[House Hearing, 108 Congress]
[From the U.S. Government Publishing Office]



  EVALUATING COORDINATION OF CARE IN MEDICAID: IMPROVING QUALITY AND 
                           CLINICAL OUTCOMES

=======================================================================

                                HEARING

                               before the

                         SUBCOMMITTEE ON HEALTH

                                 of the

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED EIGHTH CONGRESS

                             FIRST SESSION

                               __________

                            OCTOBER 15, 2003

                               __________

                           Serial No. 108-57

                               __________

       Printed for the use of the Committee on Energy and Commerce


 Available via the World Wide Web: http://www.access.gpo.gov/congress/
                                 house


                               __________

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                            WASHINGTON : 2003
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                    COMMITTEE ON ENERGY AND COMMERCE

               W.J. ``BILLY'' TAUZIN, Louisiana, Chairman

MICHAEL BILIRAKIS, Florida           JOHN D. DINGELL, Michigan
JOE BARTON, Texas                      Ranking Member
FRED UPTON, Michigan                 HENRY A. WAXMAN, California
CLIFF STEARNS, Florida               EDWARD J. MARKEY, Massachusetts
PAUL E. GILLMOR, Ohio                RALPH M. HALL, Texas
JAMES C. GREENWOOD, Pennsylvania     RICK BOUCHER, Virginia
CHRISTOPHER COX, California          EDOLPHUS TOWNS, New York
NATHAN DEAL, Georgia                 FRANK PALLONE, Jr., New Jersey
RICHARD BURR, North Carolina         SHERROD BROWN, Ohio
  Vice Chairman                      BART GORDON, Tennessee
ED WHITFIELD, Kentucky               PETER DEUTSCH, Florida
CHARLIE NORWOOD, Georgia             BOBBY L. RUSH, Illinois
BARBARA CUBIN, Wyoming               ANNA G. ESHOO, California
JOHN SHIMKUS, Illinois               BART STUPAK, Michigan
HEATHER WILSON, New Mexico           ELIOT L. ENGEL, New York
JOHN B. SHADEGG, Arizona             ALBERT R. WYNN, Maryland
CHARLES W. ``CHIP'' PICKERING,       GENE GREEN, Texas
Mississippi                          KAREN McCARTHY, Missouri
VITO FOSSELLA, New York              TED STRICKLAND, Ohio
ROY BLUNT, Missouri                  DIANA DeGETTE, Colorado
STEVE BUYER, Indiana                 LOIS CAPPS, California
GEORGE RADANOVICH, California        MICHAEL F. DOYLE, Pennsylvania
CHARLES F. BASS, New Hampshire       CHRISTOPHER JOHN, Louisiana
JOSEPH R. PITTS, Pennsylvania        JIM DAVIS, Florida
MARY BONO, California                THOMAS H. ALLEN, Maine
GREG WALDEN, Oregon                  JANICE D. SCHAKOWSKY, Illinois
LEE TERRY, Nebraska                  HILDA L. SOLIS, California
ERNIE FLETCHER, Kentucky
MIKE FERGUSON, New Jersey
MIKE ROGERS, Michigan
DARRELL E. ISSA, California
C.L. ``BUTCH'' OTTER, Idaho

                   Dan R. Brouillette, Staff Director

                   James D. Barnette, General Counsel

      Reid P.F. Stuntz, Minority Staff Director and Chief Counsel

                                 ______

                         Subcommittee on Health

                  MICHAEL BILIRAKIS, Florida, Chairman

JOE BARTON, Texas                    SHERROD BROWN, Ohio
FRED UPTON, Michigan                   Ranking Member
JAMES C. GREENWOOD, Pennsylvania     HENRY A. WAXMAN, California
NATHAN DEAL, Georgia                 RALPH M. HALL, Texas
RICHARD BURR, North Carolina         EDOLPHUS TOWNS, New York
ED WHITFIELD, Kentucky               FRANK PALLONE, Jr., New Jersey
CHARLIE NORWOOD, Georgia             ANNA G. ESHOO, California
  Vice Chairman                      BART STUPAK, Michigan
BARBARA CUBIN, Wyoming               ELIOT L. ENGEL, New York
HEATHER WILSON, New Mexico           GENE GREEN, Texas
JOHN B. SHADEGG, Arizona             TED STRICKLAND, Ohio
CHARLES W. ``CHIP'' PICKERING,       LOIS CAPPS, California
Mississippi                          BART GORDON, Tennessee
STEVE BUYER, Indiana                 DIANA DeGETTE, Colorado
JOSEPH R. PITTS, Pennsylvania        CHRISTOPHER JOHN, Louisiana
ERNIE FLETCHER, Kentucky             JOHN D. DINGELL, Michigan,
MIKE FERGUSON, New Jersey              (Ex Officio)
MIKE ROGERS, Michigan
W.J. ``BILLY'' TAUZIN, Louisiana
  (Ex Officio)

                                  (ii)




                            C O N T E N T S

                               __________
                                                                   Page

Testimony of:
    Bella, Melanie M., Assistant Secretary, Office of Medicaid 
      Policy and Planning, State of Indiana......................    33
    Hilferty, Daniel J., President and CEO, Keystone Mercy Health 
      Plan of Philadelphia, on behalf of the American Association 
      of Health Plans............................................    18
    Medows, Rhonda, Secretary, Florida Agency for Health Care 
      Administration.............................................    24
    Selecky, Christobel E., Chief Executive Officer, Lifemasters 
      Support Selfcare, Inc., on behalf of the Disease Management 
      Association of America.....................................     7
    Simms, Jeffrey, Assistant Director, North Carolina Division 
      of Medical Assistance......................................    29
Material submitted for the record by:
    American Dental Association, prepared statement of...........    53
    McAndrews, Lawrence A., President and CEO, National 
      Association of Children's Hospitals, prepared statement of.    55
    Medows, Rhonda, Secretary, Florida Agency for Health Care 
      Administration, follow-up to written testimony.............    67
    National Association of Chain Drug Stores, prepared statement 
      of.........................................................    57
    National Association of Community Health Centers, prepared 
      statement of...............................................    59
    Wadhwa, Sandeep, Vice President, Medical Management Services, 
      McKesson Health Solutions, McKesson Corporation, prepared 
      statement of...............................................    64

                                 (iii)

  

 
  EVALUATING COORDINATION OF CARE IN MEDICAID: IMPROVING QUALITY AND 
                           CLINICAL OUTCOMES

                              ----------                              


                      WEDNESDAY, OCTOBER 15, 2003

                  House of Representatives,
                  Committee on Energy and Commerce,
                                    Subcommittee on Health,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 10 a.m., in 
room 2123, Rayburn House Office Building, Hon. Michael 
Bilirakis (chairman) presiding.
    Members present: Representatives Bilirakis, Wilson, Brown, 
and Green.
    Staff present: Patrick Morrisey, deputy staff director, 
Chuck Clapton, majority counsel: Jeremy Allen, health policy 
coordinator; Eugenia Edwards, legislative clerk; David Nelson, 
minority counsel; Bridgett Taylor, minority professional staff 
member; Purvee Kempf, minority professional staff member; and 
Jessica McNiece, minority staff assistant.
    Mr. Bilirakis. Good morning. I call this hearing of the 
Health Subcommittee to order. If you are wondering what we were 
just discussing up here, the very significant issue of the Cubs 
game last night, and to the couple of young people there who 
tried to catch that foul ball and probably will be ostracized 
the rest of their lives from Chicago. I would have to move if I 
lived there.
    Anyhow, I would like to thank our witness for taking the 
time to join us and provide their perspectives of strategies 
for improving the health of Medicaid patients to enhance care 
and coordination activities.
    As I pointed out during last week's subcommittee hearing on 
challenges facing the Medicaid program in the 21st century, a 
comprehensive review of Medicaid should reveal a number of 
opportunities underlined for improving this program. In my 
opinion, learning more about the innovative strategies States 
are adopting to improve patient care is one of those 
opportunities. I feel that this is an especially critical area, 
because as we discussed last week, Medicaid payments for 
elderly, blind, and disabled beneficiaries who represent 27 
percent of the total Medicaid population account for 73 percent 
of total payments.
    Obviously, these beneficiaries who are more likely to 
suffer from one or more chronic illnesses have the most to gain 
from effective coordination of care programs. Additionally, the 
Medicaid program itself could realize substantial savings as 
well. As we will discuss today, States have used a number of 
different strategies, most notably disease management to meet 
this goal. My own State of Florida, for example, has partnered 
with several entities to better manage the chronic conditions 
that we know make up such a large part of Medicare spending--of 
Medicaid spending, and I am pleased that Dr. Rhonda Medows, the 
Secretary of Florida's Agency for Health Care Administration, 
was able to join us this morning.
    Welcome, Doctor, and I know that we are all looking forward 
to hearing more about Florida successes. Many States are also 
beginning to enroll more of their Medicaid beneficiaries in 
managed care plans. There is evidence that beneficiary outcomes 
are improving under the managed care model which emphasizes 
coordinating care, preventive benefits, disease management 
services for chronically ill patients and improving patient 
outcomes. We will find out from you hopefully whether that is 
the case.
    And finally today, we will explore what kind of programs 
States have adopted through their traditional fee-for-service 
structure to help improve patient outcomes. Primary care, case 
management programs have been implemented in a number of 
States. We have a couple of State representatives with us today 
to talk a little more about their ideas and how they have 
worked at the State level. It is my hope that this survey of 
coordination of care programs will help members of the 
subcommittee learn more about what types of care coordination 
strategies work best and how we can apply these lessons as we 
continue to think about how we can get the most out of our 
Federal investment and Medicaid.
    I would like to, again, thank all of our witnesses for 
joining us today, and we all look forward to your testimony and 
am pleased now to yield to my friend from Ohio now, Mr. Brown, 
for an opening statement.
    Mr. Brown. Thank you, Mr. Chairman.
    Thank you all, to all the witnesses who are joining us this 
morning. I would like to start by commending Ms. Wilson, my 
friend from New Mexico who has worked on behalf of the 
committee to determine whether there are ways to maximize our 
return from investment on Medicaid and especially appreciate 
the work she has done.
    To the extent that we can use information and coordination 
and outreach to reduce the burden of disease we enhance 
Medicaid's role in the public health system and potentially 
squeeze more value out of the dollars we invest. It makes sense 
to pursue these goals.
    Looking at my own State of Ohio, disease management is one 
of several tools the State's Medicaid program is using to 
improve health and health care in that State; for example, 
Medicaid--Ohio Medicaid--has initiated a large physician 
profiling demonstration to learn more about variations in 
clinical practice and make use of that information to refine 
clinical outcomes.
    Ohio's Medicaid's also working with the public health and 
provider community to make sure children receive age-
appropriate immunizations and increase the number of high risk 
children who receive screening for lead poisoning.
    Ohio has also initiated several demonstration projects 
aimed at improving the quality and cost effectiveness of care 
for the aged, the aged, the blind, and disabled.
    Public health outreach, disease management, and other tools 
would be worthwhile, even if they didn't save money, but there 
is every reason to believe that they can and they will, but I 
have reservations about relying on Medicaid HMO's and private 
disease management companies as a primary vehicle for 
integrating coordination of care into Medicaid. Effective 
disease management, like effective health care, hinges on 
continuity. HMO's undoubtedly do some things well but providing 
continuity of care is not one of them.
    Some 2.4 million senior and disabled Americans have been 
dumped from Medicare+Choice HMO's over the last 4 years. It 
would be difficult to find a population more in need of care 
coordination of continuity of care than Medicaid beneficiaries, 
but disappearing coverage and disease management just simply do 
not mix very well.
    Over the last 4 years, three Ohio HMO's, for instance, 
contracting with the Medicaid program, were shut down by the 
Department of Insurance, leaving both beneficiaries and 
providers in the lurch. To put those three failures into 
context, there were currently six HMO's currently serving 
Medicaid patients in my State. Three HMO failures is not a 
minor problem. Medicaid and pullouts are certainly not unique 
to Ohio, so continuity of care is an issue everywhere.
    I also question whether we are actually setting the stage 
for increased spending by paying private plans, whether they 
are private HMO's or private disease management companies to do 
what the Medicaid program itself could do.
    To return to Medicaid plus Medicare+Choice, for example for 
a moment, Medicare was supposed to save the program money. No 
such luck.
    Medicare+Choice plans have managed to inflate Federal 
spending while deserting beneficiaries left and right. You 
cannot begrudge HMO's their desire to maximize profits but you 
can prevent them from earning those profits at the expense of 
Medicare and the expense of Medicaid beneficiaries and American 
taxpayers. That is not to say that partnering with private 
companies is always a bad idea. It is just to say that 
privatization is not invariably a good idea.
    In the case of Medicare and Medicaid, if we overestimate 
the ability of these companies to achieve efficiencies and 
underestimate the length to come, they will go to maximize 
profits. We will have no one but ourselves to blame when 
disease management savings simply fail to materialize.
    In the case of Medicare+Choice HMO's, we not only 
overestimated their ability to achieve efficiencies, we allow 
these plans to compromise core principles, like universality, 
continuity, reliability. All this and higher Medicare 
expenditures too, not exactly a bargain for beneficiaries or 
for taxpayers.
    When its profitability versus the public good, 
profitability is going to win out, and when the choice is to 
return the maximum number of dollars to State Medicaid programs 
or return the maximum number of dollars to shareholders, the 
shareholders are going to win in a private system.
    We should consider all reasonable options when it comes to 
making the most of the dollars we spend on Medicaid, but if 
history is any guide, we should be aware of private sector 
solutions that promises big gains at a small cost. As a woman 
once wiser than I said, the nice thing about hitting your head 
against the wall is it feels really good when you stop.
    Thank you.
    Mr. Bilirakis. The Chair thanks the gentleman, and I 
appreciate Mr. Brown commenting on the work, task force work, 
that Mrs. Wilson is undergoing on this issue, and I certainly 
join in that accolade, and I will recognize her for an opening 
statement.
    Mrs. Wilson. Thank you, Mr. Chairman, and thank you for 
holding this hearing today. It is the third in a series that 
your subcommittee has held on Medicaid and ways that we can--I 
hope it lays the foundation for looking at ways that we can 
improve Medicaid for the people who depend upon it most.
    In the first hearing that we had, we talked about consumer-
directed care, and the reality is under Medicaid, beneficiaries 
have far fewer choices than most of the rest of us who have 
health insurance provided by employers or private health 
insurance. In giving people choices and the ability and the 
knowledge to be able to manage their own care improves 
satisfaction and improves people's health.
    We also heard last week in testimony that Medicaid doesn't 
do a very good job of collecting data on whether people's 
health improves or not. Seems, though, we have all kinds of 
information on how much money we spend, but almost no 
information on whether anybody's life is better because we 
spent it.
    We lack the evidence to show what we can do to improve 
people's health, and the reality is that Medicaid was really 
set up for acute care. It was set up to pay claims and not to 
prevent disease or to improve the quality of people's health 
who have disease. It doesn't reward physicians for coordinating 
care for people with chronic illness.
    There are some States, about 21 of them, where beginning to 
experiment with ways to manage chronic disease, because chronic 
diseases represent about 60 percent of the cost of health care 
in this country. Diseases like diabetes, heart disease, asthma 
among children, depression and cancer, drive up health care 
costs, and if we can manage those diseases to improve the 
quality of health for those who are facing those diseases, we 
will be much better off and much healthier as a country. But 
Medicaid doesn't--is not set up to address those problems. It 
shouldn't require a waiver from the rules to do what is right 
in the first place, and we need to change Medicaid so that it 
is not about following the payment slip and it is about 
improving the health of those who depend upon it.
    There are some tools we are going to hear about today that 
I think are interesting and exciting, some States that decided 
they were going to break the mold and ask for a waiver and beg 
CMS to approve all of their paperwork, so that you can do some 
innovative things to improve the health of the people who 
depend on Medicaid. I am looking forward to hearing about the 
results that you are seeing, but you shouldn't be the 
exception. You should be the rule, and you shouldn't have to 
say, ``Mother, may I,'' to get there.
    I am particularly pleased to welcome Chris Selecky from the 
LifeMasters here today. LifeMasters does some good work in the 
State of New Mexico, and I look forward to hearing your 
testimony and the testimony of all the witnesses we have here 
today.
    Thank you Mr. Chairman.
    Mr. Bilirakis. I thank the gentlelady.
    Mr. Green for an opening statement.
    Mr. Green. Thank you, Mr. Chairman, and like my colleague, 
I appreciate you holding these continued hearings on the 
Medicare program, but particularly today with the care 
coordination.It is an important issue, and I am glad we have 
the opportunity to learn more about it.
    Approximately 125 million Americans live with some form of 
chronic disease, the most costly and preventable of all health 
problems. According to the CDC, chronic diseases account for 75 
percent of the $1 trillion spent on health care each year in 
our country. They have an impact on almost every American 
family for the premature death, long-term illness and 
disability, loss of income and costly out-of-pocket expenses.
    Chronic diseases are among the most prevalent costly and 
preventable of health problems. By the year 2020, health care 
expenditures for the chronic disease will actually reach $1 
trillion, or 80 percent of health care costs. This is 
especially problematic in the Medicaid program, as 30 percent 
of Medicaid population suffers from these chronic diseases, 
such as diabetes, hypertension, chronic obstructive pulmonary 
disease, or cardiovascular disease.
    The cost of treating chronic diseases account for 80 
percent of the total Medicaid expenditures. Because Medicaid 
patients often lack a primary care physician or rely on 
emergency room for the treatment of these diseases, these 
patients often lack access to the kind of preventative measures 
that can help better control their chronic diseases, so 
investigating ways to improve chronic disease management is 
such an important topic, care coordination, disease management, 
and primary case management and other programs have all sought 
to improve outcomes for individuals as chronic diseases 
throughout the same time reduces the cost in the program.
    These programs aspire to improve day-to-day care for 
conditions like diabetes and asthma, so that we can reduce the 
number of hospital visits and acute episodes that often come 
with these diseases are untreated. These programs not only make 
financial sense but they also improve quality of life for the 
beneficiaries who rely on them to improve their health.
    I would much rather spend money preventing kidney failure 
than have countless individuals with diabetes go on dialysis 
each year, and I see that in my own district, but like every 
other issue this committee considers, there is a disagreement 
over different groups about how best to provide these services. 
Some feel strongly that the private sector models are the best 
route.
    I would argue that the savings generated by real disease 
management should be reinvested in the program, rather than 
used to pay a percentage of corporate profits, and I think 
these are fair questions and States are suffering some of their 
worst budgeted crises in years, and Medicare dollars are 
scarce. And again, I know from my own experience in Texas we 
are having problems not only with Medicaid scarce dollars, but 
also with our children's health care, where we lost almost 
200,000 children for the budget shortfalls.
    We should certainly do all we can to ensure that our 
limited dollars are wisely spent, and Mr. Chairman, I look 
forward to the testimony of our witnesses and I yield back my 
time.
    Mr. Bilirakis. I thank the gentleman.
    [Additional statement submitted for the record follows:]

 Prepared Statement of Hon. W.J. ``Billy'' Tauzin, Chairman, Committee 
                         on Energy and Commerce

    Thank you, Chairman Bilirakis, for holding this important hearing 
today. I also want to thank all of our witnesses for their testimony, 
which will provide valuable perspectives on current efforts to better 
coordinate care for Medicaid beneficiaries.
    As we heard in last week's hearing, Medicaid is a critically 
important program that provides health care services for the poorest 
and sickest Americans. However, Medicaid also faces a number of 
challenges--including the perverse incentives it provides for states to 
improperly obtain additional federal funding and how restrictive 
federal statutory mandates limit states' ability to best address 
beneficiary needs with flexible benefit packages.
    The need to better coordinate care is another challenge that 
confronts the Medicaid program. While this challenge is not unique to 
Medicaid, it is particularly relevant to the program, given the large 
number of chronically ill patients who are Medicaid beneficiaries. 
Traditional fee-for-service Medicaid programs have been singularly 
ineffective in managing the health care needs of these patients. This 
has contributed to rapidly increasing health care costs and 
unsatisfactory clinical outcomes.
    Clinical data shows just how poorly traditional Medicaid does at 
treating many beneficiaries with chronic conditions. For example, data 
from one large Florida hospital revealed that 90 percent of Medicaid 
patients with diabetic symptoms were admitted through the emergency 
room. This is deeply disturbing--diabetes is an eminently manageable 
disease, which can be controlled through a regimen of physician 
monitoring, diet, exercise and regular testing of blood insulin. It is 
unacceptable that, in some cases, 90 percent of diabetic Medicaid 
patients are seeking hospital admissions through the emergency room, 
rather than obtaining their treatments under the direction and care of 
a primary care physician.
    Unfortunately, this situation is not limited to the treatment of 
diabetes. The same hospital I referenced earlier also reported 
similarly high emergency room admission rates for Medicaid patients 
with hypertension and congestive heart failure. Medicaid's failure to 
adequately coordinate the care of these patients leads to increased 
utilization of expensive inpatient hospital services, increased costs 
for the program, and worse clinical outcomes for patients.
     These types of failures have prompted several states to 
affirmatively act to better coordinate Medicaid beneficiaries' care. 
These efforts have included contracting with disease management 
organizations, managed care plans and a variety of other innovative 
state-sponsored initiatives to promote improved clinical outcomes. All 
of these programs share several characteristics--including an emphasis 
on better coordination of medical services and pharmaceutical benefits, 
increased patient education, and efforts to ensure greater adherence to 
clinical treatment guidelines.
    States using these programs have experienced some dramatic 
successes, including significant reductions in the number of necessary 
hospitalizations and emergency room visits. In addition, managed care 
initiatives have produced significant program savings by reducing the 
amounts spent on pharmaceuticals, durable medical equipment and certain 
acute care services.
    We can learn from some of these successes, as we consider ideas to 
reform Medicaid. While the coordination of care for Medicaid 
beneficiaries creates significant opportunities to improve patients' 
quality of care, it also raises significant concerns. To date, efforts 
to implement effective coordination of care initiatives have been 
hampered by a lack of adequate performance measures and analysis of 
clinical outcomes that can demonstrate whether these programs deliver 
the benefits they promised. Several recent reports have criticized the 
overall cost-effectiveness of certain coordination of care programs. 
Moreover, some efforts that have been described as coordination of care 
reforms, instead have simply replicated existing flawed Medicaid 
structures.
    I believe we owe it to Medicaid's beneficiaries to provide them 
with better care. Improved coordination of care holds the potential to 
produce significant Medicaid savings, but more importantly, to also 
dramatically increase the quality of care that beneficiaries receive. I 
look forward to hearing the testimony of the witnesses, who will 
hopefully help us identify how we can achieve these important goals.

