Medicaid consumerism reward model that provides incentives to recipients for engagement in preventive services
  • Reward adoption of healthy lifestyles that promote and sustain well-being
  • Enable recipients to save real dollars to be used for current medical costs and for retirement
  • Eliminate unnecessary claims administrative cost burdens
  • Introduce rapid payment to providers while eliminating their cost of billing and collection
  • Enable improved choice and greater access to more providers due to a simple rapid payment system.

A consumer directed healthcare plan that uses a sophisticated technology system will accomplish the proposed elements. In addition, the system can adjudicate, clinically edit and re-price a medical claim at the point-of-service. The software system uses the Internet and has the following core attributes:

  • Internet based
  • Easily accessed  via a secure web browser
  • System uses standard 128 SSL encryption for all transactions
  • Ability to provide  real time eligibility data
  • Real-time online photo identification of recipient (anti-fraud)
  • Enables PIN security for both recipient and provider
  • Enables bill entry within 45 seconds
  • Display the price to be paid to recipients and provider
  • Require sign off by recipient or guardian
  • Adjudicate all line items to the health plan coverage
  • Apply instantly most all CMS, CPT or special edits to bills
  • Re-price each line item to a fee schedule  OR
  • Offer a reduced amount for rapid payment direct to provider bank account
  • Enables the complete integration of banking with the claims system
  • Enables payments from a recipients HSA t to the provider by ACH
  • Enables the recipient to view detail of their HSA
  • Enables the recipient to view a graphic image of the balance over time
  • Provides an account with no banking fees
  • Provides an account with an interest rate of 1.2% regardless of balance
  • Enables the recipient to review their claims online
  • Enables the recipient to communicate online to their health coach or MCM
  • Enables the recipient to communicate online to the provider
  • Provides consumerism tools for cost comparison
  • Provides automatic screening test reminders and rewards engagement in preventive services
  • Provides an online method to request a medical case management plan
  • Ability to search for a provider accepting the plan
  • Enables direct ACH payment to providers for a better discount
  • Provide an “Advance Account” – a Government fund to help pay the balance of any short fall within the recipient’s HSA account for services rendered
  • Enables aggregation of funds for payment from recipient HSA and Advance account for payment by ACH to provider

A radical move must occur within the Medicaid system if recipients of this government funded program wish to continue their access to subsidized healthcare.  It is no longer acceptable, nor palatable, that these recipients continue to be dependent upon the government to fund their inappropriate acute care services. A cultural shift that provides solid healthcare education which supports an informed and accountable healthcare consumer is now required in order to save the Medicaid program.

Healthcare consumerism can be achieved at any level. We are in an age of information and technology and everyone has access to the internet. Accountable and responsible healthcare consumers are more likely to engage in healthier lifestyle, use self-care techniques, use generic drugs and consider all aspects of care (quality, access and cost) before appropriately engaging in the healthcare delivery system.

A Consumer Directed Health Plan with a Health Savings Account will support healthcare affordability by design. It will use the power of the internet to eliminate the complexities of administration, point-of-service payment to engage the physician and health saving accounts that will empower recipients to be in control over their personal health spending; in a responsible manner that will equate to personal wealth and savings for the future. This structure does not currently exist in the Medicaid model today.

Medicaid is bound in a history of entitlement and cost burden. As healthcare and healthcare spending continue to spiral out of control and States are being forced to consider slashing healthcare dollars for chronically ill programs, it is time that Medicaid takes a bold and daring move to foster individuals within the Medicaid system to understand that personal health and wealth can be achieved through healthcare accountability and responsibility. Consumerism has proven its value within the private sector and has demonstrated 15-17% in medical savings alone. These same savings can be used to save Medicaid.

Consumerism must be embraced by State and Federal funded programs now in order to continue to provide services today for the chronically ill who are beyond prevention and rehabilitation. State Medicaid programs will save billions or more a year while improving the health and well-being of Medicaid recipients who misuse and/or inappropriately access the acute care service system. Medicaid consumerism fosters healthcare responsibility and accountability that will lead the way for individual long-term health and at the same time provide a savings mechanism that will allow continued funding for programs that address the chronically ill.

About Simplicity Health Plans

Cleveland, Ohio - Simplicity Health Plans is the best implementation of a CDHP/HSA. It aligns the interests of the Employer, Employee and the Provider to provide a turn-key, fully integrated Consumer Directed Health Plan. It also delivers a low cost, scalable solution to control claim costs. The Plan fuses unparalleled technology, point of service adjudication, real-time data, and first of its kind anti-fraud controls. Services include an ERISA compliant health plan, HAS administration and banking, medical claims administration, TPA functions, pharmacy, dental & vision, COBRA, stop loss reinsurance, real-time Utilization Review and Case Management, Health Coaching, Comparison Shopper, Health & Wellness programs, and a host of on-line tools for Providers, Employers and Members.

About the Authors

Lisa M. Holland, RN, MBA has been in the healthcare care industry for over 18 years and held senior level positions within major healthcare organization in the US. Lisa is an accomplished business development professional. Lisa’s professional objective is to promote appropriate utilization of healthcare services/solutions that empower healthcare consumerism.

Gregory J. Hummer, M.D., has spent the last 18 years developing and perfecting Simplicity Health Plans to solve the vexing complexities, out-of-control costs, burdens and inefficiencies that are associated with healthcare coverage in America today. Dr. Hummer is chairman and CEO of Simplicity Health Plans.

To learn more about Simplicity Health Plans, contact Lisa Holland at 401.487.1450