    Mr. Bilirakis. We will go right into the panel. Your 
written statements are part of the record and I hope what you 
would do would be to supplement those statements. We will set 
the clock for 5 minutes for each of you.
    Obviously, if you are on a roll and 5 minutes is up, I am 
certainly not going to cut you off, but we would appreciate if 
you could stay as close to it as you can, because we will be 
asking questions, and you will have an opportunity to 
supplement some of your statements that way.
    The panel consists of Ms. Chris Selecky, the chief 
executive officer of LifeMasters Support SelfCare, Inc. She is 
testifying on behalf of the Disease Management Association of 
America; Mr. Dan Hilferty, president and CEO of the Keystone 
Mercy Health Plan of Philadelphia, testifying on behalf of the 
American Association of Health Plans; Dr. Rhonda Medows, 
Secretary of the Florida Agency for Health Care Administration, 
Tallahassee, Florida, testifying on behalf of the State of 
Florida; Mr. Jeffrey Simms, assistant director of North 
Carolina Division of Medical Assistance, testifying on behalf 
of North Carolina, so to speak; and Ms. Melanie Bella, 
Assistant Secretary, Office of Medicaid Policy and Planning, on 
behalf of Indiana.
    Welcome, again.
    Thank you so very much for taking time to be up here, and 
we will start off with Ms. Selecky.
    Please proceed.

 STATEMENTS OF CHRISTOBEL E. SELECKY, CHIEF EXECUTIVE OFFICER, 
 LIFEMASTERS SUPPORT SELFCARE, INC., ON BEHALF OF THE DISEASE 
    MANAGEMENT ASSOCIATION OF AMERICA; DANIEL J. HILFERTY, 
PRESIDENT AND CEO, KEYSTONE MERCY HEALTH PLAN OF PHILADELPHIA, 
 ON BEHALF OF THE AMERICAN ASSOCIATION OF HEALTH PLANS; RHONDA 
       MEDOWS, SECRETARY, FLORIDA AGENCY FOR HEALTH CARE 
 ADMINISTRATION, ON BEHALF OF STATE OF FLORIDA; JEFFREY SIMMS, 
    ASSISTANT DIRECTOR, NORTH CAROLINA DIVISION OF MEDICAL 
 ASSISTANCE; AND MELANIE M. BELLA, ASSISTANT SECRETARY, OFFICE 
       OF MEDICAID POLICY AND PLANNING, STATE OF INDIANA

    Ms. Selecky. Good morning.
    Thank you, Mr. Chairman and Representative Wilson, for 
inviting me to speak before the committee today.
    My name is Christobel Selecky, and I am the-president elect 
of the Disease Management Association of America, which is a 
non-profit interdisciplinary association dedicated to the 
advancement of health improvement for people with chronic 
conditions.
    I am also the CEO of LifeMasters Supported SelfCare, a 
privately held disease management organization that provides 
coaching, education, and support to more than 300,000 people 
nationwide.
    We are fully accredited by the National Committee for 
Quality Assurance to provide disease management services to 
people with asthma, congestive heart failure, coronary artery 
disease, COPD, and diabetes, and manage the other conditions 
that go along with these diseases like depression and high 
blood pressure.
    Our company was founded by a physician, almost 10 years 
ago, for the sole purpose of providing disease management 
services. We have provided these services to thousands of 
Medicaid beneficiaries for several years and currently work 
with several thousands of beneficiaries in Florida and New 
Mexico.
    We were one of the first disease management organizations 
to be selected by Florida to provide services to their fee-for-
service beneficiaries and we are pleased to be continuing with 
that relationship.
    In the first 2 years of that program, we were able to 
provide the State almost $4.5 million in real bottom line cost 
savings on an average population of just 2,500 beneficiaries 
with congestive heart failures. This represented a 5.6 percent 
net reduction in health care costs. These savings were the 
result of significant reductions in health care service 
utilization; for example, emergency hospitalizations went down 
by almost 40 percent.
    In addition, beneficiaries received increased levels of 
evidence based care from their physicians, such as the 78 
percent increase in annual cholesterol screenings. These 
programs work equally well in fee-for-service and managed care 
plans. In New Mexico, nurses in our Albuquerque call center 
provide our program to Medicaid beneficiaries with diabetes and 
coronary artery disease who are members of the Presbyterian 
health plan.
    Disease management is one of those very rare win-win 
opportunities in health care, in which the beneficiaries win 
because they get a better quality of life. The physicians win 
because they have the opportunity to manage their patients more 
efficiently and the patients win because utilization and health 
care costs are reduced. The beneficiaries we serve often have 
multiple conditions, are taking several prescription drugs, see 
many different physicians, and often experience complications 
leading to expensive emergency hospitalizations. These 
complications are caused by things like drug interactions, the 
impact of lifestyle choices or the failure to correctly follow 
the treatment plan prescribed by the physician.
    Medicaid beneficiaries face additional challenges, such as 
low levels of literacy, language barriers, frequent changes in 
eligibility, problems with gaining access to primary care, 
transients and other life issues making health care a secondary 
concern and higher levels of mental-health issues than the 
general population. Disease management programs identify and 
work proactively with people to educate and support them in 
making necessary lifestyle and behavior changes, to monitor 
their condition in between office visits and to alert their 
physicians to any changes in their patient's condition.
    In Medicaid population, disease management organizations 
have learned to make special efforts, such as finding 
beneficiaries a medical home, coordinating transportation, 
providing home assessments and training, adapting programs to 
assess language, literacy and cultural issues and coordinating 
with local mental health and social-service resources.
    It has been our experience in several States that Medicaid 
beneficiaries are hungry for the support and enhanced access to 
care that disease management programs provide, and that they 
participate in these programs at equal or higher levels than 
our commercial populations.
    It is critical that our country begin to address the needs 
of our chronically ill Medicaid beneficiaries, now. In spite of 
best efforts, the Medicaid fee-for-service program is not set 
up to facilitate the program of optimal care for beneficiaries. 
We believe the solution is to integrate fully integrated fully 
accredited disease management programs into fee-for-service and 
manage Medicaid according to the following principles. There 
should be no discrimination against beneficiaries who currently 
lack access to the benefits of disease management. These 
programs should be made available to all Medicaid and duly 
eligible beneficiaries, regardless of whether they were in 
managed care or fee-for-service.
    Medicaid fee-for-service programs should consider directly 
contracting with accountable disease management organizations 
which can ramp up quickly to immediately begin delivering the 
benefits of these services on a population wide basis with 
financial arrangement that would result at a minimum budget 
neutrality.
    Results of disease management efforts should be measured 
and reported objectively, using consistent standardized 
methods, and disease management providers should be selected 
based on demonstrated and documented ability to deliver 
positive financial and quality outcomes.
    Based on the results from several States, we believe that a 
comprehensive disease management strategy could deliver cost 
savings to the Medicaid population into the billion dollars 
annually while concurrently improving access to care, quality 
of life, and health outcomes.
    I appreciate the opportunity to share my views of 
experience in disease management with you and look forward to 
trying to answer some of your questions.
    [The prepared statement of Christobel E. Selecky follows:]

 Prepared Statement of Christobel E. Selecky, President-elect, Disease 
Management Association of America, Chief Executive Officer, LifeMasters 
                        Supported SelfCare, Inc.

    The Disease Management Association of America (DMAA) is a non-
profit, voluntary membership organization, founded in March of 1999, 
which represents all aspects of the disease management community.
    Creation of the association was in response to the continued growth 
of disease management in the United States. The increasing number of 
stakeholders dependent on the ``promise'' of disease management for 
cost effective, quality healthcare in this new millennium has created a 
need for a single voice and a more scientific approach to the 
measurement of the success of disease management programs.
    DMAA has established an industry-standard definition of qualified 
DM programs and entities. The DMAA definition, established in 
consultation with primary care and specialty physicians and 
representing private practice, health plan, and institutional 
perspectives, is as follows:

 Disease management is a system of coordinated healthcare 
        interventions and communications for populations with 
        conditions in which patient self-care efforts are significant, 
        supporting the physician/patient relationship and their plan of 
        care;
 Emphasizes prevention of exacerbations and complications utilizing 
        evidence-based practice guidelines and patient empowerment 
        strategies; and
 Evaluates clinical, humanistic and economic outcomes on an ongoing 
        basis with the goal of improving overall health.
 Disease management services provided to an individual must include:
     Population identification processes;
     Evidence-based practice guidelines
     Collaborative practice models to include physician and support-
            service providers;
     Patient self-management education (e.g. primary prevention, 
            behavior modification programs, and compliance/
            surveillance);
     Process and outcomes measurement, evaluation and management, and 
            routine reporting; and
     Feedback loop (e.g. communication with patient, physician, health 
            plan, and ancillary providers and practice profiling)
    The Disease Management Organization which I am privileged to lead, 
LifeMasters ' Supported SelfCareSM, Inc., has extensive 
experience in and NCQA accreditation for providing disease management 
programs to patients with CHF, COPD, CAD, Diabetes, and Asthma and has 
demonstrated that a multi-disciplinary Disease Management program 
including patient education, interactive vital sign and symptom 
monitoring, nurse support and physician intervention can significantly 
reduce unnecessary utilization and improve quality of care. The company 
was founded by a physician in 1994 and currently provides services to 
more than 300,000 individuals nationwide through its contracts with 
healthplans, employers, and government agencies. The LifeMasters 
' service model has served as the basis for five major 
published outcomes papers.
    States are experiencing unprecedented budget deficits as a result 
of the economic recession and its resultant impact on tax revenues. 
Following more than a decade of economic expansion, state tax revenues 
are falling for the third year in a row and most states have already 
dipped into their ``rainy day'' funds to make ends meet in the previous 
2 years. This year's budget balancing promises to be the most difficult 
in recent times.
    State Medicaid agencies are having an exceptionally difficult time 
making ends meet as the result of rising health care costs and 
increasing enrollments over the past several years.
    Most states are contemplating Medicaid program reductions in the 
form of: 1. Reduced benefits; 2. Tightened eligibility requirements; 3. 
Lower health care provider rates; and 4. Moving Medicaid fee-for-
service beneficiaries to managed care.
    For most poor people, low-income children, the frail elderly, and 
the blind and disabled, Medicaid is often the only source of health 
care coverage available to them. Reducing eligibility and access to 
care for these groups may offer short-term savings by shifting costs 
from the state to the safety net providers and the community. But the 
economic hardship placed on safety net providers today, however, will 
likely have to be swallowed by the state in subsequent years. To stop 
this cycle, we must explore alternative strategies that do more than 
shift costs.
    To identify successful cost-cutting strategies for Medicaid it 
makes sense to begin with an understanding of what drives health care 
costs in this population. A report by the Centers for Disease Control 
and Prevention's Chronic Disease Center estimates that 70% of the 
nation's medical costs are attributable to the treatment of people with 
chronic disease(s). In addition, 75% of the nation's deaths result from 
complications associated with chronic disease. In a recent report in 
California, where LifeMasters is headquartered, the Legislative 
Analyst's Office (LAO) estimated that more than 25% of adult 
beneficiaries, or over 700,000 people, enrolled in Medi-Cal have at 
least one chronic condition. The greatest concentration of chronic 
disease is among the aged, blind and disabled (ABD) population where 
the California LAO estimated that 440,000 ABD beneficiaries cost the 
state $5.3 billion in 2001, an average annual cost of $12,000 per 
beneficiary. On a national basis, the elderly and disabled constitute 
25% of Medicaid beneficiaries but account for two thirds of the 
healthcare costs.
    Nationally, the direct cost of treating people with chronic 
disease(s) is estimated to be at least $510 billion this year and will 
soar to $1.07 trillion by the year 2020. Three diseases, diabetes, 
congestive heart failure (CHF) and coronary artery disease (CAD), 
account for $250 billion or more in annual direct costs, and $429.2 
billion in total costs (including lost productivity, wages, etc.). Many 
of these expenditures are related to preventable repeated 
hospitalizations and emergency room visits. During the next 30 years, 
as the U.S. population ages, the number of individuals and estimated 
cost of care for people with chronic disease is expected to grow 
dramatically. The time for the states and the federal government to 
devise proactive cost reduction and quality improvement strategies is 
now.
    Further compounding problems for states are the health care 
challenges caused by disparities of race, class, culture and ethnicity 
facing the nation's elderly and disabled poor. Barriers of education 
and language directly impact a patient's ability to access care. These 
patients may not seek care, or may rely solely on emergency room 
visits, and may be non-compliant with follow-up. These factors 
contribute to the high cost of care, and relatively poor outcomes, for 
Medicaid eligible patients. The chart displays the disproportionate 
burden of diabetes facing non-whites.
    Cardiovascular disease is a leading cause of morbidity and 
mortality for all racial and ethnic groups, but as with diabetes, non-
whites disproportionately experience all risk factors (excepting 
tobacco use) and rates of complications. Hispanics are also more likely 
to have high blood pressure and elevated cholesterol, major risk 
factors for cardiovascular disease. In addition, African Americans and 
other minorities experience death rates from diabetes and heart disease 
that are 50-100% higher than their Caucasian counterparts.
    As Congress and the states ponder solutions to this problem, we 
urge you to consider implementing an innovative approach to managing 
health called disease management (DM). DM has taken shape over the past 
several years and is showing great promise to deliver better care at 
lower cost. These results have been achieved while simultaneously 
increasing beneficiary access to care, enhancing patient satisfaction 
with their healthcare providers, and improving clinical outcomes. 
Although there is no singular solution to cure the complex problems 
facing Medicaid today, DM is one option that can immediately begin to 
reduce costs while improving health outcomes. Based on experience 
managing similar populations, it is estimated that DM could save the 
states many millions of dollars.
    Nearly 25 states have initiated disease management efforts, at 
least at a pilot project level, and eight have initiated comprehensive 
programs similar to the ones described below. Furthermore, the U. S. 
Department of Health and Human Services (HHS) and Centers for Medicare 
and Medicaid Services (CMS) have gained Congressional approval to begin 
larger scale demonstration projects with Medicare and Medicare/Medicaid 
dual eligible populations with chronic disease. Several large awards 
were made late in 2002 and several other DM demonstrations are expected 
to be awarded and implemented in 2003 and 2004.

                       DESCRIPTION OF THE PROBLEM

    When Medicaid was created in 1965 (Title XIX), the intent was to 
improve the medical care being delivered under the public assistance 
programs. Beneficiaries were expected to enter the program for a period 
of time while they needed public assistance and then move back into the 
private sector. Consequently, most Medicaid programs were originally 
rooted in the provision of acute care under a medical treatment model 
that largely ignored prevention, self-management, peer support, and 
management of complex, co-morbid conditions.
    Most people receiving public assistance, however, stay on service 
longer than expected. Coupled with advances in the pharmaceutical and 
clinical management of chronic conditions, people now have 
substantially longer life expectancies, extending the period of 
eligibility for a larger percentage of the population than was 
envisioned in 1965. This added longevity has contributed greatly to the 
steadily growing number of beneficiaries dually eligible for Medicaid 
and Medicare. The U.S. Census Bureau indicates that life expectancy 
rates have increased steadily since 1965, as follows:

------------------------------------------------------------------------
                                       Life expectancy at birth,  both
                Year                       sexes, all races (years)
------------------------------------------------------------------------
1965...............................                                70.2
1970...............................                                70.8
1975...............................                                72.6
1980...............................                                73.7
1985...............................                                74.7
1990...............................                                75.4
1995...............................                                75.8
2000 Projections...................                                76.4
2010 Projections...................                                77.4
------------------------------------------------------------------------

    As a result, chronic diseases, such as arthritis, asthma, cancer, 
chronic obstructive pulmonary disease, CHF, depression, and diabetes 
account for 60 percent of medical costs in the United States. 
Cardiovascular disease (principally high blood pressure, heart disease, 
and stroke) is the leading cause of death among both men and women and 
across all racial and ethnic groups. About 58 million Americans live 
with some form of the disease. In 1999 alone, cardiovascular disease 
cost the nation an estimated $287 billion in health care expenditures 
and lost productivity, and this burden is growing as the population 
ages.
    Medicare has recognized that an acute care system is no longer 
appropriate where the major killers and cost drivers of our era are 
chronic conditions. Moreover, it has reacted by exploring high-tech, 
innovative delivery systems, such as DM. Medicare has thus far lacked 
the legislative authority, however, to implement its demonstrations on 
a beneficiary-wide scale to provide fair access to all fee for service 
beneficiaries. On the state level, in the past two years, legislation 
has been passed in several states to fund DM. As many as two dozen 
states considered DM legislation in their recent legislative sessions.
    Those states undertaking DM have elected not to cover dually 
eligible beneficiaries in their DM projects since the state would be 
primarily responsible for paying the cost of the DM program, most 
savings achieved through DM, however, would accrue to CMS (this is the 
result of Medicare being the primary payor and states are generally 
being at risk for only pharmacy, Medicare co-payments and 
transportation costs for this population). In fact, many beneficiaries 
enrolled in DM programs in FFS Medicaid lose this benefit when they 
become eligible for Medicare. Former CMS Deputy Administrator Ruben 
King-Shaw made it clear that CMS is willing to approve waivers that 
would allow states to share in any savings achieved through DM efforts 
with dually eligible beneficiaries. CMS is also reviewing 
``unsolicited'' demonstration projects for the management of dual 
eligibles with chronic disease, whereby CMS would fund the DM project.
    Like the ABD population, dual eligibles have chronic disease 
prevalence rates much higher than the overall Medicaid population. For 
example, CHF prevalence in the dual eligible population may approach 
10% while the prevalence in the general population is less than 1%. The 
average monthly cost for dual eligibles with CHF is approximately 
$1,500 to $2,000 compared to a $200 to $300 monthly cost for the 
overall Medicaid population. Whether or not the states elect to offer 
DM services for this population will likely depend on the ability of 
the states to negotiate shared cost savings with CMS or on having CMS 
fund DM services as part of a CMS demonstration project.
    Historically, a small proportion of Medicaid beneficiaries have 
accounted for a major proportion of Medicaid expenditures. In the fee-
for-service environment, health care for individuals with chronic 
illness has often been fragmented and poorly coordinated across 
multiple health care providers and multiple sites of care. Evidence-
based practice guidelines have not always been followed, nor have 
patients always been taught how best to care for themselves. These 
shortcomings are particularly true for patients served under 
reimbursement systems in which providers lack incentives for 
controlling the frequency, mix, and intensity of services, and in which 
providers have limited accountability for the outcomes of care, such as 
fee for service Medicaid.
    In its current form, the health care system in not equipped to 
educate, monitor or support these very sick patients on a longitudinal 
basis to ensure proper coordination of care and compliance with complex 
treatment regimens. For fee for service Medicaid beneficiaries, this 
problem is exacerbated by the lack of any medical management or quality 
improvement infrastructure. The infrastructure offered by DM programs 
fills these gaps resulting in better human and financial outcomes.
    Disease managers provide a safety net for seriously and chronically 
ill patients in between their physician visits, and are frequently 
credited with helping patients with chronic disease avoid unnecessary 
hospitalizations, unnecessary emergency room (ER) visits, surgery, and 
other more invasive care. Instead of relying solely on the physician-
based care system (which, under managed care, and even in fee for 
service, has suffered serious and often irrational restraints from 
formularies, utilization review, and incentives to reduce doctor-
patient consultation time), DM programs typically provide access to 
health care professionals on a 24-hour per day/ 7-day per week basis. 
Although disease managers are typically nurses, dietitians, health 
educators, social workers, and others who do not take the place of the 
primary care physician, they bridge the care management gap that often 
exists for patients between physician office visits. Given the 
propensity by many Medicaid beneficiaries to use the ER for primary 
care, DM can act as a means of educating patients on the proper use of 
the health care system, thus directing patients to primary care, as 
well as coordinating a patient's care across a variety of care 
settings, i.e., ER, specialist, PCP, etc.
    Disease managers also improve physicians' effectiveness by 
providing real-time patient data and timely information on disease-
specific best practices protocols. Without a DM program, it is unlikely 
that physicians can monitor patients effectively between (and even 
during) visits, due to constraints on their time and office staff.
    Given the few Medicaid Managed Care plans available to Medicaid 
beneficiaries in rural settings, DM could serve to fill the access to 
care and quality gap now being experienced in these areas and greatly 
reduce overall costs. Since most DM services can be fully implemented 
telephonically or via the Internet, rural patients in DM programs enjoy 
significantly improved access to care. In addition, to the extent that 
the DM programs succeed as expected, rural patients should not need as 
many visits to hospitals or specialty facilities, which may be distant 
from their homes and therefore avoided. Finally, on-line and telephonic 
DM programs frequently offer patient self-management and informational 
tools without cost, which improves access to services by the uninsured 
and poor.
    DM programs address issues raised by the Institute of Medicine 
(IOM) regarding medical errors and quality of care. The IOM reports on 
medical errors and the deteriorating quality of healthcare in America 
1 argue that DM is not only integral to preventing medical 
errors, but also to protecting and improving overall health care 
quality, especially for the chronically ill. In the reports, the IOM 
Committee on Quality of Health Care in America cites extensive evidence 
that ``the nation's health care industry has foundered in its ability 
to provide safe, high-quality care consistently to all Americans. 
Reorganization and reform are urgently needed to fix what is now a 
disjointed and inefficient system.''
---------------------------------------------------------------------------
    \1\ Crossing the Quality Chasm: A New Health System for the 21st 
Century, Committee on Quality of Health Care in America, Institute of 
Medicine, National Academy Press, Washington, D.C. (2001).
---------------------------------------------------------------------------
    The IOM quality of care report properly stresses the issues posed 
by chronic conditions, and concludes that:
        ``clinicians, health care organizations, and purchasers--
        companies or groups that compensate health care providers for 
        delivering services to patients--should focus on improving care 
        for common, chronic conditions such as heart disease, diabetes, 
        and asthma that are now the leading causes of illness in the 
        United States and consume a substantial portion of health care 
        resources. These ailments typically require care involving a 
        variety of clinicians and health care settings, over extended 
        periods of time.''
    To address these issues, the IOM suggests that private and public 
purchasers, health care organizations, clinicians, and patients should 
work together to redesign health care processes in accordance with the 
following rules:

 Care based on continuous healing relationships. Patients should 
        receive care whenever they need it and in many forms, not just 
        face-to-face visits.
 Customization based on patient needs and values. The system of care 
        should be designed to meet the most common types of needs, but 
        have the capability to respond to individual patient choices 
        and preferences.
 The patient as the source of control. Patients should be given the 
        necessary information and the opportunity to exercise the 
        degree of control they choose over health care decisions that 
        affect them.
 Shared knowledge and the free flow of information. Patients should 
        have unfettered access to their own medical information and to 
        clinical knowledge.
 Evidence-based decision-making. Patients should receive care based on 
        the best available scientific knowledge.
 Safety as a system property. Patients should be safe from injury 
        caused by the care system. Reducing risk and ensuring safety 
        require greater attention to systems that help prevent and 
        mitigate errors.
 The need for transparency. The health care system should make 
        information available to patients and their families that 
        allows them to make informed decisions when selecting a health 
        plan, hospital, or clinical practice, or when choosing among 
        alternative treatments.
 Anticipation of needs. The health care system should anticipate 
        patient needs, rather than simply reacting to events.
 Continuous decrease in waste. The health care system should not waste 
        resources or patient time.
 Cooperation among clinicians. Clinicians and institutions should 
        actively collaborate and communicate to ensure an appropriate 
        exchange of information and coordination of care.''
    With regard to medical errors, the IOM emphasized that one of the 
chief culprits in medical errors is the lack of care management and 
coordination, resulting from the decentralized and fragmented nature of 
the health care delivery system, and the multitude of unaffiliated 
providers practicing in different settings without access to complete 
medical record information or coordination.
    The IOM reports are, in all respects, a call to action for, and a 
validation of, the critical need to support and promote DM as a 
solution to many of the problems besetting the health care system, both 
public and private, managed care and fee-for-service. High-quality DM 
programs focus directly on the chronic conditions that the IOM reports 
consider most costly and ripe for new models of intervention, and 
improve clinical and financial outcomes in every one of the areas 
considered most problematic by the IOM.

            ENHANCING CARE COORDINATION--DISEASE MANAGEMENT

    The central premise behind DM is elegant in its simplicity. Simply 
stated, the value proposition for DM is that ``healthier people cost 
less.'' Put another way, if we can improve the health of the 
population, we will reduce their demands on the health care system and 
that reduced demand translates into lower costs. Chronic illness is a 
major driver of health care costs. One reason for this is that many 
chronically ill individuals experience acute episodes that require 
expensive (and often traumatic) treatment in institutional settings. 
The incidence of such episodes can be reduced or entirely avoided 
through proper management of chronic conditions, as can the progressive 
worsening of chronic conditions that leads to complications and co-
morbidities. Thus, if health care payors can efficiently deliver 
interventions that result in improved management of their chronic 
condition to those beneficiaries, quality improvement and cost savings 
will result.
    Candidates for DM services are typically identified through review 
of their health insurance and available medical data by health insurers 
and disease management organizations (DMOs), or by their primary care 
providers. Disease managers then reach out to these individuals and, in 
concert with their physicians, enroll them in DM programs.
    Many of the interventions that can be provided to individuals with 
these chronic illnesses are often relatively simple. For example, great 
progress can be made by promoting smoking cessation, improvements in 
diet and exercise, and teaching patients to better self-manage many 
aspects of their condition like blood glucose level self-monitoring and 
adherence with prescription drug regimens. These interventions are 
supported by regularized, ongoing communication between beneficiaries, 
care providers and disease managers through a variety of media 
including phone, mail and electronic, and, when warranted, in-home 
visits, that serves to promote adherence, monitor clinical status, 
ensure a continuum of care, and to proactively identify and address 
situations that could lead to avoidable acute events. Most DMOs have 
proven adept at addressing populations with multiple conditions, which 
is significant because a high percentage of individuals with chronic 
disease have more than one condition (co-morbidity).
    One challenge in delivering effective DM services lies with the 
fact that the beneficiary population can be a difficult one to impact. 
Often, the harmful behaviors and habits that DM programs seek to 
address have become highly ingrained over decades. In other cases, 
beneficiaries are depressed as a consequence of their condition, have 
grown skeptical of health care interventions, and may have developed 
hostility toward the health care system. DM programs have developed 
techniques for successfully reaching these populations and are able to 
uncover and motivate the underlying desire of most chronically ill 
individuals for improved quality of life.
    Another important feature of disease management is the integration 
with the beneficiary's personal physician. Many DM programs assist the 
physician as well as the patient by helping to provide evidence-based 
practice guidelines specific to their patients and their conditions. DM 
programs develop programs and techniques for reaching out to physicians 
and have generally been successful in achieving positive physician 
satisfaction and participation.
    DM works. Peer reviewed studies show that DM can have a significant 
impact on both the cost and quality of care and health outcomes.

                                OUTCOMES
 
   The state of Florida was one of the first states to offer disease 
management services to beneficiaries eligible for Medicaid fee for 
service and Primary Care Case Management (PCCM). In LifeMasters 
' program for Florida Medicaid beneficiaries with Congestive 
Heart Failure, we were able to reduce healthcare expenditures over a 
two-year period by 16.3%, resulting in a net savings to the state 
(after paying for program costs) of $4.4 million for an average of just 
2,500 beneficiaries. Other states have launched their own DM 
initiatives including Washington, Colorado, Texas, Oregon, Mississippi, 
Ohio, Kansas, Idaho, Missouri and Arkansas to name just a few. There 
are several DM Organizations that have extensive experience meeting the 
distinct needs of Medicaid populations.

                             Florida Medicaid Results (Population-based CHF Program)
----------------------------------------------------------------------------------------------------------------
                                                                  Intervention Period
              Indicator                     Baseline Year             (Two Years)         Percent Change/Comment
----------------------------------------------------------------------------------------------------------------
Total Medical Claims/Year............  $77,727,365 (Projected   $65,065,548 (Two year    -16.3%
                                        two year costs).         actual costs).
Hospital days/Year...................  8,859 per 1000 members.  5,431 per 1000 members.  -38.7%
Percent of beneficiaries on ACE        58.1%..................  76.5%..................  32%
 inhibitor/angiotensin receptor
 blocker therapy.
Percent of beneficiaries on beta       30.2%..................  44.1%..................  46%
 blockers.
Percent of beneficiaries receiving an  30.3%..................  53.8%..................  78%
 annual cholesterol screening.
Percent of patients reporting          N/A....................  69%....................  N/A
 abstaining from smoking.
Percent of patients compliant with     N/A....................  98%....................  N/A
 drug treatment plan.
Percent of patients compliant with     N/A....................  77-85%.................  Depends on risk
 dietary restrictions.                                                                    category and month
                                                                                          measured
Compliant with drug treatment plan...  N/A....................  98%....................  N/A
----------------------------------------------------------------------------------------------------------------

    LifeMasters also provides services to managed care Medicaid 
beneficiaries through a relationship with Presbyterian Health Plan in 
New Mexico. Presbyterian has 133,000 Medicaid beneficiaries. Of this 
number, there are 2,100 beneficiaries with Coronary Artery Disease 
(CAD) and Diabetes enrolled in the disease management program. While it 
is too early in the program to have clinical, cost, and quality data 
available, we have found the same level of receptivity to the program 
as we experienced with fee for service Medicaid beneficiaries in 
Florida. One of our disease management nurses said of one of her 
program participants: ``When I first started calling [the participant] 
in May, she was stressed and depressed and frustrated with her foot 
pain. Since that time, she has started walking a few miles 4 times a 
week and lifting weights. She has lost 10+ lbs and her energy and 
spirits are higher than ever. After a trip to her podiatrist, her feet 
are feeling better. She often thanks me for calling her and holding her 
accountable to keep on top of her DM and exercising. Without the 
program she doesn't think she would be doing so well.''
    LifeMasters has also provided services to managed care Medicaid 
beneficiaries through a relationship with Fallon Community Health Plan, 
which has been ranked the number one HMO in America four times over the 
past several years: twice by Newsweek (1999, 1996) and twice by U.S. 
News and World Report (1998, 1996). Beginning in 1999, Fallon's members 
with diabetes were enrolled in the LifeMasters diabetes management 
program. According to Val Slayton, MD, Fallon's former Chief Medical 
Officer, the cost savings achieved with the Medicare (9.2%) and 
Medicaid (42.9% for a relatively small population) populations have 
been larger than those in the Commercial group (4.7%) for patients with 
diabetes in the first year on a per member, per month (pmpm) basis 
compared with baseline figures (see below). Diabetic claims cost on a 
PMPM basis fell from $691 to $632.

                  Fallon Community Health Plan Results (Diabetes) Program Results after 1 Year
----------------------------------------------------------------------------------------------------------------
                                                                                                 Percent Change/
               Indicator                        Baseline Year           Intervention Period          Comment
----------------------------------------------------------------------------------------------------------------
Total Medical Claims/Year..............  $717.80...................  $486.93..................           -42.9%
Hospital days/Year.....................  1,536 per 1000............  1,173 per 1000...........           -23.6%
Cardiac (CHF+CAD) Days/Year............  284 per 1000..............  69 per 1000..............           -75.6%
Average HbA1c Value (entire population)  8.2%......................  7.5%.....................            -8.5%
----------------------------------------------------------------------------------------------------------------

    Other Disease Management Organizations have had success in 
deploying DM interventions in Medicaid populations.
    McKesson Corporation has extensive expertise providing disease and 
demand management experience through direct contracting with State 
Medicaid programs including contracts with the Washington State Medical 
Assistance Administration (MAA), the Oregon Medical Assistance Program, 
Florida's Agency for Health Care Administration (AHCA), the Mississippi 
Division of Medicaid, and Colorado's Division of Health Care Policy and 
Administration. Furthermore, the states of New Hampshire and Montana 
have selected McKesson to provide disease management for their Medicaid 
fee-for-service population.
    Initial results for Washington MAA (asthma, diabetes and heart 
failure) have demonstrated significant clinical and economic 
improvement. The state of Washington recently released their first year 
estimated net savings from their disease management programs. The 
results from the state show greater than $1.5 million of first year 
savings for the 18,000 Medicaid recipients eligible for the service. 
Savings of $900,000 were noted in the diabetes population, $375,000 for 
heart failure, and $250,000 for asthma.
    Columbia United Providers, a Medicaid managed care provider based 
in Vancouver, Washington has had significant success in implementing 
behavior changes among members enrolled in an asthma DM program. At the 
time the plan's members first enrolled in the asthma program 
approximately 8% had an action plan; at six months, nearly 46% had such 
a plan--an increase of 450%. Members taking asthma medication every day 
to control symptoms increased to 33% at six months from 29% at 
enrollment. The analysis of medical and pharmacy claims (using a 
matched cohort design) for this Medicaid Program was quite positive and 
resulted in a very positive financial return to the client ($2.25 ROI).
    A second managed Medicaid program in the Northeast completed an 
asthma program for its identified members, showing highly significant 
reductions in inpatient, emergency room and outpatient symptomatic 
office visits utilization when compared to a matched cohort of non-
participating asthmatics (p< .01 for all comparisons), resulting in a 
very favorable financial return ($1.61 ROI).
    In addition to these Medicaid-specific analyses, McKesson has 
completed 9 medical claims analyses for commercial asthma programs; 13 
completed studies for commercial diabetes programs; and 10 completed 
studies for commercial heart failure programs. The results of these 
studies demonstrate improvements in health status and net reductions in 
claims costs resulting in favorable ROI.
    The experience of McKesson' Care Support Programs demonstrates 
their efficacy and relevance to Medicaid populations. These studies 
strongly suggest that structured DM programs can create positive 
clinical and financial outcomes while promoting enhanced self-
management through continued support, education, and patient 
involvement.
    LifeMasters and McKesson are not unique in achieving results such 
as those described above. As the industry matures, other companies are 
also demonstrating the economic and qualitative value of DM services in 
the commercial, Medicare+Choice, and Medicaid arenas

   DM PROGRAMS ARE BUDGET NEUTRAL IN THE FIRST YEAR OF IMPLEMENTATION

    Most DM programs expect to generate net savings during the first 
contract year (defined as savings greater than the cost of the DM 
program), with the greatest program impact being realized in the second 
half of the year, once the majority of program prospects are enrolled. 
Further savings are expected in years two and beyond as the program 
staff has more time to interact with program participants and their 
physicians. Savings are generally calculated by comparing per member 
per month healthcare costs for the year(s) in which the program was in 
effect with a per member per month baseline which is adjusted for 
medical inflation. In some cases, a control group methodology is 
employed which compares the cost of people who had access to the 
program with a group of similar people who did not. This is 
particularly useful because chronic disease is progressive in nature 
and costs can be expected to increase in the absence of a program. 
However, there are ethical concerns about denying a program to people 
who could benefit from it. The table below illustrates this ability of 
a CHF disease management program to reduce cost trend as well as actual 
cost.
    Which disease(s) the states elect to focus their immediate 
attention on will depend largely on the prevalence and cost of 
disease(s) in the Medicaid population and the states' specific goals. 
For example, if the state's immediate goal is to maximize return on 
investment and savings in the first year, the likely choice is to 
manage beneficiaries with diabetes, CHF and CAD. People with these 
conditions are costly, the diseases are closely related (many people 
with diabetes are co-morbid with CHF or CAD) and a significant 
reduction in hospitalizations and ER visits can happen very quickly. If 
the state decides to move in that direction, it is recommended that the 
state contract with one organization to manage these conditions in a 
specific geography. This approach leads to much better coordination of 
care and less confusion among patients and their physicians.

                            RECOMMENDATIONS

    DMAA believes that comprehensive disease management, if fully 
employed in Medicaid, can:

 Achieve the objective of better addressing preventive care and 
        chronic illness under Medicaid
 Improve the safety and quality of care by adhering to evidence-based 
        treatment guidelines and outcomes data, and by providing 
        patients with a safety net between physician and hospital 
        visits, thereby reducing drug and treatment errors and 
        improving care coordination
 Improve access to care by around the clock nursing and high-tech 
        contacts, and by assisting rural caregivers and their patients 
        who do not have the benefit of easy entree to in-person care
 Improve patient self-management of, and responsibility for, 
        preventing and treating their conditions by its innovations in 
        patient-centered and collaborative education
 Improve financial cost containment without sacrificing quality or 
        patient satisfaction by serving as an alternative to the 
        increasingly unacceptable cost-containment techniques of 
        managed care, such as utilization review, gatekeeper 
        restrictions, referral limitations, and drug restrictions
 Enhance efforts in the public health arena by providing health 
        improvement programs on a population basis; creating financial 
        incentives to promote and deliver preventive interventions on a 
        large scale using advanced outreach technologies, especially 
        secondary preventive measures; and encouraging those segments 
        of the private sector that have not yet embraced DM to do so.
    DMAA supports the integration of fully accredited DM programs into 
fee for service and managed Medicaid according to the following 
principles endorsed by DMAA:

 There should be no discrimination against beneficiaries who currently 
        lack access to the benefits of DM programs available to some 
        managed care and fee for service Medicaid enrollees
 Medicaid fee for service programs should directly contract with DM 
        organizations to offer such benefits on a population basis.
    Congress and the states should focus their initial DM efforts on 
managing beneficiaries with the highest cost, highest prevalence 
conditions where evidence exists that changes in lifestyle, monitoring 
and early intervention reduce costs and improve health outcomes.
    With these criteria in mind, the first priority should be to 
disease manage aged, blind and disabled beneficiaries with diabetes, 
congestive heart failure (CHF), coronary artery disease (CAD), chronic 
obstructive pulmonary disease (COPD) or asthma. A secondary emphasis 
should focus on managing all fee for service beneficiaries and dual 
eligibles with these same chronic illnesses. States should focus their 
efforts on beneficiaries with these diseases for a number of reasons 
including:

 Diabetes, CHF, CAD, COPD and asthma affect more than 20% of the 
        entire Medicaid aged, blind, disabled and dual eligible 
        populations while accounting for as much as 75% or more of 
        total costs.
 Incidence of these diseases continues to grow at a significant rate--
        costs will continue to increase over time.
 These debilitating diseases greatly diminish an individual's quality 
        of life and have a high rate of morbidity and premature 
        mortality.
 Non-whites are disproportionately affected by these chronic diseases, 
        experiencing much higher morbidity and mortality rates than 
        their white counterparts. Focusing on managing people with 
        these diseases helps to minimize the impact of the racial and 
        ethnic disparities experienced in health care.
 Diabetes, CHF and CAD are closely related, with a great percentage of 
        people with diabetes developing CHF and/or CAD as a result of 
        the cardiovascular damage caused by their diabetes. People with 
        diabetes are frequently co-morbid with these conditions.
 Typically, investing in DM for these groups delivers a return on 
        investment of 150% to 250% in the first year.
 Asthma prevalence rates among low-income children and adults make it 
        a high public health priority. First year ROI experienced 
        managing people with asthma is break even or slightly positive.
 Much of the human and economic cost associated with these diseases 
        can be positively impacted through longitudinal health 
        management, lifestyle modification, disease-specific vital 
        signs and symptoms monitoring, and early intervention. These 
        efforts have been shown to reduce or delay health complications 
        while lowering overall costs.

                               CONCLUSION

    Based on documented cost reductions and quality improvements from 
Medicaid DM programs in selected states, it is likely that a 
comprehensive DM strategy covering beneficiaries with diabetes, CHF, 
CAD, COPD, asthma and ESRD could deliver cost savings to the Medicaid 
program into the billions of dollars annually while concurrently 
improving access to care, beneficiary quality of life and health 
outcomes.
    The most innovative states along with Medicare+Choice and private 
sector organizations have benefited from high quality DM, and these 
organizations now have irrefutable evidence that these programs have 
not only improved the delivery of healthcare services, but have also 
achieved impressive clinical quality improvements and cost savings. 
Based on the demonstrated evidence of successful clinical and financial 
outcomes of disease management programs, DMAA and LifeMasters believe 
that our nation should move to offer disease management services to all 
Medicaid beneficiaries with chronic disease.

    Mr. Bilirakis. Thank you very much, Ms. Selecky.
    Mr. Hilferty?

                 STATEMENT OF DANIEL J. HILFERTY

    Mr. Hilferty. Mr. Chairman and members of the subcommittee, 
my name is Daniel Hilferty. I am president and CEO of 
AmeriHealth Mercy/Keystone Mercy Health Plan. AmeriHealth Mercy 
and its family of health plans serve over 1.3 million Medicaid 
beneficiaries in six States, Pennsylvania, New Jersey, 
Kentucky, South Carolina, Virginia, and California.
    As a mission-driven organization, AmeriHealth Mercy 
specializes in managing the delivery of health care services 
and providing health care management services for organizations 
serving enrollees in Medicaid managed care programs and State 
children's health insurance programs.
    I appreciate this opportunity to testify about the value of 
the private sector health plans bring to the Medicaid program. 
AmeriHealth Mercy/Keystone Mercy has played a leading role in 
improving health care quality for Medicaid beneficiaries.
    I am also testifying today on behalf of the American 
Association of Health Plans.
    Today, I will focus on strategies Medicaid's managed care 
plans are implementing to improve the health care system for 
Medicaid enrollees. My testimony will also emphasize the 
importance of ensuring that State Medicaid managed care 
programs are funded at levels that support the participation of 
Medicaid managed care plans and their providers.
    At the same time, I will discuss the important role that 
plans are playing in delivering cost-effective health coverage 
and ensuring that State Medicaid programs receive maximum value 
for their limited resources at a time when State budgets are 
severely restrained.
    First I would like to talk about coordination of care. 
Health plans participating in State Medicaid-managed care 
programs have developed systems of coordinating care for 
ensuring that Medicaid beneficiaries receive all medically 
appropriate health care services. Covered under the State 
Medicaid managed-care program on a timely basis.
    As a result, physicians services, hospital care, 
prescription drugs, and other health care services are 
integrated and delivered through an organized system whose 
overriding purpose is to prevent illness, improve health 
status, and employ the best practices to swiftly treat medical 
conditions that occur. This approach is far superior to a 
system of uncoordinated care, in which patients are forced to 
navigate a fragmented health care system on their own.
    AmeriHealth Mercy serves a high percentage of non-
traditional Medicaid recipients, the sickest of the sick, those 
accounting for the highest cost, the aged, blind, and disabled. 
AmeriHealth Mercy is at risk for the total health care of the 
patient/member.
    Therefore, we have designed a population-based approach to 
care management, which has enhanced the quality of life for our 
members and produced significant annual savings for these high 
cost members. In terms of preventive health care services, 
instead of focusing solely on treating beneficiaries when they 
are sick or injured, Medicare-managed care plans place a strong 
emphasis on preventive health care services to keep 
beneficiaries healthy, detect diseases at an early stage, and 
avoid preventable illnesses.
    Passport health plan owned by University Health Care in 
Kentucky and managed by our organization has improved 
adolescent immunizations by over 160 percent, from 1997 to 2002 
and increased well child visits in the first 15 months of life 
by 216 percent.
    Over 90 percent of our pregnant members receive prenatal 
care, meeting the standards of the National Committee for 
Quality Assurance for whom passport has earned the highest 
level of accreditation, excellent in all categories; in fact, 
each of our entities has achieved NCQA status of outstanding or 
excellent.
    In terms of disease management services, Medicaid 
management care plans have also introduced the concept of 
disease management programs to Medicaid. Improving quality of 
care for beneficiaries with chronic conditions by focusing on 
the comprehensive care of patients over time, rather than 
individual episodes of care.
    AmeriHealth Mercy's disease management programs have 
improved health outcomes and significantly lowered the cost of 
care for the highest cost patients. These programs have 
improved patient care and achieved major savings for small but 
very ill population groups; for example, our hemophilia case 
management program has reduced hospitalizations by 40 percent 
for 60 members, thus saving $2 million annually in the cost of 
blood factor and overall medical care.
    In terms of innovations by Medicaid health plans, Medicaid-
managed care plans have developed a wide range of innovative 
programs to improve the health status of Medicaid 
beneficiaries; for example, our plan in Pennsylvania, Keystone 
Mercy, is promoting preventive health care for Medicaid through 
a health ministry program for women.
    This program links church groups with other medical and 
social services in their communities. Using a team of specially 
trained nurses, this program provides women with health 
assessments to identify diseases for which they may be at risk. 
This assessment is followed by a second session in which women 
learn about preventive measures they can take to avoid these 
conditions, and at the same time, learn about nutrition, 
exercise, and stress management techniques.
    In order for these programs to continue, there must be an 
adequate funding of Medicaid health plans. While Medicaid-
managed care plans are focused intensely on improving health 
care for Medicaid enrollees, our efforts are complicated by the 
steps States have been taking to limit funding for Medicaid 
benefits in recent years.
    The American Association of Health Plans and its member 
plans are pleased that the centers for Medicare/Medicaid 
services has issued regulations upholding the fundamental 
principle that Medicaid managed-care plan rates must be 
actuarially sound. We believe it is critically important for 
CMS to proactively work with the States to be sure these are 
implemented in a way that will promote fair and adequate 
payments.
    We also urge the subcommittee to closely monitor this issue 
and ensure that payments to Medicare plans are actuarially 
sound.
    There is a value to Medicaid-managed care. While payment 
adequacy is a major concern for Medicaid-managed care plans, it 
is also important for Congress to recognize that plans are 
working hard to ensure that State, Medicare-managed programs 
receive the highest possible value for the dollars they spend 
on health care. Passport, our plan in Kentucky, has saved the 
Commonwealth $92.4 million on 100,000 lives in just 4 years, 
and our health choices program in Pennsylvania has saved the 
Department of Public Welfare hundreds of millions of dollars 
since its inception in 1997.
    At the same time, enrollees in these programs benefit from 
improved continuity of care and are highly satisfied with their 
care.
    In conclusion, I want to emphasize that AmeriHealth Mercy 
and its family of health plans, along with other American 
Association of Health Plan member plans, is strongly committed 
to our mission of providing high quality affordable patient-
centered care, patient centered health coverage to low income 
Americans and persons with disabilities.
    We are proud of the success we have demonstrated in 
improving the health that is available under Medicaid programs 
to many of our Nation's most vulnerable citizens.
    In conclusion, I would just like to say thank you for this 
opportunity.
    [The prepared statement of Daniel J. Hilferty follows:]

     Prepared Statement of Daniel J. Hilferty, President and CEO, 
AmeriHealth Mercy/Keystone Mercy Health Plan on Behalf of the American 
                      Association of Health Plans

    Mr. Chairman and members of the subcommittee, my name is Daniel J. 
Hilferty. I am President and CEO of the AmeriHealth Mercy/Keystone 
Mercy Health Plan. AmeriHealth Mercy and its family of health plans 
serve over 1.3 million Medicaid beneficiaries in six states, 
Pennsylvania, New Jersey, Kentucky, South Carolina, Virginia and 
California. As a mission-driven organization, AmeriHealth Mercy 
specializes in managing the delivery of health care services and 
providing health plan management services for organizations serving 
enrollees in Medicaid managed care programs and State Children's Health 
Insurance Programs (SCHIP).
    I appreciate this opportunity to testify about the value that 
private sector health plans bring to the Medicaid program. AmeriHealth 
Mercy/Keystone Mercy has played a leading role in improving health care 
quality for Medicaid beneficiaries. We do this by coordinating care, 
placing a strong emphasis on preventive health care services, providing 
disease management services for chronically ill patients, and offering 
innovative programs to promote the health and well being of our 
Medicaid enrollees. We are strongly committed to ensuring that Medicaid 
enrollees have access to high quality, affordable, patient-centered 
health coverage.
    I am also testifying today on behalf of the American Association of 
Health Plans (AAHP), of which AmeriHealth Mercy/Keystone Mercy Health 
Plan is a member through our parent, Independence Blue Cross of 
Pennsylvania. AAHP and its member plans have a longstanding commitment 
to Medicaid and its mission of meeting the health care needs of low-
income Americans and persons with disabilities. AAHP's membership 
includes approximately 100 health plans participating in Medicaid 
managed care programs. In my testimony, I will refer to such plans as 
Medicaid managed care plans. Collectively, AAHP members serve more than 
half of the 15.5 million Americans who are covered under Medicaid 
managed care plans.
    Today, I will focus on the strategies Medicaid managed care plans 
are implementing to improve the health care system for Medicaid 
enrollees. I will begin by reviewing the importance of coordinated care 
and why this approach is producing better health outcomes and higher 
satisfaction among Medicaid beneficiaries than Medicaid fee-for-service 
programs. Next, I will focus on preventive health care services and 
disease management programs offered by Medicaid managed care. I will 
also highlight several specific examples of the dozens of innovative 
programs that plans have developed to meet the needs of their Medicaid 
enrollees.
    My testimony will also emphasize the importance of ensuring that 
state Medicaid managed care programs are funded at levels that support 
the participation of Medicaid managed care plans and their providers. 
At the same time, I will discuss the important role that plans are 
playing in delivering cost-effective health coverage and ensuring that 
state Medicaid programs receive maximum value for their limited 
resources at a time when state budgets are severely strained.

                          COORDINATION OF CARE

    Medicaid managed care plans have developed systems of coordinated 
care for ensuring that Medicaid beneficiaries receive all medically 
appropriate health care services, covered under the state Medicaid 
managed care program, on a timely basis in a challenging environment in 
which an individual's Medicaid eligibility may change during the year. 
In general, each Medicaid beneficiary is encouraged to establish a 
relationship with a primary care physician who helps makes arrangements 
for specialty visits, hospital care, home health care, or other care he 
or she may need. The primary care physician ensures that each patient 
receives the best available care in the most appropriate setting, and 
oversees all of a patient's treatments and medications.
    Moreover, coordinated care systems provide for the seamless 
delivery of health care services across the continuum of care. In other 
words, physician services, hospital care, prescription drugs, and other 
health care services are integrated and delivered through an organized 
system whose overriding purpose is to prevent illness, improve health 
status, and employ best practices to swiftly treat medical conditions 
that occur.
    This approach is far superior to a system of uncoordinated care in 
which patients are forced to navigate a fragmented health care system 
on their own. Coordinated care provides the opportunity to reduce 
emergency room visits for routine care, and to ensure prompt access to 
primary care physicians and specialists when care is needed. It also 
promotes communication between treating physicians about various 
treatments and medications a patient receives. This is very important 
because the interaction of multiple medications prescribed by multiple 
physicians can result in high risk to the patient and death in some 
instances.
    Coordinated care creates an intense focus on health care quality 
because health care services are well integrated and a single physician 
oversees each patient's care. AmeriHealth Mercy serves a high 
percentage of non-traditional Medicaid recipients, the ``sickest of the 
sick,'' those accounting for the highest costs (aged, blind and 
disabled). AmeriHealth Mercy is at risk for the total cost of care for 
the patient/member. Therefore, we have designed a population-based 
approach which links traditional medical care management with pharmacy 
care management to promote comprehensive, cost effective, quality care. 
The results are striking. Our case management programs for high cost 
populations have enhanced the quality of life for our members and 
produced an annual savings of $740,000 for just 190 high cost members.
    Research findings indicate that systems of coordinated care are 
highly successful in improving access to health care for Medicaid 
enrollees. For example, a study published in the March 2001 issue of 
the American Journal of Public Health found that, in New York City, 
Medicaid managed care enrollees are more likely than Medicaid fee-for-
service enrollees to have a regular source of health care and also more 
likely to obtain care from a doctor's office or a clinic. The same 
study found that Medicaid managed care enrollees are less likely than 
Medicaid fee-for-service enrollees to obtain care from a hospital 
emergency room or an outpatient hospital clinic, which are not optimal 
settings for receiving routine care.

                    PREVENTIVE HEALTH CARE SERVICES

    Instead of focusing solely on treating beneficiaries when they are 
sick or injured, Medicaid managed care plans place a strong emphasis on 
preventive health care services that help to keep beneficiaries 
healthy, detect diseases at an early stage, and avoid preventable 
illnesses.
    According to AAHP's 2001 and 2002 Industry Surveys, Medicaid 
managed care plans routinely provide coverage for diabetes screening, 
colorectal cancer screening, prostate cancer screening, mammograms for 
women age 40 and older, hearing tests for newborns, and osteoporosis 
screening. In addition, a large percentage of Medicaid managed care 
plans contact enrollees on a regular basis with reminders about child 
immunizations, mammograms, cervical cancer screening, or other 
preventive services. By actively encouraging enrollees to receive these 
services, plans are empowering them to take proactive steps to enhance 
their health and well-being.
    AAHP's surveys also found that almost all Medicaid managed care 
plans offer various types of counseling programs. Many programs focus 
on prenatal care, nutrition, or exercise counseling, while others 
address issues such as smoking cessation or alcohol dependency. These 
programs help enrollees address behavioral or lifestyle issues in ways 
that can significantly improve their health and the quality of their 
lives.
    Medicaid managed care plans also typically exceed the core 
objectives of the Early and Periodic Screening, Diagnosis, and 
Treatment (EPSDT) program by placing a strong emphasis on primary care 
for children. The EPSDT programs of Medicaid managed care plans 
typically include aggressive education and outreach components in order 
to ensure that children receive complete physical examinations, hearing 
and vision checkups, dental care, immunizations, and other health care 
services they need to stay healthy. One Medicaid managed care plan in 
Connecticut has implemented a program that, by using specially trained 
staff to place ``welcome'' calls to Medicaid enrollees, was successful 
in increasing EPSDT participation rates from 52 percent to 75 percent 
in just one year. The delivery of these crucial primary care services 
is an important factor in promoting good health among children and 
adolescents in the Medicaid program.
    Passport Health Plan, owned by University Health Care in Kentucky 
and managed by our organization, has improved adolescent immunizations 
by over 160 percent from 1997 to 2002, and increased well-child visits 
in the first 15 months of life by 216 percent. Over 90 percent of our 
pregnant members receive prenatal care meeting the standards of the 
National Committee for Quality Assurance from whom Passport has earned 
the highest level of accreditation, Excellent in all categories.

                      DISEASE MANAGEMENT SERVICES

    Medicaid managed care plans have also introduced the concept of 
disease management programs to Medicaid--improving quality of care for 
beneficiaries with chronic conditions by focusing on the comprehensive 
care of patients over time, rather than individual episodes of care. 
Because of their prevalence, asthma and diabetes are the two illnesses 
that are targeted most frequently for disease management services by 
Medicaid managed care plans. AAHP's surveys found that the top three 
benefits of these services are: (1) reduced morbidity and mortality; 
(2) lower health care costs; and (3) improved patient satisfaction.
    The success of these programs is demonstrated by research findings 
which show that asthmatic children covered by Medicaid managed care 
plans are less likely to experience serious asthmatic attacks that 
require them to be hospitalized, relative to asthmatic children who 
have fee-for-service Medicaid coverage. According to a 2002 report by 
the Wisconsin Department of Health and Family Services, 11.7 percent of 
asthmatic children in the Medicaid fee-for-service program had asthma-
related hospital admissions, compared to only 8.6 percent of asthmatic 
children in Medicaid HMOs.
    AmeriHealth Mercy's disease management programs have improved 
health outcomes and significantly lowered the cost of care for the 
highest cost patients. These programs have achieved major savings and 
improved patient care for small, but very ill populations groups. For 
example, our Hemophilia Case Management program has reduced 
hospitalizations by 40 percent for 60 members, thus saving $2 million 
annually in the cost of blood factor and medical care. Our Dialysis 
Case Management program saves $2 million annually by improving patient 
care for 300 members. Finally, our Sickle Cell Case management program 
has reduced hospitalizations by 23 percent and emergency room visits by 
24 percent. The savings from high quality Medicaid managed care are 
indisputable and the value to members is high.

                  INNOVATIONS BY MEDICAID HEALTH PLANS

    Last year, AAHP published a report highlighting more than 60 
initiatives Medicaid managed care plans have undertaken to improve the 
health status of Medicaid beneficiaries. This report provides practical 
guidance to policymakers and health care professionals on effective 
strategies for addressing the needs of Medicaid beneficiaries.
    For example, our plan in Pennsylvania, Keystone Mercy, is promoting 
preventive health care for its Medicaid enrollees through a Health 
Ministry Program for Women. This program links church groups with other 
medical and social services in their communities. Using a team of 
specially trained nurses, this program provides women with health 
assessments to identify diseases for which they may be at risk. This 
assessment is followed by a second session in which women learn about 
preventive measures they can take to avoid these conditions and, at the 
same time, learn about nutrition, exercise, and stress management 
techniques.
    Another AAHP member plan, Humana, has implemented a program in both 
Florida and Illinois to improve patient care for pregnant Medicaid 
enrollees. Under this program, the health plan first takes steps to 
identify women who are at risk of experiencing complications during 
their pregnancies. Obstetrical case managers then perform ongoing 
assessments of these women and coordinate the care they receive from 
their primary care physicians and other health care professionals. 
Educational materials, including a pregnancy-related guidebook, are a 
key component of this program. A survey found that 99 percent of 
participants were satisfied with this program.
    Another excellent example is an asthma program that an AAHP member 
plan, UCare Minnesota, implemented in Minnesota in 2000. This program 
provides Medicaid beneficiaries who have asthma with an ``action 
plan''--developed by their primary care physicians--with specific 
directions on steps to take when a patient's asthma reaches certain 
levels of severity. In addition, this program makes arrangements for 
respiratory nurses to conduct home health visits during which they 
educate patients about the proper use of their inhalers and peak flow 
meters. Patients can also reach respiratory nurses through a telephone 
hotline that is open 24 hours a day, seven day a week. A survey of 
patients participating in this program found that 97.1 percent were 
satisfied with their action plan and 98.8 percent were satisfied with 
their nurses.
    The Medicaid populations we serve are unique. Our PerformRx 
program, an in-sourced pharmacy management program, has applied our 20 
years of experience in Medicaid care management to achieve an 8.8 
percent average annual pharmacy trend, versus the national trend of 20 
percent. Remember, this is for the sickest, most disadvantaged 
citizens!

               ADEQUACY OF MEDICAID HEALTH PLAN PAYMENTS

    While Medicaid managed care plans are focused intensely on 
improving health care for Medicaid enrollees all across the nation, our 
efforts are complicated by the steps states have been taking, in 
response to budget crises, to limit funding for Medicaid benefits in 
recent years. According to a September 2003 report by the Kaiser Family 
Foundation, 21 states either reduced or froze Medicaid managed care 
payments in fiscal year 2003, and 19 states are targeting Medicaid 
managed care for similar payment cuts or freezes in fiscal year 2004. 
These cost containment measures are seriously challenging the viability 
of Medicaid managed care program participation for plans that are 
demonstrating their strong commitment to providing Medicaid 
beneficiaries with the high quality health coverage they need and 
deserve.
    AAHP and its member plans have strongly encouraged the Centers for 
Medicare and Medicaid Services (CMS) to take appropriate steps to 
ensure that state Medicaid agencies provide adequate funding for plans 
serving Medicaid enrollees and their providers. We are pleased that the 
agency has issued regulations and related guidance upholding the 
fundamental principle that Medicaid managed care payment rates must be 
actuarially sound.
    We believe it is critically important for CMS to proactively work 
with the states to ensure that these regulations are implemented in a 
way that promotes fair payments to support the continued viability of 
Medicaid managed care programs. We also urge the subcommittee to 
closely monitor this issue and take any steps that may be needed to 
ensure that payments to Medicaid managed care plans are actuarially 
sound.

                     VALUE OF MEDICAID MANAGED CARE

    While payment adequacy is a major concern for Medicaid managed care 
plans and their enrollees and providers, it is also important for 
Congress to recognize that plans are working hard to ensure that state 
Medicaid managed care programs receive the highest possible value for 
the dollars they spend on health care. In addition to delivering high 
quality health coverage, health plans also bring value to the Medicaid 
program by providing coverage that is much more cost-effective than 
fee-for-service Medicaid coverage.
    One recent study, conducted by the Lewin Group, found that pharmacy 
benefits are 10 to 15 percent less costly under Medicaid managed care 
programs, compared to Medicaid fee-for-service programs. This is a 
highly significant finding, considering that rapidly rising 
prescription drug costs are a major factor contributing to medical 
inflation throughout the health care system.
    Another study, conducted by Milliman USA, Inc., estimated that 
Medicaid managed care plans saved the Wisconsin Medicaid and BadgerCare 
programs a total of $35 million in 2001 and $56 million in 2002. This 
study indicated that health plans did a better job, relative to the 
Medicaid fee-for-service system, of reducing the inappropriate use of 
emergency rooms and unnecessary inpatient hospital stays. Moreover, 
this study found that Medicaid health plan enrollees in Wisconsin are 
more highly satisfied than Medicaid fee-for-service enrollees.
    Yet another study, conducted by Schaller Anderson, found that 
managed care plans in Oklahoma's Medicaid program achieved savings of 
four percent in the total medical and administrative costs associated 
with health care for persons with chronic disabilities. This same study 
found that 61 percent of Medicaid managed care enrollees with chronic 
disabilities said their care was better than under the Medicaid fee-
for-service program; another 32 percent said their care was about the 
same. Fully 60 percent of these beneficiaries said it was easier to get 
prescription drugs through their health plan than through the fee-for-
service program.
    Passport, our plan in Kentucky, has saved the Commonwealth $92.4 
million on 100,000 lives in just four years and our HealthChoices 
program in Pennsylvania has saved the Department of Public Welfare 
hundreds of millions of dollars since its inception in 1997. At the 
same time, enrollees in these programs benefit from improved continuity 
of care and are highly satisfied with their care.

                               CONCLUSION

    In conclusion, I want to emphasize that AmeriHealth Mercy and its 
family of health plans, along with other AAHP member plans, is strongly 
committed to our mission of providing high quality, affordable, 
patient-centered health coverage to low-income Americans and persons 
with disabilities. We are proud of the success we have demonstrated in 
improving the health care that is available under Medicaid programs to 
many of our nation's most vulnerable citizens.
    By coordinating care, by emphasizing prevention, by offering 
disease management services to the chronically ill, and by developing 
innovative programs to meet the unique needs and circumstances of our 
Medicaid enrollees, we have established ourselves as a model for 
Congress to consider as you address the challenges in Medicaid--
including the current funding crisis--and undertake future efforts to 
expand coverage to the uninsured.

    Mr. Bilirakis. Thank you so very much, sir.
    Dr. Medows, you are on.

                   STATEMENT OF RHONDA MEDOWS

    Ms. Medows. Good morning, Chairman Bilirakis, 
Representative Brown, Representative Wilson, Representative 
Green.
    I want to thank you for the opportunity to address with you 
today the role of disease management in Medicaid programs, as 
well as improving clinical outcomes. I am Dr. Rhonda Medows, I 
am a family physician, and also the Secretary of Florida's 
Agency for Health Care Administration. That is the State's 
agency that administers the Medicaid program as well as 
regulates health-care facilities and HMO's.
    Today I would like to share with you some highlights of our 
innovative programs that are in the State of Florida, as well 
as some lessons learned as we have trudged through implementing 
disease management programs over the years.
    By way of history, you may recall that Governor Bush, in 
his recent testimony, stated that Florida is the fourth in the 
Nation, in terms of the size of its Medicaid program. We serve 
2.2 million people and have a $12.7 billion budget.
    On further review of the health care expenditures that are 
covered in that budget, we noted that 50 percent of our health 
care expenditures were associated with only 5 percent of our 
population. On further review, we noted that 5 percent of the 
population had in common several chronic illnesses. Disease 
management has allowed us to address those chronic disease 
States, as well as those in need of beneficiaries more 
directly. So since 1997, Florida became one of the first States 
in the Nation to implement disease measured programs as a way 
of addressing those needs. To date, we have disease-measured 
programs for individuals with diabetes, hypertension, 
congestive heart failure, asthma, all the immune diseases, HIV 
AIDS, hemophilia and depression.
    The goals for disease management for us include four major 
categories. One is that we want to be able to change the 
behavior of the beneficiary, and by changing the behavior, I 
mean, to increase their compliance with their treatment 
regimen, to get them to understand what their disease consists 
of and how they can best control it.
    We encourage medication compliance, lifestyle changes, such 
as correct diet, weight loss, smoking cessation, home 
monitoring of blood pressures, and also glucose monitoring for 
those with diabetes.
    The second goal is to improve the quality of care that is 
delivered, and this is best noted when we see that we through 
disease management actually coordinate their care better, 
coordination between the patient and physician, as well as 
between the primary-care physicians and specialists and other 
health-care professionals.
    We also, through disease management, have the opportunity 
to share best practices and use those across the State.
    Third goal would be to improve health outcomes. Well, if 
one and two happen, then our third bullet actually comes to 
play, but in addition to improving the quality of care and 
changing behaviors, we also want to make sure we empower the 
beneficiary to assume the ability to make their wise health 
care decisions, so therefore, we invest in their education, the 
resources they need, and support their need to make those 
correct health care decisions; and our fourth goal is to lower 
health care expenditures. This comes about when they are able 
to make again the correct health care decisions. We note that 
this occurs when they are taught about the appropriateness of 
ER visits, the use of hospitals for care.
    We teach them how to do preventive care, how to do 
maintenance care, instead of focusing on crisis care or acute 
care, which have been the previous model.
    We also look at the expenditures in terms of not just the 
dollar amount saved by looking at claims, but also in terms of 
the quality of life and quality of health that they develop 
with these changes.
    We use measures that are evaluated by independent 
evaluators to try and keep this as scientifically sound as 
possible.
    I would like to share with you some lessons learned, and 
there is probably a whole book that we could probably go 
through, but I will try to condense it down to maybe five basic 
ones. No. 1, disease management is an investment in people. The 
return on this investment is not one that you should think is 
going to be immediate. We are talking about a long-term 
investment that takes years to develop.
    In the short-term, what happens is we enjoy the benefit of 
people making lifestyle changes. We enjoy watching the 
improvements in clinical outcomes as they develop. We enjoy the 
benefit of having emergency room visits decline and 
hospitalizations decline as people learn to take better care of 
themselves and invest in themselves up front.
    Second, we have learned the value of public private 
partnerships. At a time when our State budgets are very well 
constrained, we have learned to look outward into the community 
and into the private sector to partner with us in the 
development of these programs.
    Our third lesson learned that I would share with you is 
that we have learned to look at the whole person, and when I 
say this, I mean that our first disease management program 
focuses primarily on a specific disease state that an 
individual had and providing them with specific services to 
address that one disease. In reality, though, many of our 
beneficiaries actually have multiple diseases. They have co-
morbidities.
    To be more realistic in our approach to try and improve 
their health outcomes, we had to address their multiple co-
morbidities. It is difficult to treat someone with asthma, 
prescribe medication and not take into account that they also 
have diabetes as well, that the medication we prescribe for 
asthma does not affect their diabetes. It does. It needs to be 
taken into account, and on that note I can say that one of our 
prime examples of being able to address the person as a whole 
and to look at co-morbidities is the Florida Healthy State 
program. This is the program that we have developed in 
partnership with Pfizer, so this is our public private 
partnership.
    In it, we address the needs of people who have asthma, 
hypertension, diabetes and congestive heart failure. Pfizer 
provided a grant for the disease management program for its 
development and for its operations. The Agency for Health Care 
Administration used this money and funding to contract with 10 
of our high-volume safety net hospitals scattered about the 
State.
    In addition, I should note that it is not just a 
partnership with the hospital, but it is with the medical 
community that is associated with that hospital.
    In addition, we also had contracted with the call center to 
provide additional support services. This created a community-
based network of care statewide.
    The components of the Florida Healthy State program include 
the following: No. 1, 60 care managers. These are nurses who 
are individually assigned to individual beneficiaries, usually 
those who are higher at risk for any of the four diseases that 
I have described to you and we have 13,000 individuals who are 
assigned to a particular nurse who is available to them, not 
just on phone. I do not want to shock you, but occasionally 
home visits do occur.
    No. 2, there is a 24/7 call center that is available to all 
participants in this program. At the call center there are 
medical professionals and health-care professionals available, 
whether they be nurses, nutritionists, et cetera . They are 
able to provide education, and let's just say gentle 
encouragement to the individual to take care of themselves, 
complete their compliance as required.
    Mr. Bilirakis. Please try to summarize, Doctor.
    Ms. Medows. I am going to try to wrap this up real quick. 
The program also consists with providing them with the home 
health care supplies they need to manage their disease. It 
provides health literacy. It is both culturally and 
linguistically appropriate, as well as a different literacy 
levels, as well as product donation. The program has reached 
113,000 individuals. The fourth and final lesson that I will go 
over with you today is that the disease management program we 
believe needs to be community-based. We believe that the 
services should be delivered where the beneficiary lives. 
Through a partnership with Bristol Myers Pharmaceutical 
Company, we have a program that is community-based. It utilizes 
the 27 fully health care qualified centers in the State and 
seven counties, and what it does is it incorporates the value 
of lay health care leaders who are already in the communities, 
some of which are faith-based, and it is primarily directed 
toward minority communities, Hispanics, African Americans, et 
cetera, and what we do is pair them up with health-care 
professionals, who can take the information back into the 
community for education support, particularly on issues such as 
diabetes and depression. Those would probably be the major 
lessons learned.
    In conclusion, I would like to say that we are seeing 
through our programs, both the ones that I mentioned and the 
many other others that we have, that there is improved 
lifestyle changes, there is improved behavior in terms of 
making correct health care decisions. There is a decline in the 
use of ER visits, as well as inpatient hospitalizations.
    We believe that disease management is a potentially 
powerful tool in managing health, as well as health care costs.
    Thank you. I appreciate the time.
    [The prepared statement of Rhonda Medows follows:]

  Prepared Statement of Rhonda Medows, Secretary, Florida Agency for 
                       Health Care Administration

    Good Morning, Chairman Bilirakis, Representative Brown, and Members 
of the Committee. Thank you for this opportunity to address the 
Committee on improving quality and clinical outcomes through disease 
management in the Medicaid program. I am Dr. Rhonda Medows, Secretary 
for Florida's Agency for Health Care Administration (AHCA)--the state 
agency that directly oversees the Medicaid program. Today, I will 
briefly highlight a number of innovative Medicaid disease management 
programs in Florida.
    As you learned from the testimony of Governor Bush earlier this 
year, Florida's Medicaid program is the nation's fourth largest. We 
serve more than two million people and manage a $12.7 billion budget.
    Disease management in Florida is a pioneering effort to coordinate 
treatment efforts and improve health outcomes. We established a number 
of unique programs that are financed through innovative strategies--
including pharmaceutical investments, and other state partnerships. 
They focus on chronic diseases, the area that accounts for one of the 
largest portions of Medicaid spending. We spend 50 percent of our 
Medicaid budget on 5 percent of our beneficiaries.
    In 1997, Florida Medicaid was one of the first state Medicaid 
programs to establish a disease management program, and may, today, 
have the largest Medicaid initiative in the U.S. We have learned a 
great deal about what works and what does not. Time is needed to 
realize the full benefits of disease management, but early outcomes are 
positive and worth noting.
    This is what we know(disease management works. It saves dollars. 
For a three-year period starting in July 2000, it is estimated that 
through program savings and manufacturer guarantees, federal and state 
Medicaid program spending has been reduced by nearly $90 million. And, 
more importantly it has led to changes in health behaviors, better 
health outcomes, and improved quality of care and life. We have seen 
individuals lose weight, start exercising, and check their blood 
pressure and blood sugar on a daily basis. Many have returned to more 
active lifestyles, allowing some to return to work.
    In Florida, we started with a demonstration project and have now 
implemented disease management programs for asthma, autoimmune 
disorders, congestive heart failure, diabetes, hemophilia, HIV/AIDS, 
hypertension, and depression.
    Our goals have been to educate consumers, promote best practices, 
improve health outcomes and care coordination, and reduce both 
emergency room visits and inpatient hospitalizations. Our first efforts 
were segmented. That is, we assigned beneficiaries to specific 
interventions targeted for specific diseases. We quickly found that 
significant numbers of beneficiaries had more than one chronic 
condition. This led us to change the program to address patients with 
multiple diseases. We adjusted our focus to caring for the total 
patient, not just the diseases.

                      DISEASE MANAGEMENT PROGRAMS

    Beneficiary education and consultation has been a primary focus of 
the GlaxoSmithKline program as they have provided funding through a 
medication error demonstration project. AstraZeneca has funded outreach 
to physicians through regional pharmacists.
    The first effort to serve patients with multiple diseases was 
through our partnership with Pfizer, Inc., to serve people with asthma, 
congestive heart failure, diabetes, and hypertension. Pfizer provided a 
grant for disease management services, and the Agency contracted with 
10 high-volume hospital systems and one call center. Patients are 
matched with 60 nurse care mangers to provide one-on-one beneficiary 
education and to support change in health behavior. The program 
expanded--doubling from the original 50,000 targeted population--to 
more than 113,000 beneficiaries enrolled in this disease management 
program.
    Participants work individually with their nurse care managers who 
assess their physical, mental and environmental status, provide 
education about their diseases, support healthy behavior changes, 
coordinate care with primary care providers and specialists, and help 
with access to other needed services. The process empowers people. It 
helps them make better health care choices and navigate the health care 
system more efficiently. It provides help with managing the conditions 
at home by offering glucometers and lancets for diabetics, pillow 
covers and peak flow meters for asthmatics and weight scales and blood 
pressure cuffs for heart failure patients at no charge to either the 
beneficiary or Medicaid.
    With Bristol-Myers Squibb we launched a second partnership to 
provide disease management services through a contract with Federally 
Qualified Health Centers in seven counties. For the first time we 
employed a faith based outreach model using Promotoras (lay health 
workers) with health professionals, and social workers to provide 
education and support for a minority population with diabetes and 
depression. More than 2,100 minority beneficiaries have been enrolled.
    These partnerships offer a new funding model financed by 
pharmaceutical manufacturers through a combination of investments and 
guaranteed savings. Service delivery is focused in the communities 
where beneficiaries live and requires daily involvement by participants 
toward a goal of improving both their overall health and their quality 
of life.
    Let me provide an example. Cora Stewart is a 62-year-old Miami 
woman with diabetes, hypertension, congestive heart failure and 
emphysema. Before enrolling in disease management under the Pfizer 
grant, she was insulin dependent, had high cholesterol and could not 
walk a block or climb stairs. Working with her nurse care manager, Cora 
lost 45 pounds in six months. She began monitoring her blood pressure 
at home. She recently attended her daughter's wedding--without the 
walker she has relied on for years. She has taken control of illnesses 
that previously controlled her life.
    These disease management programs have reduced inpatient 
hospitalizations and the number of emergency room visits, brought a new 
level of coordination to every participant's total health care, and 
improved their quality of life immeasurably. And as if those outcomes 
were not enough, we have realized substantial cost savings.
    Disease management is a powerful tool both in managing health and 
in containing Medicaid costs. This common sense approach is emerging as 
the next important chapter in health care.
    Thank you. I will be happy to answer any questions you may have.

    Mr. Bilirakis. Thank you, Doctor.
    Mr. Simms.

                   STATEMENT OF JEFFREY SIMMS

    Mr. Simms. Good morning, Mr. Chairman, and other members of 
the subcommittee.
    I am Jeffrey Simms, one of the assistant directors of the 
State Medicaid program for North Carolina, and thanks for the 
opportunity to share our experience with you.
    Over the last 10 years, the North Carolina Department of 
Health and Human Services, through its two agencies, the 
Division of Medical Assistance and the Office of Research 
Demonstrations and Rural Health Development, has worked 
diligently to link Medicaid recipients with the primary care 
provider and create medical homes across the State.
    This link with the provider has enabled us to really 
establish a system where we can have the infrastructure to 
buildupon to improve the health care for the Medicaid patients 
in North Carolina.
    As of October 1, 2003, we have more than 700,000 Medicaid 
recipients linked with the primary provider and in the medical 
home across the State. 417,000 of those 700,000 recipients are 
enrolled with providers who are participating in what we call 
community care of North Carolina, where we are able to have 
disease management and other quality improvement conditions in 
place for them.
    The Community Care of North Carolina program has 
established a structure that allows the local, State coalition 
of county, which includes primary care providers, health 
departments, hospitals and departments of Social Services to 
partner together and create a local health care delivery system 
for the Medicaid patients receiving care.
    The local CCM networks identify costly patient services and 
then develop strategies which will improve utilization and cost 
management.
    The local community care networks collaborate at the State 
level through statewide clinical directors groups, which select 
targeted disease and care management processes which will be 
implemented systematically in all networks. They also review 
evidence-based practice guidelines and establish program 
measures.
    Disease management in North Carolina has been implemented 
for diseases specific to asthma and diabetes, and these 
initiatives include process measures like chart audits, whereby 
the State and local networks can measure the providers 
performance and offer feedback regarding this process measure.
    Since the implementation of the asthma initiative over the 
last 4 years, we have seen a continual increase in the number 
of individuals who suffer from asthma who are appropriately 
staged or documented for staging, given the appropriate 
prescription for corticosteroids and accurate asthma action 
plans in their medical records.
    Improvement can also be seen in the areas of 
hospitalizations and emergency room utilization for children 
who suffer from asthma.
    For the period of April 2000 through December 2002, the 
rate of inpatient hospitalizations for children who were linked 
with the CCNC doctor is 5.3 per 1,000 member months in 
comparison to 8.2 per 1,000 member months for individuals who 
were not linked with CCNC providers.
    Overall cost data shows that for calendar year 2000, the 
average asthma episode cost is was $687 for children who were 
linked with the CCNC provider and the cost for children not 
linked with the CCNC provider was $857 for the episode.
    Through the CCNC program, we are able to identify patients 
who use the emergency room frequently for what would be 
classified as routine primary care and the care managers follow 
up with the patients on the telephone, reminding him of primary 
telephone care office hours, after hours telephone numbers, and 
they also do home visits as well.
    We are seeing the benefits of these efforts, but we are 
limited in the steps that can be taken to control the 
inappropriate use of the emergency room because of certain 
regulations.
    During the period of July 1, 2001 to June 30, 2002 we were 
able to show somewhere in the neighborhood of a 6 percent 
difference in emergency room utilization for the individuals 
and children linked with CCNC providers.
    The CCNC infrastructure at the local level affords us the 
opportunity to work with the local hospitals to devise 
strategies to reinforce the medical home concept and to also 
provide the patient's primary care providers with real time 
emergency room encounter sheets.
    That is where the local partnership with the local hospital 
helps us and is able to come to the table to work with us.
    We are also exploring reimbursement options for the 
emergency room as well. The providers who are participating in 
community care of North Carolina have seen this, as the 
opportunity to really work together and identify ways and 
strategies to improve care, but not only improve care and 
quality, but also figure out ways to address some of the budget 
issues we are facing with our North Carolina Medicaid program. 
They identify strategies that would give us quick return.
    One of those is by looking at prescribing patterns for the 
providers participating in the community care of North 
Carolina. As a result, the providers have come together and 
they have developed a voluntary provider list where they are 
able to go in and look at prescribed drugs that evaluate the 
relative cost of medicines prescribed to key therapeutic 
categories.
    They identify the top 100 drugs by Medicaid expenditures in 
North Carolina, and then arrange those compounds in a tiered 
fashion, whereas the providers are now able to see where the 
actual costs are.
    As a result of this voluntary provider-driven effort, 
preliminary findings show that a post-rollout period of 
February through March of 2003 has shown 22 percent lower 
expenditures compared to pre-rollout period of September 
through October of 2002.
    Additionally, the Community Care of North Carolina 
infrastructure has allowed us to develop and implement 
strategies that are not necessarily included in the traditional 
PCCN program. We have looked at a nursing home polypharmacy 
initiative that creates pharmacist and physician teams that 
review drug profiles and medical records and care coordination 
for Medicaid patients and nursing homes.
    They determine if a drug therapy problem exists and 
recommend a change and perform follow-up. Approximately 9,200 
nursing home residents had greater than 18 drugs used within a 
ninety-day period. The criteria used to identify individuals 
included inappropriate drugs for the elderly, known as Beers 
drugs, drugs used beyond usual time limits, drug use warning 
and precautions and potential therapy duplications.
    We have been able to see some results of that initiative in 
the UNC School of Pharmacy, is completing an extensive 
evaluation of this initiative.
    In my conclusion, the Community Care of North Carolina 
program provides the infrastructure for the Department of 
Health and Human Services and the Medicare program of North 
Carolina to set priorities that can be implemented at the local 
level. We will continue to identify additional disease 
management initiatives and other opportunities for 
coordination, which will allow us to collaborate with public 
providers--public and private providers at the local level.
    We have learned that the success of this program is 
contingent on community ownership, partnership, appropriately 
aligned incentives, behavior change and the ability to measure 
change and patients.
    Thank you.
    [The prepared statement of Jeffrey Simms follows:]

Prepared Statement of Jeffrey Simms, Assistant Director, North Carolina 
                     Division of Medical Assistance

    Over the last ten years, the North Carolina Department of Health 
and Human Services through two of its agencies--the Division of Medical 
Assistance and the Office of Research Demonstrations and Rural Health 
Development, has worked diligently to link Medicaid recipients with a 
primary care provider in their local community, creating a medical home 
and addressing the access to medical services issue commonly known to 
Medicaid recipients. This link with the provider has established the 
basic infrastructure of the Community Care of North Carolina Program, 
also known as Carolina ACCESS I, II & III, a statewide primary care 
case management program. Community Care of North Carolina provides a 
system wherein the health care for the Medicaid population can be 
managed through a fee for service reimbursement environment.
    As of October 1, 2003 more than 700,000 Medicaid recipients across 
the state have medical homes with providers through this PCCM program 
and approximately 417,000 of these recipients are linked with one of 
the 2,000 providers who participate in a Community Care Provider 
Network that focuses on improved quality, utilization and cost 
effectiveness for the Medicaid program. Included in the supporting 
information is a map showing the distribution of the current thirteen 
CCNC networks across North Carolina. We are in the process of expanding 
the CCNC networks statewide by June 30, 2005.
    The Community Care of NC Program has established a structure that 
allows the local stakeholders in a county, which includes primary care 
providers, health departments, hospitals, and Departments of Social 
Services, to partner together and create a local health care delivery 
system for the Medicaid recipients receiving care in their community. 
The local CCNC networks identify costly Medicaid patients and services 
and then develop strategies that will improve utilization and cost 
management. This local collaboration also assists in the elimination of 
the fragmentation of care between public and private providers.
    The local Community Care Networks collaborate at the state level 
through the statewide clinical directors group, which selects targeted 
disease and care management processes that will be implemented 
systematically in all networks; reviews evidenced-based practice 
guidelines; and establishes program measures. At the present time these 
targeted disease and care management processes include: asthma, 
diabetes, pharmacy management, high risk/high cost management, and 
emergency room utilization.
    Any of the disease management initiatives implemented in Community 
Care of NC involves the clinical directors group setting performance 
standards; each network obtaining local provider buy-in; standardized 
physician toolkits; local and state level technical assistance; and 
practice level quality improvement system processes.
    The asthma and diabetes disease management initiatives include 
chart audits as a process measure whereby the state and networks can 
measure the providers' performance and offer feedback regarding this 
process measure. Since the implementation of the asthma initiative over 
the last four years we have seen a continual increase in the number of 
individuals who suffer from asthma who had documentation of staging, 
appropriately prescribed corticosteroids and accurate asthma action 
plans in the medical record. A bar graph is included in the packet 
showing this trend. Also included is a graph showing the chart audits 
for diabetes, which also shows improvements in the way providers are 
treating individuals who suffer from diabetes.
    Improvement can also be seen in the area of hospitalizations and 
emergency room utilization for children who suffer from asthma. For the 
period of April 2000-December 2002, the rate of inpatient 
hospitalizations for children linked with a CCNC provider was 5.3 per 
1000 member months, whereas those children linked with providers who 
were not participating in CCNC was 8.2 per 1000 member months.
    For that same period, April 2000 through December 2002, the 
pediatric asthma emergency room utilization rate was 158 per 1000 
member months for children linked with a CCNC provider, whereas for 
children linked with providers who were not participating in CCNC, the 
rate was 242 per 1000 member months.
     Overall cost data shows that for calendar year 2000, the average 
asthma episode cost was $687 for children under 18 years of age linked 
with a CCNC provider and the cost for those children linked with a 
provider who was not participating in CCNC was $857. We are in the 
process of pulling more recent cost data related to the treatment of 
asthma.
    CCNC has enabled the North Carolina Medicaid program to establish 
medical homes for the Medicaid population across the state. However, we 
still struggle with the inappropriate use of the emergency room. 
Through the CCNC program we are able to identify patients who use the 
emergency room for what would be classified as routine primary care and 
the care managers follow up with those patients on the telephone, 
reminding them of their primary care provider's office hours and after 
hours telephone number. We are seeing the benefits of these efforts, 
but we are limited in the steps that can be taken to control the 
inappropriate use of the emergency room. During the period of July 1, 
2001 through June 30, 2002, we were able to show a 6% difference in the 
number of children linked with a CCNC provider who received services in 
the emergency room when compared to the children linked with a provider 
who was not participating in CCNC. The CCNC infrastructure at the local 
level affords us the opportunity to work with the local hospitals to 
devise strategies to re-enforce the medical home concept and to also 
provide the patient's primary care providers with real time emergency 
room encounter sheets. We are also exploring reimbursement options for 
the emergency room.
    The physicians who participate in Community Care of North Carolina 
felt the need to encourage providers to take an informed look at their 
prescribing habits for their Medicaid patients. The providers felt the 
need to evaluate the relative costs of medicines prescribed in key 
therapeutic categories. They identified the top 100 drugs by Medicaid 
expenditures in North Carolina and then arranged those compounds in a 
tiered fashion by average wholesale price (AWP), where Tier 1 drugs 
offer the greatest potential cost savings to the Medicaid program. The 
tiered list is shared with providers throughout the CCNC network via 
posters, pocket-sized reference cards and an electronic drug reference 
entitled ePocrates. As a result of this voluntary, provider driven 
effort, preliminary findings show that a post-rollout period of 
February-March 2003 has a 22% lower expenditures compared to a pre-
rollout period of September 2002-October 2002. The actual savings 
equals approximately $640,000.
    Additionally, the CCNC infrastructure has allowed us to develop and 
implement a nursing home poly-pharmacy initiative that creates 
pharmacist and physician teams that review drug profiles and medical 
records for Medicaid patients in nursing homes. They determine if a 
drug therapy problem exists and then recommend a change and perform 
follow-up. Approximately, 9,208 nursing home residents had greater than 
18 drugs used within a 90 day period. The criteria used to identify the 
individuals included: inappropriate drugs for the elderly known as 
``Beers drugs''; drugs used beyond usual time limit; drug use warnings 
and precautions; the prescription advantage list; and potential 
therapeutic duplication. Of the 9,208 patients, recommendations were 
made on 8,559 of them and 74% or 6,359 had recommendations implemented. 
This initiative has proven that the pharmacist and physician team 
approach reduces costs and improves quality. The UNC School of Pharmacy 
is completing the evaluation of this initiative. Potential expansion 
options include all nursing home and assisted living patients, 
including adult care home patients in North Carolina.
    In my conclusion the Community Care of North Carolina program 
provides the infrastructure for the NC Department of Health and Human 
Services to set priorities that can be implemented at the local level. 
We will continue to identify disease management initiatives and other 
opportunities to collaborate with public providers at the local level. 
We have learned that the success of this program is contingent upon 
community ownership, partnership, appropriately aligned incentives, 
behavior change, the ability to measure change and patience.

    Mr. Bilirakis. Thank you very much, Mr. Simms.
    Ms. Bella, you are on.

                  STATEMENT OF MELANIE M. BELLA

    Ms. Bella. Good morning, Mr. Chairman, Representative 
Brown, Representative Wilson and Representative Green.
    My name is Melanie Bella. I am the Medicaid director for 
the State of Indiana, and I appreciate the opportunity to come 
talk to you a little bit about what we are doing.
    Under the leadership of our Governor, Joe Kernan, and in 
partnership with our State Department of Health and the Health 
Commissioner, Dr. Wilson, we have developed what we call the 
Indiana Chronic Disease Management program. It is a program 
that is designed to change the way care is delivered statewide, 
not just within the Medicaid population, because the problems 
that we see plaguing our programs in the area of chronic 
disease are the same ones that our Medicare beneficiaries are 
facing, our employers are facing, and the rest of the public 
health community providers in Indiana are facing, so it is 
critical that we have the partnership of the Department of 
Health in building this community effort that we have put 
together.
    Right now, we started our program in July and we have a 
program in place for recipients place for diabetes and 
recipients with congestive heart failure and we will be adding 
asthma, stroke, hypertension, HIV AIDS within the next 6-month 
period, so we are excited about the initial results we are 
seeing, and I want to talk to you a little bit about how we got 
to where we are.
    We started out looking at using commercial disease 
management vendors and changed the course to really do what we 
call assemble the pieces in a locally based infrastructure 
across the State that utilizes our existing public health 
infrastructure and puts together a program that works for the 
State, regardless of payer source, regardless of disease state, 
to create true sustainable long-term value for the State of 
Indiana.
    Henceforth, our focus has been on developing infrastructure 
that we need to promote permanent, long-term, sustainable 
change, so if I could just direct you to that picture over 
there for a few minutes and hopefully keep me on time here.
    I want to talk to you about the main pieces that are part 
of our program and how they work together, and there are five 
main principles that we have used in putting together this 
infrastructure, those being what we promote as evidence-based 
guidelines, protocols for our providers. We believe strongly 
that this program must have the involvement of patients and we 
have a strong patient self-management program, we use the 
Stanford self-management approach.
    We would not be able to do this program without extensive 
involvement by the primary care providers in the Indiana 
community.
    Fourth, this program must be cost effective for us. As you 
all know, the pressures that Medicare and payers everywhere are 
facing, and last it is very important that we use our existing 
public health infrastructure. If we are going to spend 
resources on attacking the problems of chronic illness, we 
wanted to spend those in-state and infuse them into the local 
public health infrastructure, rather than spend them quite 
honestly with a commercial vendor, so let me talk to you about 
those pieces.
    If you start at the top, that is where Medicaid and the 
Department of Health are working together and using community 
resources, and that feeds really into the heart of our program, 
which is the patient and the provider.
    The goal of this program is to keep the patient engaged 
with their medical home, knowing if we are going to have long-
term sustainable success the patient has to be engaged with 
their primary-care provider. We provide a support system, but 
that is just short-term, dead-end work with our high-needs 
patients and put them back in touch with their primary-care 
system to promote the medical home concept.
    On the left-hand side is where we bring in the patient, and 
we are teaching them self-management, how to better interact 
with their primary care providers and make healthy choices and 
decisions affecting their health care.
    On the right-hand side are the materials and tools that we 
give to our providers. We were fortunate enough to be kind of 
adopted by the McCall Institute and use the chronic care model 
and the institute for Health Care Improvement to help us take 
evidence-based guidelines, work with our physician, community, 
and commercial payers within the State to modify them for 
Indiana's use and put together guidelines and protocols that 
have been endorsed by payers and providers to spread across the 
State so that everyone in Indiana is using the same evidence-
based guidelines for these disease states, so it is those 
resources that we feed into our providers.
    I brought a copy today. We have a provider tool kit and a 
nurse care manager book, very simple, straightforward 
guidelines, flow sheets. I would be happy to share this with 
anyone.
    In addition, we have all of this on CD that we have 
provided to all of our providers who are interested across the 
State and who are also willing to share with any other State 
Medicaid programs or public health entities, because this has 
been developed in the public domain and we want to maximize the 
public investment for everyone.
    Mr. Bilirakis. Would you provide those to the committee?
    Ms. Bella. Certainly. I will be happy to do that.
    Mr. Bilirakis. Without objection, that will be the case and 
that will be made part of the record.
    Ms. Bella. Okay.
    Thank you very much.
    Again focusing on the heart of the patient and provider, 
the question was what supports do we give to promote the 
medical home concept, so we have a care management component 
that has two pieces: One is a call center and one is a network 
of care managers.
    Our call center is managing about 80 percent of our 
patients, although they touch everyone in our program and our 
call center functionality is provided with our existing partner 
who provides call center services to Medicaid. That helps us, 
because they already know our population and they have 
credibility with our provider base.
    We have a nurse care manager network that those functions 
are provided to us by Indiana Minority Health Coalition and our 
primary health care association; again, resources already 
located in the community who know how to deal with our patient 
population.
    And last and most importantly, we have a Web-based patient 
registry that we developed in conjunction with one of the 
Medicare quality improvement organizations to support the 
exchange of data and the ability to measure outcomes, and we--I 
know I am running out of time, but I would be remiss not to let 
you know that we have a very strong measurement and evaluation 
component in place that is being provided to us by the 
Regenstrief Institute of the Indiana University School of 
Medicine. They will be doing a statewide study of our program, 
as well as a randomized controlled trial, so that we can truly 
isolate the impact of these interventions and see if what we 
are doing is successful or not, so I would very much appreciate 
the opportunity to talk to you today and would love to share 
information with anyone who is interested in how to change the 
way care is delivered across their State.
    Thank you very much.
    [The prepared statement of Melanie M. Bella follows:]

 Prepared Statement of Melanie M. Bella, Assistant Secretary, Indiana 
               Family and Social Services Administration

                              INTRODUCTION

    Chairman Bilirakis, Ranking Member Brown, distinguished 
Subcommittee members, thank you for this opportunity to share with you 
an initiative designed to improve quality and clinical outcomes for 
Medicaid recipients in Indiana. My name is Melanie Bella, and I am the 
Assistant Secretary of the Indiana Family and Social Services 
Administration, and the Director of the Office of Medicaid Policy and 
Planning (OMPP). In partnership with the Indiana State Department of 
Health and the State Health Commissioner, Greg Wilson, M.D., we have 
developed and implemented a comprehensive initiative, the Indiana 
Chronic Disease Management Program (ICDMP), designed to change the way 
health care is delivered across the state of Indiana.
    The goal of the ICDMP is to build a comprehensive, locally based 
infrastructure that: 1.) is sustainable; 2.) strengthens the existing 
public health infrastructure; and 3.) helps improve the quality of 
health care for all populations, not just Medicaid recipients. We hope 
that the ICDMP infrastructure will be an asset not only for patients 
but also for healthcare providers. We also hope the ICDMP can serve as 
a model for other states that may be interested in building integrated, 
locally based infrastructures for their Medicaid program and state as a 
whole. Strengthening public health systems and care delivery networks 
designed to decrease the prevalence of chronic illness and increase the 
use of primary care ensures that states are maximizing the public 
investment in achieving quality health outcomes.

                           MEDICAID CHALLENGE

    The Medicaid program in Indiana covers approximately 765,000 
recipients at a cost of $4.3 billion today. Like most states, 
enrollment and demand for Medicaid services continues to increase. By 
the end of State Fiscal Year 2005, Indiana expects to spend $4.8 
billion to cover over 825,000 recipients. Even with continued cost 
containment efforts, the rates of growth in Medicaid expenditures will 
continue to be unsustainable for states unless they develop new 
strategies for managing Medicaid costs. The new strategies must address 
the primary drivers of Medicaid expenditures: utilization and poor 
quality. It is critical that Medicaid programs focus on controlling 
utilization and improving health care quality for recipients with 
chronic illness. By making strategic system investments, states can 
develop the infrastructure necessary to improve care delivery and 
quality outcomes, which will help chronically ill patients lead more 
productive lives, slow the rate of growth in the short term and, 
ultimately, reduce costs in the long term.

                               BACKGROUND

    In 2000, approximately 125 million people in the United States had 
some type of chronic illness and by 2020 it is estimated to grow to 157 
million. By 2010, 17% of our GDP will be spent on health care, and 78% 
of these costs will result from chronic diseases, including almost 80% 
of total Medicaid expenditures, and this is increasing as our 
population ages. Numerous surveys and audits have documented gaps 
between well-established guidelines for the clinical aspects of care 
and how practitioners are actually delivering care. Providers feel 
resource constrained and too rushed to meet the clinical, educational, 
and psychological needs of chronically ill patients and their 
caregivers. Patients often experience care that is uncoordinated, 
impersonal and unsupportive, which may leave them feeling incapable of 
meeting the day-to-day needs of managing their chronic condition.
    In Indiana, national, state, and local partners are working 
together to implement a model of care for people with chronic 
conditions. Indiana's five major objectives for its chronic disease 
management program are as follows:

 Provide consistently high quality care to Medicaid recipients that 
        improves health status, enhances quality of life and teaches 
        self-management skills.
 Provide support to primary care providers and integrate primary care 
        with case management.
 Utilize and strengthen the public health infrastructure.
 Reduce the overall cost of providing health care to Medicaid patients 
        suffering from chronic diseases.
 Achieve long term results by changing the way primary care is 
        delivered across the state, not just for Medicaid.
    The key themes underlying the objectives are: patient self 
management, involvement of primary care providers, utilization of 
public health infrastructure and cost effectiveness. Most importantly, 
Indiana's program eventually aims to change the way care is delivered 
statewide--regardless of payer source and regardless of illness.
    We are initially targeting recipients with diabetes and congestive 
heart failure (CHF) and are quickly expanding to include asthma, 
stroke, hypertension and HIV/AIDS. Other chronic diseases will be added 
as appropriate and necessary. The clinical priorities of each condition 
are based on currently available scientific evidence. The principles 
used to improve care for the chronic conditions include:

 Implementation of the Chronic Care Model in the primary care 
        settings.
 Creation of a care management network to provide support to primary 
        care practices.
    This will begin through a series of ``Collaborative'' learning 
sessions, which will serve as the foundation for spreading the Chronic 
Care Model statewide. The Breakthrough Series Collaboratives were 
developed by the Institute for Healthcare Improvement (IHI) in the mid 
90's to facilitate health system change. Participants in the 
Collaborative will learn and implement an organizational approach to 
caring for people with chronic disease that utilizes and supports a 
comprehensive, sustainable locally based care network. The 
Collaborative model will be implemented statewide in a phased approach 
over a twelve-month period by sharing the best available scientific 
knowledge on the care for people with these conditions, and by learning 
and applying methods for change in the delivery of primary care.

               STATE OPTIONS FOR MANAGING CHRONIC DISEASE

    In the 2001 legislative session, the Indiana General Assembly 
mandated that the Office of Medicaid Policy and Planning (OMPP) 
contract with a commercial vendor to provide disease management to 
recipients with diabetes, congestive heart failure, asthma, HIV/AIDs 
and to provide case management for recipients with the top 10% of 
costs. OMPP issued a request for proposal (RFP), received bids from 
four vendors, selected one and began negotiations. Eleven months later, 
OMPP canceled the procurement. In the 2002 legislative session, the 
General Assembly removed the requirement that OMPP contract with a 
commercial vendor.
    We learned that there are options other than the commercial vendor 
approach, and it is important for other states to know that alternative 
options exist. Many people assume there are just two choices: ``make'' 
or ``buy''. ``Make'' usually implies starting from scratch and states 
are legitimately concerned about the time, resources and potential 
duplication of effort of that approach. The ``buy'' option is 
attractive because states can hold a vendor accountable and augment 
scarce state resources. The question is what is the state left with 
when the contract ends. Luckily, there is a third option: ``assemble''. 
The assemble approach is basically a hybrid of the make or buy models 
that allows states to assemble the best pieces together into a locally 
based infrastructure that supports and enhances the existing state 
public health infrastructure. Indiana chose the assemble approach, but 
it is important to note the pros and cons of each option.
    There are two major options in the ``Buy Model'': outsourcing 
completely to a commercial vendor or utilizing commercial chronic 
illness software. Based on our analysis, we identified some of the 
major pros and cons of each to be as follows.
Buy: Commercial Vendor Approach

------------------------------------------------------------------------
                   Pros                                 Cons
------------------------------------------------------------------------
One stop shopping.........................  Little or no local input or
                                             involvement of providers or
                                             community
Access to resources (products and people).  Jobs & revenue associated
                                             with running the program go
                                             out of state
Financial risk accepted by vendor.........  Risk negotiation difficult
                                             for Medicaid populations
                                            No sustainable investment in
                                             infrastructure
------------------------------------------------------------------------

Buy: Chronic Illness Software

------------------------------------------------------------------------
                   Pros                                 Cons
------------------------------------------------------------------------
Off the shelf program, already developed..  No local physician or
                                             delivery system input or
                                             involvement
                                            Limited/no flexibility with
                                             survey tool
                                            Telephonic case management
                                             only
                                            System does not always
                                             interact with claims
                                             systems, makes reporting
                                             duplicative
------------------------------------------------------------------------

Assemble: Chronic Care Model

------------------------------------------------------------------------
                   Pros                                 Cons
------------------------------------------------------------------------
Evidence based interventions with proven    Requires significant state
 results.                                    resources
Allows for local input and experience in    State retains financial risk
 developing program components.
Promotes patient self management..........  In the short term, may take
                                             longer to develop and
                                             implement (note: this was
                                             not the case in Indiana)
Carries over to improve care for all
 patients in a practice
Keeps revenues and jobs in state
Provides on site as well as telephonic
 case management
Creates a comprehensive, sustainable
 locally based infrastructure with
 effective case management in place to
 support primary care providers and
 Medicaid members.
------------------------------------------------------------------------

      INDIANA'S CHOICE: CHRONIC DISEASE MANAGEMENT PROGRAM (ICDMP)

    During the period of negotiations with the commercial vendor, 
Indiana was chosen to participate in a Policy Academy on Chronic 
Disease Management and Prevention sponsored by the National Governors 
Association. A team of state policymakers, legislators and community 
stakeholders attended a planning session and developed a strategic 
action plan. As part of that process, we became introduced to experts 
in the field of chronic disease management and began to question if 
what we had asked for in the RFP and were in the process of negotiating 
was in the long-term best interests of the State. As we learned more 
and the negotiations narrowed to debates over guaranteed cost savings 
as opposed to interventions, protocols and quality improvement, we 
concluded that the commercial vendor approach we had originally 
envisioned was no longer the model we wanted to pursue. We enlisted the 
support of Dr. Ed Wagner, Director of the MacColl Institute for 
Healthcare Innovation, Center for Health Studies, Group Health 
Cooperative, and his team in developing a program grounded in the 
principles of the Chronic Care Model. The Chronic Care Model was 
developed through Improving Chronic Illness Care (ICIC), a national 
program supported by the Robert Wood Johnson Foundation. The Chronic 
Care Model focuses on improving care delivery and promoting system 
change through the use of evidence based care practices, strong patient 
self-management and extensive involvement of primary care providers and 
practices. The Chronic Care Model reinforces all the elements necessary 
for creating a sustainable, comprehensive, locally based 
infrastructure:

 Evidence based guidelines
 Tools to support and assist providers
 Strong patient self management and involvement in health care 
        decisions
 Investment in public health infrastructure
 Creation of sustainable infrastructure in a locally based manner that 
        benefits state as a whole and leaves the state better off than 
        when it started
 Long term focus on improving quality vs. short term focus on 
        ``guaranteed'' savings
    The Chronic Care Model changes the approach of medical care from 
reactive, acute care for illness to a preventive, coordinated care 
model for health that will decrease complications and eventually reduce 
costs. As mentioned earlier, we will be spreading the Chronic Care 
Model through a series of Collaborative learning sessions developed by 
the Institute for Healthcare Improvement (IHI). IHI has been a valuable 
partner in teaching us how to test change concepts and develop and 
implement quality improvement initiatives in the medical care 
environment.

                     ASSEMBLING THE INFRASTRUCTURE

    Using the assemble approach, the first step is to identify the best 
components and partners available to build and strengthen the existing 
public health infrastructure and that will facilitate the interaction 
between primary care and chronic disease case management statewide.
    The ICDMP has the following major components and partners:

 Program Management. Medicaid and the Department of Health are jointly 
        responsible for the program including policy development, 
        contracting and monitoring performance.
 Primary Care. The focal point of patient care is the primary care 
        physician. Key elements of the ICDMP are designed to provide 
        information and resources to support the physician. The 
        Medicaid provider community is our partner in this component, 
        and we are working with them to ensure our reimbursement is 
        aligned with the outcomes we hope to achieve.
 Care Management. Care management is comprised of:
     A Call Center that monitors patient status and follow-up based on 
            the established protocols. We partnered with the existing 
            Medicaid call center vendor to provide these services to 
            take advantage of the relationships, credibility and 
            knowledge they already have with our recipients and 
            providers. The call center services are available for all 
            ICDMP patients.
     A Nurse Care Manager network whose nurses provide more intense 
            follow up and support to a smaller group of high-risk 
            patients. We partnered with the Indiana Minority Health 
            Coalition and the Indiana Primary Health Care Association 
            to hire nurses and deploy them statewide, according to 
            physician practice and geographic area. These organizations 
            are natural partners in that they have established 
            relationships and credibility across the state and are 
            fairly evenly split between urban and rural areas, which 
            prevent overlap or duplication.
 Patient Data Registry. An electronic data registry is available to 
        physicians and can be used for all patients. For Medicaid 
        patients, it will be populated with claims data and case 
        management data. We partnered with Mountain Pacific Quality 
        Health Foundation, the Medicare Quality Improvement 
        Organization for Montana, in the development of the Chronic 
        Disease Management System (CDMS). CDMS contains the ICDMP care 
        protocols and clinical guidelines, patient education materials, 
        Medicaid claims data, reminder and recall functions and other 
        clinical data entered by the call center, providers or nurse 
        care managers.
 Measurement & Evaluation. Measures of program performance are being 
        established using both claims history data and individual 
        health outcomes indicators for both an intervention and control 
        group. We partnered with the Regenstrief Institute, of the 
        Indiana University School of Medicine, to perform a statewide 
        evaluation as well as a randomized controlled clinical study 
        within Marion County (Central Indiana region). We are committed 
        to a rigorous evaluation of this program that will measure 
        total costs (not just savings from reduced hospitalizations) 
        and identify which components are effective as well as those 
        that are not achieving the intended outcome and need to be 
        changed. For an evaluation to be meaningful, it must be clearly 
        structured to measure total program effectiveness. As such, 
        when evaluating chronic disease management programs, it is 
        critical to examine all costs for all patients during the 
        intervention. Looking only at selected costs or only at the 
        most expensive groups of patients can be deceiving.
    In closing, I'd like to thank the Members of the Subcommittee for 
the opportunity to discuss this important issue with you. The Indiana 
Chronic Disease Management Program was assembled with the help of many 
experts in this field to solve a public health problem that reaches far 
beyond the Medicaid program alone. We would be more than happy to share 
any of our materials (clinical protocols, consensus guidelines, patient 
education materials, call center scripts, patient identification 
criteria, etc) with any state that is interested in assembling their 
own chronic disease management program. Thank you again for your time, 
and I would be happy to answer any questions you may have.

    Mr. Bilirakis. Thank you, Ms. Bella, and I would ask all of 
you to feel free--we would welcome any additional information 
you might have to furnish to us, such as the information that 
you have talked about becomes a part of the record. So please 
basically help us to come up with whatever changes need to be 
made and any need to be made, improvement and that sort of 
thing.
    Well, Dr. Medows, I guess it is no surprise that I am going 
to start with you. I am just pleased that you and others spoke 
with great emphasis on benefits to the patient, the patient, 
slash, beneficiaries, slash, patient. You know, when you talk 
about savings, and they are very significant obviously, because 
there is only so much there, and we want to be sure that the 
dollars are best used and in the best way possible. But I think 
the bottom line is the benefit to the patient. And so you have 
talked about improving quality of care, improve health 
outcomes, et cetera. I want you to feel free to submit to us in 
more detail, if you can, some of your experiences in that 
regard, you know, and what you have learned.
    You talked about the four areas that Florida has learned. I 
find that very significant. And so if you can go into details 
there and in writing to us, and also, the Promotora program, 
because, again, as your written statement indicates, a lot of 
the chronic diseases have disproportionate impact on many 
minority populations, and apparently a Promotora program is 
being very helpful in that regard in conjunction with working 
with Bristol-Myers. So please expand upon that, give us more 
details so we can learn more about it. And the reason is 
because we can only go into so many things here orally, but it 
could be very helpful.
    The question that I would have is something that you 
haven't mentioned regarding the Florida Legislature's Office of 
Program Policy there, their study and their analysis, which 
recently released a report that was very critical of the 
funding, and I say very critical. Maybe very is wrong, but, in 
any case, critical of the funding mechanism used to pay for 
your disease management program. It indicated that the State 
could have received more money through supplemental drug 
manufacturer rebates rather than having the manufacturers pay 
for a disease management program.
    So the questions regarding that are do you believe that 
Florida negotiated a fair deal in its negotiations from the 
drug manufacturers? Does the analysis account for future year 
savings that can be achieved through improved beneficiary 
health as against if you have got the dollars and use them 
toward that end; and what assumptions did the report make, if 
you know, about all the manufacturers participating in the 
value-added programs converting to supplemental rebate?
    Now those are basically the questions. If you can take 
maybe the rest of the time to respond to that, I would 
appreciate it.
    Ms. Medows. Okay. Thank you, Mr. Chairman.
    I do believe that the negotiations were done fairly. In 
2001, the Florida Healthy State contract was signed with 
Pfizer, and at that time we believed that the rebate value with 
us, with the State of Florida and Pfizer, would have been $33 
million. Instead of that what we chose to do was take this in 
terms of value-added funding for the disease management 
program.
    I would have to disagree with APAGA's conclusion that it 
would be better to simply take that one-time savings and rebate 
that would be non reoccurring as opposed to continuing the 
program that was already serving over 100,000 individuals.
    Mr. Bilirakis. Can you evaluate the dollars of the program 
in terms of the Pfizer's--the drug manufacturers' part in it as 
against the $33 million? Is that it, or are Florida 
beneficiaries receiving more in terms of benefits?
    Ms. Medows. I believe that they certainly are.
    Mr. Bilirakis. Okay. Please continue.
    Ms. Medows. I believe that because if we simply had done a 
rebate, it would have been a nonreoccurring. We believe that 
several assumptions were made that would not necessarily be 
true: First, that if we took a rebate, that the money that 
would be saved for that particular year would automatically be 
sent back to the Medicaid program in terms of disease 
management. We don't know that that necessarily would be true. 
In fact, given budget crunch and budget shortfalls, I am not so 
sure that it would have made it back to them, okay.
    No. 2, this was an assumption that was made that the 
pharmaceutical manufacturers would have agreed to a rebate if 
value-added programs were not an option. The pharmaceutical 
manufacturers do not have to do that. They do have a third and 
fourth option. One is not to participate in our program at all. 
And two is to have us to do a prior authorization-type program 
which would be costly and a little bit prohibitive in terms of 
resources and staff. They made an additional assumption, and 
that assumption was not valuing what the benefits would be to 
the individuals being served in that program and looking in the 
long haul over the decreased health care expenditure because of 
the improved health outcomes that we expect.
    Mr. Bilirakis. My time is up. But, again, I would ask you 
to expand as you may wish to your answer in that regard, 
because that is certainly a significant point in our 
deliberations.
    And I now yield to Mr. Brown.
    Mr. Brown. Thank you, Mr. Chairman.
    I would like to start by asking unanimous consent to enter 
into the record the Office of Program Policy analysis of the 
Government Accountability Office of the Florida Legislature, if 
I could, which discusses and illuminates some of Dr. Medows' 
comments and contentions. If I could enter that.
    Mr. Bilirakis. Without objection.
    Mr. Brown. Ms. Bella, I would like to ask you and Mr. Simms 
each a question. I first want to mention a comment my friend 
from New Mexico Ms. Wilson made in her opening comments about 
needing more data--and, yes, the hearing last week on Medicaid 
showed we really don't get enough data. And I would ask the 
committee at some point to help us get more information from 
those--from those carriers, private, HMOs, both in Medicare and 
Medicaid that don't collect data, frankly, as well as fee-for-
service, because they don't give us data on individual claims. 
So I hope that we can work together and be able to get more 
information and be able to understand both Medicare and 
Medicaid better in the future.
    Ms. Bella, you spoke generally of some of the reasons why 
Indiana decided that the private vendor approach wouldn't lead 
to the long-term sustainable and effective case management 
model that you were seeking. Could you elaborate on how the 
private disease management organization was interested in being 
reimbursed, and can you approximate how much of the savings 
earned by Indiana would have actually gone to them?
    Ms. Bella. Sure. Thank you.
    Briefly, they were--proposed to us a funding on a per-
member/per-month basis. At different points in the negotiation, 
it was unclear whether you would be paying on eligible members, 
enrolled members or engaged members. And so there was a lot of 
variation there in terms of how you know if someone is truly 
being touched and affected in order to generate a payment on a 
monthly basis. They proposed to put a percentage of their fees 
at risk, and that is one of the main problems that we had, 
quite honestly, is that we spent a lot of time negotiating over 
a guaranteed savings and not a lot of time discussing the 
substance of the interventions. We ran into problems about how 
to count savings for the Medicare dual-eligibles, for example, 
and how to take into account the fluidity of the recipients as 
they go on and off the Medicaid program.
    Mr. Brown. Thank you.
    Mr. Simms, it appears that because disease management is 
new to a number of States, that monitoring and reporting and 
benchmarks can be critical to creating future success, 
obviously. What kinds of monitoring tools--if you would share 
with us the monitoring tools, the reporting requirements that 
North Carolina implemented through its--all its ACCESS I, II 
and III program.
    Mr. Simms. We have really made a lot of effort at getting 
the process measures in place and looking at the chart audits, 
those sorts of things, and that can be provided. Some of the 
results of those chart audits can be provided to the 
subcommittee.
    Some other things that we have been looking at are some 
practice profiles for the providers. We are looking at doing an 
in-house sort of practice profiles that can be risk-adjusted to 
give to the providers. We are learning that the feedback to the 
docs are what really enables them to really begin looking and 
working more aggressively to get things in place. But I can 
give the subcommittee examples of those practice profiles as 
well and what we are putting in place.
    Over the last couple of years we have also done some things 
with quality in relation to our patient population, looking at 
the CAP survey, patient satisfaction, making sure that the 
patients are feeling that the health care delivery system is 
something that is meeting their needs as well.
    Mr. Brown. Thank you.
    And, Ms. Bella, one more question for you in the last 
minute or so. Could you just describe to us how you--more about 
the integration of the Department of Health, the physicians, 
other providers, community resources and patients when you 
develop the program that it seems to be more sustainable in the 
long run? How critical is that integration to creating a more 
effective and long-lasting program?
    Ms. Bella. Thank you. That is a very important question, 
Representative Brown. We convened a Chronic Disease Policy 
Advisory Council that consisted of all the major insurers in 
the State of Indiana, the medical associations and other health 
plans as well as physician groups. They came to the table and 
worked with us, so we got their buy-in and involvement early 
on, which we believe helps engage them in the implementation of 
our program.
    In addition, we identified local resources across the State 
who already have relationships with recipients and the provider 
community as well as the public health infrastructure, and the 
reason we believe that makes that more sustainable is because 
they are invested in these decisions, and they are already part 
of that health care system. And we are creating the 
infrastructure with them, and we believe that that will make 
them more active participants in that and vested in the success 
and the long-term viability.
    Mr. Brown. Thank you.
    Mr. Bilirakis. Mrs. Wilson to inquire.
    Mrs. Wilson. Thank you, Mr. Chairman.
    I wanted to ask a question of Chris and also of the three 
State representatives as well. In order to embark on these 
programs, and in your case, Chris, with the States that you 
work with, did the States require a waiver from CMS to try 
this?
    Ms. Selecky. Yes. In the case of Florida, we did have to 
get a waiver, and it took about a year to go through that 
process, which was unfortunate. It delayed the start of the 
program. In New Mexico we are working with the managed care 
organizations, so no waiver is required.
    Mrs. Wilson. So the only waiver was the one that they had 
to apply for to do managed care under Medicaid.
    Ms. Selecky. Yes.
    Mrs. Wilson. What about in the other States? Did you 
require waivers, and how long did it take you? Dr. Medows, do 
you want to----
    Ms. Medows. It is actually variable in terms of the length. 
There are some programs--we have had programs going on since 
1997, so there are different people working in CMS at different 
times, different emphasis on getting waivers through the 
system.
    And then you have to take into account that some of our 
programs like the Pfizer Healthy State program was quite new 
and complicated. I think we may have built some new laws just 
around it, new rules. It took quite a bit of work.
    Mrs. Wilson. Mr. Simms, did North Carolina require a waiver 
in order to do what you wanted to?
    Mr. Simms. Initially with our Primary Care Case Management 
program, when we started in the early 1990's, yes, it was a 
1915(b) freedom of choice waiver. But most recently, with the 
BBA managed care regs, they allow you to do a lot of the 
enrollment and linkage with primary care providers through the 
State plan amendment process, and that is what we have been 
able to do with the bulk of this population. It does not allow 
you to mandatorily link the vulnerable or the special needs 
population. You have to make sure that they recognize it is a 
voluntary program for them. But for the bulk of the population 
we were able to still mandatorily link them through the State 
plan amendment process.
    Mrs. Wilson. How about Indiana?
    Ms. Bella. Indiana also has a 1915(b) waiver for our 
managed care program, and we were able to add this. Basically 
it is an amendment to that waiver to allow us to provide these 
services.
    Mrs. Wilson. With respect to Indiana, you mentioned that 
there is a--I think you said Indiana University is doing a 
study on measurement and evaluation. But aside from the kind of 
studies where someone goes in and takes a snapshot look, what 
kind of information systems do you have in place linking all of 
these to know whether you are improving the health status of 
the members?
    Ms. Bella. We have what is on there referred to as the Web-
based patient registry, CDMS's chronic disease management 
system, developed by the quality improvement organization for 
Montana. And we have worked with them to--it is an electronic 
patient registry that contains claims data, clinical data, 
guidelines, reminder recall, anything that anybody that touches 
that patient wants to put in there. So we use that.
    In addition, we have softer measures that we obtained 
through assessments that our call center is doing. We have 
process measures that we look at; simply, is the person getting 
their recommended eye exam. And then we have outcome measures, 
mostly through the Regenstrief Institute.
    And one point to note that IU is doing for us, they are 
doing a statewide evaluation that will be a pre- and 
postsnapshot look, as you refer to. But we do have a randomized 
control trial going on as well that will provide an even more 
rigorous evaluation, and our focus is on both process and 
outcomes.
    Mrs. Wilson. Chris, how does LifeMasters use information 
systems to give you--what kinds of data systems do you have on 
telling whether people are healthy or not?
    Ms. Selecky. We have developed a very sophisticated data 
base management system which brings in data from a variety of 
sources, Medical Claims Administration demographic data, lab 
information, pharmacy benefit information, and consolidates all 
that information into an individual profile of every single 
program participant with whom we work.
    Mrs. Wilson. And then can you aggregate that data?
    Ms. Selecky. Yes. So we have an individual profile, and 
then we have an aggregated profile of the entire population. We 
track over time improvements in clinical status and reductions 
in utilization. And then we usually have that information pre 
the program so that we know what the baseline is. We measure 
what is going on during the program year, and then we do a pre-
postanalysis. We also do randomized control trials as well and 
have third parties validate the outcomes.
    Mrs. Wilson. One final question, if we can do it quickly, 
and that is everyone--or several folks mentioned mobility on 
and off of Medicaid eligibility. And I don't know whether you 
know that off the top of your head what your mobility rates are 
in Florida, North Carolina and Indiana, but if you do, what are 
they? I mean, what percentage of your population is there at 
the end of the year that you started with at the first of the 
year or however you measure your mobility? Dr. Medows, do you 
know, or should I just leave that one for the record?
    Ms. Medows. I would rather actually get you something that 
is much more definite. I can tell you that it is an issue of 
people losing their eligibility coming back in, because that 
disrupts care. And we try to make it so that if they--if we can 
get them back on board within 90 days, that they are just 
resuming instead of starting from scratch. But I can't tell you 
an exact number right now.
    Mrs. Wilson. Maybe if we could leave that question for the 
record, and I would also ask to reserve the right to submit 
additional statements for the record.
    But getting at this issue of mobility is, I think, one of 
the keys to addressing some of the problems we face with 
Medicaid.
    Thank you, Mr. Chairman.
    Mr. Bilirakis. Thank you, Mrs. Wilson.
    By the way, without objection, the opening statements of 
all members of the subcommittee will be made a part of the 
record.
    Oh, Mr. Green is back.
    Mr. Green. Thank you, Mr. Chairman.
    Mr. Bilirakis. You are recognized.
    Mr. Green. Thank you. I have a number of questions.
    First, Ms. Selecky and Ms. Bella, in your testimony both of 
you indicate that minority health is a component of disease 
management programs, and as is representative, I have a 60 
percent plus Hispanic district. I am especially interested in 
the lessons you have learned on how to treat the population; 
and as you point out, and we know in my own district, higher 
incidence for diabetes and heart disease and certain cancers, 
and in some cases less cancers with Hispanic women in one 
particular area, and a host of other chronic illnesses.
    Have you designed your programs, particularly in 
California, but also in Indiana, to the unique needs of the 
Hispanic community? I guess the overall minority community, 
because some of these same indicators are in Hispanic 
communities and African American communities.
    Ms. Selecky. Yes, Congressman Green. We employ nurses who 
speak Spanish so we can provide multilingual services over the 
telephone and in person with our program participants. We 
provide program materials in Spanish and Chinese actually, 
because we have a very large Chinese population in the Bay 
area. And we also adapt the content of our program to cultural 
issues. There are definitely different issues around the way 
that people interact with their physician, the way that their 
families support them, the kinds of diet that they eat. And so 
we have gone through, and, again, because we have got a 
computer system that can adjust our program to each individual 
that we work with and that guides our nurses through the 
interaction with people, we very definitely customize the 
program to language and cultural and other kinds of issues.
    Mr. Green. Ms. Bella.
    Ms. Bella. Our materials are also available in Spanish, and 
our nurse care managers in our call centers employ bilingual 
workers as well.
    I would say the way we have been most successful in that is 
partnering with our Minority Health Coalition, who represents--
who has Hispanic affiliates across the State, and they have 
helped us tailor those interventions to understand that the 
involvement of the community or involvement of the family may 
be different given the different cultural need. And so through 
our partnership with them we have been successful at tailoring 
our interventions in a way that we couldn't have done. We 
wouldn't have had that knowledge base on our own. So, yes.
    Mr. Green. Ms. Bella, I will ask you if this committee 
enacted the Healthy Communities Access Program modeled after 
the successful CAP, the administration project and CAP provides 
grants to help agencies coordinate preventative and primary 
care for 44 million Americans without insurance. And I know 
that Indiana has received several CAP grants, one in Marion 
County, central Indiana and South Bend. And I think the 
objective of the CAP program, to improve coordination of health 
care for uninsured Americans, is similar to the Indiana Chronic 
Disease Management Program.
    Can you tell me whether your program works with the CAP 
Program or the--is there cross-pollination, I guess, between 
the two?
    Ms. Bella. There is. That has given us a unique 
opportunity. With the most recent funding that we received, we 
were doing a survey and health assessment of the uninsured in 
Indiana, and we included specific questions related to chronic 
illness to try to understand the prevalence across the State, 
again, knowing that we see a lot of overlap between the 
uninsured and Medicaid and other payer sources. And so our goal 
is to include and develop a system that covers everyone.
    So it is very closely integrated with the efforts through 
our CAP grant and looking at how to address chronic needs 
across the State of Indiana. We appreciate those funds.
    Mr. Green. Thank you.
    Mr. Simms, according to your testimony, North Carolina 
Primary Care Case Management Program creates a physician 
provider network that includes nurse care managers to implement 
the disease management program, which is similar to the diagram 
here in Indiana. Can you explain the motives for physicians and 
providers to join together in implementing that disease 
management program?
    Mr. Simms. Yes. They are very committed to having control 
and the opportunity to direct the local health care delivery 
system for the patient population there in their local 
communities, so they see this as the opportunity to continue 
and to buildupon that. The providers in North Carolina have 
been very committed to serving Medicaid populations, especially 
the pediatric providers, and so they have really worked very 
closely with the Medicaid program with the implementation of 
this and see this as their opportunity to really help get the 
health care delivery system at a local level in place that they 
can continue to maintain the level of quality of care that they 
have been providing.
    The other thing is that they also see it as the opportunity 
to be able to show our legislature that we can implement a 
local infrastructure that can contain costs, improve quality, 
and therefore prevent them from having to have their rates 
reduced as well.
    Mr. Green. Okay. Thank you, Mr. Chairman.
    I know I have a little time left. It is interesting last 
Friday morning in Houston, I actually met with the chief of 
neurosurgery at the University of Texas Health Science Center 
in Houston, and one of his concerns is the lack of--he sees 
what happens because they have a trauma care unit at Memorial 
Herman Hospital, but the concern about utilizing case 
management and nurses more into the process, and the program he 
talked around about was similar to what we are hearing about 
today.
    Thank you, Mr. Chairman.
    Mr. Bilirakis. I thank the gentleman.
    Without objection, there is a statement by Sandata 
Technologies that they wanted to submit to the record, and 
without objection, that will be made part of the record.
    [The information referred to follows:]
            Prepared Statement of Sandata Technologies, Inc.
    Chairman Bilirakis, Ranking Member Brown and members of the 
Subcommittee: We appreciate the opportunity to offer this statement on 
behalf of Sandata Technologies, Inc. in connection with the 
Subcommittee's consideration of Medicaid reform and today's hearing on 
``Evaluating Coordination of Care in Medicaid: Improving Quality and 
Clinical Outcomes.''
    As you know, the Medicaid-funded health care system is under great 
pressure to deliver quality health care to eligible beneficiaries while 
controlling Medicaid expenditures. Policy-makers have begun to rethink 
ways to deliver quality health care services in the most cost efficient 
manner possible while preventing the loss of limited health care 
dollars due to waste, fraud and abuse. We commend the Subcommittee's 
efforts to advance a thoughtful discussion of these important policy 
objectives.
    Today's hearing appropriately focuses on the quality of patient 
care within the Medicaid system. To improve patient outcomes, we 
believe it is critical to ensure that the individual patient's plan of 
care is followed. It is important, therefore, for providers to be able 
to leverage easy-to-use, proven technology to accomplish that 
objective.
    More and more of our Medicaid-funded health care will be delivered 
in home- and community-based settings. To meet the growing needs of 
patients, home care providers can rely on cost efficient, proven 
technology to deliver efficient, appropriate, high quality home health 
care throughout the United States. This technology--known as 
``telephony for home care''--enables providers to deploy a capable 
management and information technology infrastructure to prevent fraud 
and abuse and ensure monies are not squandered as necessary services 
are delivered to achieve positive health outcomes.
    Telephony for home care delivers concrete benefits to State 
Medicaid programs and to Medicaid contracting home care providers, as 
described below. Equally important, it helps ensure that eligible 
Medicaid recipients receive the quality of care defined in their 
individual plan of care for the appropriate cost.
    Currently, the City of New York's Human Resources Administration as 
well as the Nassau County Department of Social Services in New York 
State, the Visiting Nurse Service of New York and select visiting nurse 
associations in other jurisdictions mandate that their contracting and 
sub-contracting home health care providers use telephony for home care 
as a condition of contracting with Medicaid to deliver home health 
services.
    The use of telephony for home health care by Medicaid programs 
delivers many benefits directly to State Medicaid home care programs, 
for example:

 It reduces Medicaid expenditures without cutting benefits to Medicaid 
        beneficiaries.
 It ensures payment is limited to the actual hours of service 
        performed by providers for the Medicaid home care program 
        instead of what might be written on a paper timesheet (e.g., 
        the City of New York Human Resource Administration's Medicaid-
        funded home care program saves 5.5% of expenditures from the 
        difference between authorized hours and actual hours of service 
        provided),
 It verifies patient coverage and provides payment only for visits 
        that actually occur in the patient's home or other approved 
        location.
 It improves the quality of care delivered by tracking tasks 
        accomplished and matching them against the patient's plan of 
        care.
 It reduces the time and costs of audits by providing a permanent, 
        comprehensive audit trail via telephony.
 It provides important aggregate oversight data at the county, state 
        and national level.
    Equally important, telephony delivers important concrete benefits 
to Medicaid contracting home care agencies, for example:

 It cuts administrative costs by collecting all home care visit data 
        from the patient's home electronically, eliminating manual data 
        entry of time and attendance, tasks accomplished, etc., for 
        billing and for payroll.
 It ensures the delivery of quality care in accordance with the 
        patient's plan of care--eliminating missed visits and verifying 
        that ``the right worker was at the right place, at the right 
        time, performing the right tasks.''
 It improves management visibility over field operations--i.e., 
        telephony collects visit data in real time from the patient's 
        home, making it available to the supervisor in real time, so 
        they know exactly what is going on in the field.
 There are no upfront hardware or software costs, enabling providers 
        to ``pay as they go.''
 Likewise, providers benefit from the permanent, comprehensive audit 
        trail.
    A recent review of Medicaid home and community-based waivers by the 
U.S. General Accounting Office (GAO) concluded that the Centers for 
Medicare and Medicaid Services (CMS) does not adequately monitor state 
Medicaid and Medicaid waiver programs and the quality of beneficiary 
care.1 According to GAO, the most common problems included 
``failure to provide necessary services, weaknesses in plans of care, 
and inadequate case management.'' 2
---------------------------------------------------------------------------
    \1\ Long-Term Care: Federal Oversight of Growing Medicaid Home and 
Community-Based Waivers Should Be Strengthened, GAO-03-576 (June 20, 
2003).
    \2\ Id.
---------------------------------------------------------------------------
    Telephony, with its accurate real time data collection capability 
and management data presentation, can play a significant role in 
addressing these concerns by enabling improved ``visibility'' into 
field operations and improved government oversight. In addition, this 
service is available wherever telephone service is available, even 
under crisis conditions. During the recent blackout, for example, the 
service continued to collect data, so Medicaid programs and home care 
providers had assurance and confirmation that patients were being 
served.
    In closing, the use of telephony for home care can provide concrete 
benefits to State Medicaid programs, to home health care and other 
social service providers, and to eligible Medicaid beneficiaries. We 
look forward to working in partnership with you as the Subcommittee 
considers ways to strengthen the Medicaid program and to ensure the 
continued viability of this important safety net for our nation's most 
vulnerable patients.
    Thank you for your consideration of our views.

    Mr. Bilirakis. I wanted to do something different just for 
the next few minutes.
    The bottom line is quality of care, and we all agree, some 
States have chosen to do it themselves without the private/
public, if you will, and other States have chosen to go the 
other way for whatever reasons. I wonder, could we take a few 
minutes, and I will control the time, where you all might feel 
free to ask each other questions? I mean, Dr. Medows, are you 
not curious as to how well Indiana is doing their way, and Mr. 
Simms, and vice versa and that? Well, if you are, raise 
questions.
    Mr. Hilferty.
    Mr. Hilferty. Mr. Chairman, I am sorry, if I may, from our 
vantage point we truly believe there are situations where 
States, much like this Indiana program, can do it on their own. 
What we have come to realize is there are opportunities where 
States and private entities can partner and collaboratively 
work to get the data that is needed to do the health outcomes 
analysis, to really work in partnership to improve quality, 
improve access and, most importantly, reduce cost. So from the 
private perspective we are not saying it should be all private, 
but we are saying that there are situations.
    Mr. Bilirakis. So you are impressed with the way Indiana is 
doing it, but you say that there is a possibility that there 
could be some improvement in there.
    Mr. Hilferty. Well, I think time will tell. I mean, we were 
one of the bidders on the--with LifeMasters on the business in 
Indiana. Time will tell, and I think the importance of 
collecting the data, analyzing the data and seeing if the 
outcomes are there--we will see if it works.
    Mr. Bilirakis. Go ahead, please.
    Mr. Brown. Ms. Bella, if they had won--if Mr. Hilferty and 
Ms. Selecky had won the bid, how would it have been different 
in Indiana from what happened, from what you have been able to 
do?
    Ms. Bella. In my opinion, we would have had much less 
involvement in the development of the interventions. We would 
not be involving the community as much. The focus that we found 
for that approach was more on the patient management, the 
particular patient as opposed to managing and developing a 
system and an infrastructure. And so we are really stepping 
back and putting together a system for the State as opposed to 
focusing on a recipient with congestive heart failure because 
we want long-term system change. And so I think that that would 
have been the biggest difference.
    Mr. Bilirakis. Any response, Mr. Hilferty?
    Mr. Hilferty. Well, I think that is accurate, an accurate 
portrayal. I think that the importance that we bring and the 
data bases, whether it be LifeMasters or AmeriHealth Mercy 
bring to the table, is we are able to analyze by disease state 
and to categorize folks. Yes, there is the importance of the 
community contact, but categorize folks by a disease state and 
develop programs to truly monitor their health status and 
improve that status.
    Mr. Bilirakis. Dr. Medows.
    Ms. Medows. Yes, sir. I think I have kind of the best of 
both worlds because I actually have contracts with a private 
entity who is providing us with the funding, and providing us 
with some software, and providing us with some of their 
expertise, but at the same time, make no bones about it, the 
patient is still being cared for by their primary care 
physician. They are in their communities with their community 
hospital, with their community clinics. It is not a new third 
party just coming in and providing care. They are being treated 
in their home with people that they know. And then they are 
getting, on top of that, extra attention, extra support, and 
they are getting things that they weren't able to get before. 
It is not just a matter of a nurse calling and finding out if 
you have gone to the doctor.
    But, like you say, we have put that personal touch. It is, 
why didn't you make it? Was it a transportation issue? Was 
there an issue with you paying your copay for your 
pharmaceutical? Was it that you didn't understand what you were 
supposed to do?
    So I don't know that we would have to go all State or all 
private. I think, you know, I feel much more comfortable with 
the way that we have it compiled, that it is a combination of 
both. But again, as long as the focus is on improving the 
actual care that is being delivered to the patient and their 
improved health outcome, I think any of the options would be 
fine as long as that is the focus.
    Ms. Selecky. Mr. Chairman, might I weigh in on this?
    Mr. Bilirakis. Sure.
    Ms. Selecky. Because I--you know, I commend all of the 
States for all of their efforts. And disease management is a 
relatively new phenomenon. It is a very difficult thing to do 
well. There are a lot of moving parts, and health care is about 
delivering quality care from physicians to their patients. And, 
in my opinion, disease management is really a platform to 
deliver evidence-based medicine and enable physicians to 
deliver better care to their patients. And we provide the 
technology and communication platform and some of the support 
services that help offload physicians who are very busy and who 
don't have time to provide educational and coaching services to 
their patients.
    We believe very strongly in supporting the doctor/patient 
relationship. When we work in a community, we work equally with 
the doctors and the patients. We send the physicians exception 
reports about how their patients are doing in between office 
visits. We send them relevant information about how they might 
deliver better care to their patients. And I think that there 
is definitely room for very close collaboration between public 
entities and private entities. We do it with our commercial 
employer and health plan customers all the time. We wrap our 
programs into their existing efforts, and I believe that there 
is room for all of the different, you know, very dedicated 
players in this.
    Ms. Bella. If I could add one thing. I want to echo what 
Dr. Medows said. I am afraid that sometimes States feel like 
there are just two choices. It is make or buy. And as I 
indicated in the testimony, we have chosen what we call the 
assemble approach. We are still buying some of our services, 
but the difference is we are in control of designing the 
program, and it is a system focus.
    So if I think--again, if I had to answer your question 
again about what is different, it is that at the end of the day 
in the program we have put together, the resources remain in 
the public health infrastructure in the State of Indiana 
because we have made an investment there. And what we were 
concerned with with another program with a little different 
focus is that the resources leave the State, and we don't 
retain that expertise or that knowledge base or that critical 
infrastructure.
    But it is not--you know, the two are not mutually 
exclusive. You can have a hybrid, but I think it is very 
important for States to understand that they with their public 
health system can do this themselves. And as--what is not to be 
minimized is the technical assistance, and best practices that 
were shared with us by the McCall Institute, the Institute for 
Healthcare Improvement, and improving chronic illness care are 
available to all States, and that is really the meat of what 
you need. What is on this little CD is the key to intervening 
with your providers and your patients, and those things are 
available in the public domain, and that helps us all maximize 
our investment. And so----
    Mr. Brown. If I could pursue that, Mr. Chairman, for a 
moment.
    Mr. Bilirakis. By all means.
    Mr. Brown. Ms. Bella and then Mr. Hilferty, you talk about 
the public resources thing and the public domain, and I guess 
that is dollars and health care resources. In terms of 
information, we talked about that earlier a little bit. You--I 
assume that you have information how much each patient costs, 
how much goes to overhead, all of that. Do we get that, Mr. 
Hilferty, from you? Can we get that for what every patient 
costs?
    Mr. Hilferty. Yes.
    Mr. Brown. That is made available to Medicaid.
    Mr. Hilferty. Yes. Yes, it is, Congressman Brown. If you 
take Pennsylvania, for example, Pennsylvania has implemented a 
risk adjustment rating program where the way the plans are, it 
is analyzed what rate you will get in the coming year is 
partially done by your case mix and the data you provide to the 
State. And it is done through practice profiling and encounter 
data, and it is incumbent upon the private plan to supply that 
data, and then the State goes through the calculations to 
figure out the risk adjuster and provide the rates for the 
private plan.
    Any--the key point is that any Medicaid managed care 
program that works, that includes the private sector, has to be 
done collaboratively. It can't be all one or all the other, all 
private, all public. But it is incumbent upon the private 
entity to provide the data, but not only to provide it, but to 
verify the data so that the States know that the outcomes are 
there, and that they can come up with a pricing strategy for 
those services.
    Mr. Brown. And the data coming from you, from others in the 
private sector, from the private contractors is every bit as 
comprehensive and detailed as the information that Ms. Bella 
would get from her public program.
    Mr. Hilferty. The difference there is that our data is--we 
can't confirm that it is--or our issue is related to being able 
to access the local provider and get them to fill out encounter 
data on time. An issue that we struggle with, quite frankly, is 
the timeliness of getting that data.
    Ms. Bella, when she goes through a program, there is that 
individual claims data that you referenced earlier that is 
there on a retroactive basis. But as we have gotten better at 
getting the data from our private physicians, from our private 
hospitals, yes, we are providing the same timely information. 
And I would be more than happy to provide that to the committee 
from the States in which we do business.
    Mr. Bilirakis. Would you do that, please.
    Mrs. Wilson. Mr. Chairman.
    Mr. Bilirakis. Mrs. Wilson.
    Mrs. Wilson. If I could follow up on this a little. The 
data, claims data, is one thing, but that is about what we paid 
out. And I think one of the problems with Medicaid is that it 
is set up to pay claims. Does Indiana--has Indiana invested, or 
North Carolina or Florida invested, in the information systems 
to give you any information about the health status of--you 
know, can you tell me the improvement in A1-C for diabetics 
dependent on Medicare--I am sorry, Medicaid; or reduction in 
asthma admissions in emergency rooms?
    Ms. Bella. We have our patient registry set up to collect 
that information now. It is dependent on the provider practices 
entering that information. And so our job then----
    Mrs. Wilson. So we have the same problem that Dan has.
    Ms. Bella. Well, except that we provide a migration from 
their system to dump into our system and make it very easy on 
them. If we need to send someone in there to do chart pulls and 
medical reviews to get us that data, we will do that because it 
is that critical. In addition, we can also get the data entered 
by the care managers or the call center, so it can come from a 
variety of sources, and we just work to figure out how to best 
get that.
    But you are right. I mean, you need lab values. You need 
the richer clinical data to support the administrative data. 
But a large successful component of ours is also the pharmacy 
data. That can tell you an awful lot. In our system--I mean, in 
everybody's Medicaid system, that is real time-instantaneous 
data. And so much of the compliance is driven by their 
pharmacy, that you can use that again because it is real time 
as opposed to your standard medical claims to really provide 
you with that indicator you need to get in and manage that care 
quickly.
    Mr. Hilferty. I think the point you make, Congresswoman, 
around asthma is a good one. If you look at west Philadelphia, 
for example, juvenile asthma is growing at alarming rates, as 
it is nationwide. Well, what we are able to do is by engaging 
the member, the member's parents in education and from 
everything to what meds they should be taking to ways to 
relieve stress to work when there is an emergent situation, 
what we have found is that we are able to take the data from 
their well visits, their physicians, their emergency room 
encounters and also the use of pharmaceuticals and really 
receive the improvement and the care to this membership. And 
that is something that disease management and case management 
provides that frankly is proactive in really analyzing if care 
is improved and if health status is improved.
    Mrs. Wilson. Mr. Simms.
    Mr. Simms. Yes. I think one of the things, and I agree with 
Ms. Bella, that we are having to look at ways to do the process 
measure, for example, the chart audit, of really getting folks 
in to be able to provide feedback to the docs immediately, 
showing them, okay, this is what you are doing with your 
process measures and specific to asthma.
    Some other things that we are looking at doing in North 
Carolina is working with the school systems as well to begin 
looking at has there been a reduction in number of days missed 
by the children, by the Medicaid children, and comparing it to 
ways that we should see improvement in that area because of the 
asthma disease management initiatives. So--and then combining 
that with the data that we are able to pull from the claims 
data that will give us the ability to provide the practice 
profiles back to the doctors and let them know what is 
happening.
    But, again, that is a challenge that the Medicaid programs 
face in that if you are really building it only upon claims 
data, then you have got a great challenge there. But we as well 
have a Web-based management system where the care managers have 
to enter the data in there. And so we are encouraging and 
continuing to stay on the care manager and the networks to make 
sure that information gets entered as timely as possible.
    Ms. Medows. I would just say ditto, but we do the same 
thing. I mean, just using claims data like you said just gives 
you the financial picture, and what we are looking at is the 
actual patient picture: Are we improving the quality of care; 
are we improving the quality of their health. And what we do is 
pretty much the same. We get that information from the patient 
themselves, we get it from their physician, from the care 
manager, who reaches them through the call center nurses and 
health care professionals that they reach that way as well and 
take a look at that, and look at markers that we know are 
associated as benchmarks for each disease state. Is it 
hemoglobin A1-C for diabetes?
    But there is also did they get their eye exam this year? 
Did they have their retina examination for diabetic 
retinopathy? Did the asthmatic people--did they report that 
they are actually using those peak flow meters that we gave 
them? People with CHF, are they actually weighing themselves? 
Are they telling us the truth when they give us their weight? 
Are they actually taking the medication, and if not, why? And 
do they notice themselves an improvement in their health and in 
their well-being?
    And I think it is important to ask them to give us that 
input as well, and we take that all into account. That is 
actually, I think, a truer measure of our success.
    Mr. Bilirakis. Wonderful.
    Well, there will be, as per usual, a series of questions 
which will be presented to you, and we would appreciate a 
timely response to them.
    I would also ask maybe can you also furnish us a typical 
case, you know, the step-by-step process of how you handle a 
typical case in every one of your areas? I think that would 
be--could be very helpful.
    And your just being here is so very, very helpful. I think 
we have had a good hearing. Not many members here, but, you 
know, we have no votes until after 6:30, and that happens on a 
day like that where many members are not here yet. But there is 
great interest in the Medicaid program on this committee. Thank 
you so very much for your help.
    The hearing is adjourned.
    [Whereupon, at 11:40 a.m., the subcommittee was adjourned.]
    [Additional material submitted for the record follows:]

           Prepared Statement of American Dental Association

    The American Dental Association (ADA) is pleased to submit 
testimony for the record as the committee examines the challenges 
facing the Medicaid program and how to evaluate coordination of care 
within the program.
    On behalf of the dental profession, the ADA wants to make clear 
that dentists find it unacceptable that in 21st century America there 
are children who are eligible for public assistance who cannot sleep or 
eat properly and cannot pay attention in school because they're 
suffering from untreated dental disease--a disease that can be easily 
prevented. As a nation, we must recognize how critical oral health is 
to overall health--especially to the healthy development of a child--
and find the political will to do a better job of caring for the next 
generation of children. The dental community is committed to working 
with Congress, the federal agencies and the states to address and 
remedy this fixable problem.
    The oral health community has come a long way these last few years 
in working to address issues affecting access to oral health care. 
Dental providers have joined with governors, state legislators, 
Medicaid officials and many others to tackle barriers impeding 
children's access to care present in the Medicaid program. In response, 
some states have worked to make oral health a priority, but as a result 
of serious state budget cutbacks, many more have lost ground.
    In the absence of effective public health financing programs, many 
state dental societies have sponsored voluntary programs to deliver 
free or discount oral health care to underserved children. Private 
dentists and community organizations are working to do what is 
necessary to reach out to these children; however, charity alone is not 
a permanent system. Congress and the states must work with dentists to 
establish an improved health care system for the delivery of oral 
health care under Medicaid to our most needy and vulnerable citizens.
    Because of devastating budget deficits, states have been forced to 
make difficult spending decisions, and dentistry has taken a serious 
hit. States are eliminating or severely reducing optional dental 
benefits under the Medicaid program for adults. These are adults who 
will not be able to gain employment in public focused jobs due to the 
affect poor oral health has on appearance, or be able to function 
properly due to chronic oral pain. Not having access to needed oral 
health care, many will end up in an emergency room. The resulting cost 
of emergency room treatment for patients and taxpayers far exceeds the 
cost of preventive dental care. In addition, emergency room care is 
only limited to pain management, so these individuals will still go 
without necessary treatment to end their suffering.

                         THE CURRENT SITUATION

    Oral health care for the nation's poor is a patchwork of 
chronically underfunded, poorly administered programs. Many state 
Medicaid programs shortchange dental care, providing payments that fall 
far short of the cost needed to deliver care. This results in an 
insufficient number of dentists who can participate in the program. The 
result--underserved children and families often do not have access to 
necessary oral health care.
    A recent ADA analysis of dental Medicaid programs across the 
country shows that only one in four children eligible for Medicaid 
receives access to needed dental services. This is true despite the 
fact that federal law requires states to cover dental services for 
Medicaid-eligible children through the Early, Preventive, Screening, 
Diagnostic, and Treatment program (EPSDT). It is critical for 
policymakers at the federal and state level to acknowledge that oral 
health is integral to general health and well-being and that we work 
together to improve the Medicaid program to increase the participation 
of providers, improve the delivery of services and enhance access to 
care for those most in need.
    As an optional benefit under Medicaid, adult dental care is often a 
poor stepsister to medical care, facing restrictions or elimination 
during tough economic times and often not reinstated when times 
improve. Some states simply do not cover dental care for adult Medicaid 
beneficiaries, and many others are cutting back. The result--
underserved and vulnerable adult populations, including the frail 
elderly do not have access to necessary oral health care, which can be 
even be life threatening since we now know that oral disease is 
associated with systemic diseases such as diabetes and heart disease.
    With the current state budget deficits, dental benefits have been 
severely reduced across the country both within Medicaid and the State 
Children's Health Insurance Programs (SCHIP):

 Georgia recently passed a state budget proposal to eliminate dental 
        coverage for SCHIP children (an optional benefit) and also 
        eliminate adult dental benefits.
 Michigan eliminated adult dental coverage earlier this year, 
        eliminating care for over 600,000 adults.
 Texas eliminated dental SCHIP coverage earlier this year.
    Facing tough budget decisions, many other states have frozen 
enrollment or reduce eligibility in their SCHIP or Medicaid programs. 
Others are considering how to seek federal assistance to reduce federal 
mandates to provide access to dental services through the EPSDT 
program. All of this devastates access to needed oral health care for 
our country's most vulnerable.

       NEEDED FEDERAL SUPPORT AND RESPONSE--EXAMINE STATE MODELS

    Dentists seek to work with members of Congress, the Centers for 
Medicare and Medicaid Services (CMS) and states to improve the Medicaid 
program in terms of financing and administration in order to increase 
dentist participation. Several problems affecting provider 
participation have been identified--these problems include Medicaid 
reimbursement rates at less than what it costs dentists to provide 
care, concern with the dental administrative structure, excessive 
paperwork and other billing and administrative complexities, and lack 
of case management and other social barriers that result in a high rate 
of broken appointments.
    There are several ways to address these recognized problems. One of 
the most critical strategies is for states to be able to raise Medicaid 
rates to more closely mirror the marketplace, rather than allow 
dentists to be reimbursed for care at significantly less than what it 
costs them to provide it. Without federal support, this may not be 
possible, given the economic situation. In some states, inadequate fee 
increases set a standard in the state--sometimes for as many as 15 or 
20 years. In many states it is not uncommon to find that Medicaid 
reimbursement rates for dental care have not been adjusted since the 
1980's--not even for cost-of-living adjustments. How can dentists 
effectively provide care to patients if the system will not afford that 
care?
    Recent state budget cutbacks have escalated the problem of 
inadequate reimbursement rates. Dentists who have signed up to 
participate in the program are often punished as their legislature 
targets provider reimbursement rates as a means to reduce state 
Medicaid expenditures. In 2000, for example, the Iowa legislature 
increased reimbursement rates from 60 to 70 percent of a dentist's 
usual charges--only to cut these rates to half that amount in 2002. It 
is impossible to achieve increased and consistent dental participation 
in such an inconsistent system.
    The good news is that there are success stories. The bad news is 
that state budget deficits threaten these success stories. A recent 
study conducted by the ADA, State Innovations to Improve Access to Oral 
Health Care for Low-Income Children: A Compendium, shows how some 
states have succeeded in recent years in increasing and stabilizing 
Medicaid reimbursement rates at marketplace levels--such as Michigan, 
South Carolina and Delaware. The state of Michigan, for example, in 
addition to addressing reimbursement concerns, also worked to 
creatively improve the delivery of the dental Medicaid program. With 
the support of the dental community, the state contracted with Delta 
Dental to administer its Medicaid program within 37 counties, naming it 
the ``Healthy Kids Dental'' program. The result--a Medicaid program 
that functions like a private program, with each Medicaid-eligible 
individual bearing a Delta Dental coverage card. The program offers 
reimbursement rates at market levels, has eliminated administrative 
complexities and functions like a private insurance benefit. Since this 
partnership, the number of Michigan Medicaid kids seen by a dentist has 
increased from 18 percent to 45 percent. Undoubtedly, this public-
private model is a success story, and there are others. As Congress 
contemplates Medicaid reform, the ADA encourages efforts to closely 
examine models like the Michigan model, which seek to stabilize a 
public insurance program to ensure access to care.
    Where state fiscal situations impede increases in provider 
reimbursement, state dental societies are working to encourage 
improvements in the administration of the Medicaid program. Some 
examples are improved case management, transportation services to 
assist patients with scheduled appointments and public education on the 
importance of oral health. Many dentists have faced years of 
frustration with the Medicaid program, resulting in a great deal of 
mistrust. Too often the ADA and other dental organizations have heard 
their members outline the administrative hassles they face within these 
programs. Medicaid bureaucracy through lengthy provider applications, 
prior authorization requirements, and complex claims forms deter 
provider participation. Congress should ensure that the appropriate 
federal agencies work with states to help address this bureaucracy and 
improve the system.
    Examining the problem, the ADA recommends that Congress consider 
the following when addressing Medicaid reform and improving the 
coordination of care delivered to those served by the program:

 Maintain an EPSDT benefit to ensure state requirements to provide 
        oral health services to mandatory beneficiaries;
 Increase the federal match and/or other funding support for oral 
        health services;
 Encourage and support states in developing and implementing a dental 
        care delivery system for their Medicaid eligible population 
        that mirrors the private sector indemnity benefit system.

                               CONCLUSION

    Concerned about the future of the Medicaid program, the ADA is 
convening a Symposium in December 2003 to address opportunities for 
systemic improvements to the dental Medicaid program. Our goal is to 
offer recommendations to Congress and the Administration on dental 
Medicaid reform.
    Dentists are justifiably proud of the overall state of the nation's 
oral health, which, for most Americans, is excellent. But we cannot 
forget the fact that millions of people in this country--particularly 
low-income children and adults--aren't getting even basic preventive 
and restorative dental care. These children and their parents are out 
there suffering. There are many dentists out there who want to end that 
suffering. Working with Congress and the states, together we must find 
the will to break down the barriers that separate them.
                                 ______
                                 
    Prepared Statement of Lawrence A. McAndrews, President and CEO, 
              National Association of Children's Hospitals

    The National Association of Children's Hospitals (N.A.C.H.) is a 
not-for-profit trade association, representing more than 120 children's 
hospitals across the country. Its members include independent acute 
care children's hospitals, acute care children's hospitals organized 
within larger medical centers, and independent children's specialty and 
rehabilitation hospitals. As the Committee discusses the challenges 
facing Medicaid, we appreciate the opportunity to submit this statement 
for the record describing the critical role Medicaid plays in the lives 
of our nation's children and the ability of children's hospitals to 
care for them.
    Medicaid is the largest health coverage program for children. It is 
important to recognize that Medicaid is the largest single source of 
health coverage for children, covering nearly one in four children. 
Children comprise more than half of the nation's 50.8 million Medicaid 
beneficiaries. As such, the future of Medicaid is of special concern to 
children's health, and therefore to the nation's children's hospitals 
as well. As hospitals devoted exclusively to the health and well-being 
of all children, children's hospitals are integral to the pediatric 
health care safety net, providing both inpatient and outpatient care to 
a disproportionate share of children enrolled in Medicaid. Although 
only 3% of all hospitals, children's hospitals provide nearly 40% of 
the hospital care required by the 25.5 million children assisted by 
Medicaid.
    Medicaid coverage for children is low-cost. Children are a 
relatively inexpensive group to cover. In FY 2000, children under 19 
(including SSI disabled children) accounted for only 21% of Medicaid 
spending. Children's coverage is not fueling the growth in Medicaid 
spending. In fact, Medicaid spending for children accounts for only 10% 
of the annual growth in total Medicaid spending. In addition, more than 
50% of children in Medicaid are already enrolled in managed care plans, 
and Medicaid per capita spending for children is comparable to private 
coverage.
    Medicaid coverage works effectively for children. During the recent 
economic downturn, Medicaid has been an important safety net for 
children whose parents have lost employer-sponsored coverage. Recently 
released U.S. Census Bureau data on the uninsured indicates that the 
number and percentage of children (under 18 years of age) without 
health insurance did not change in 2002, remaining at 8.5 million or 
11.6%. The Census Bureau's report, Health Insurance Coverage in The 
United States: 2002, states that a decline in employment-based health 
insurance coverage of children was offset by an increase in coverage by 
Medicaid and the State Children's Health Insurance Program. The result 
suggests that the program--the financing structure of which is designed 
to accommodate fluctuations in the economy--is working as intended.
    Medicaid's benefits are essential to meet children's unique health 
care needs. Medicaid's benefits structure, unlike any other health 
insurance program, is designed specifically to meet children's unique 
health care needs, including children with special health care needs. 
The health care needs of all children are special and distinct from 
those of adults, but the term ``children with special health care 
needs'' (CSHCN) refers to a group of children who require specialized 
health care, habilitation and rehabilitation services. Frequently 
children with special health care needs are limited, or have potential 
limitations, in their ability to function because of a chronic or 
congenital illness, a major trauma, a developmental disability, or 
exposure to a serious or life-threatening condition.
    For CSHCN, simply having access to health insurance may not be 
adequate for their healthcare needs because health insurance policies, 
like children, come in all sizes and shapes. Private insurance often 
lacks the comprehensive benefits needed by this population, such as 
physical and speech therapy, durable medical equipment, behavioral 
health services, home health care and some medications. Private 
insurance benefits may require that an individual be improving, a 
definition that doesn't fit for a child with cerebral palsy who may 
need a service to maintain function or a child with a congenital 
condition who may need a service to maximize their developmental 
potential.
    Preservation of the Medicaid program's federal guarantee of 
accountability for children's health insurance needs under the Early 
and Periodic, Screening, Diagnosis and Treatment (EPSDT) benefit 
package is an essential part of sustaining the health care safety net 
for children. EPSDT requires that, for children only, states cover all 
Medicaid services that are determined to be medically necessary by 
their physician during a regularly scheduled EPSDT screening visit. 
These can include preventative services, developmental/habilitation 
services for very young children, eyeglasses and hearing aids to ensure 
that children may learn, as well as prostheses, orthotics and 
wheelchairs that can be provided and changed as children grow.
    Medicaid affects the ability of children's hospitals to serve all 
children. Medicaid is not only the single largest program of public 
assistance for children's health care, it is the single largest payer 
of care delivered by children's hospitals--paying, on average for 
nearly half of the inpatient care provided at children's hospitals. 
Children's hospitals also provide the vast majority of inpatient care 
required by children with serious illnesses and conditions. For 
example, children's hospitals perform 99% of organ transplants and 88% 
of cardiac surgeries, and provide 88% of the inpatient care for 
children with cystic fibrosis. In some regions, they are the only 
source of pediatric specialty care, which makes children's hospitals 
essential not only to the children in their own communities but to all 
children across the country.
    Medicaid generally falls far short of reimbursing children's 
hospitals for the cost of providing these essential services. As a 
consequence, Medicaid disproportionate share hospital (DSH) payments, 
which average more than $6 million per children's hospital, are 
extremely important to the financial health of these institutions. In 
hospital FY 2001, Medicaid, including DSH payments, on average 
reimbursed only 84% of the costs of care in children's hospitals, a 
percentage that fell to 76% without DSH payments. This crucial source 
of funding for children's hospitals aids in their ability to serve all 
children
    The specialty and critical care and trauma services that children's 
hospitals maintain, including staffing and equipment, carry costs that 
are not completely covered. But this ``stand by'' capacity assures that 
these services will be there when any child needs them. Because 
Medicaid is a vital revenue stream for children's hospitals, any single 
reduction in funding presents financial difficulties, which in turn can 
lead to curtailing or elimination of programs--programs relied upon not 
only by Medicaid-dependent children, but all children.
    All children benefit from the work carried out at children's 
hospitals--regardless of whether they ever step foot inside their 
doors. The nation's children's hospitals serve all children by 
fulfilling a variety of critical public needs--training most of our 
nation's doctors devoted to children, providing continuing advancements 
in children's care, performing some of the most important, cutting-edge 
pediatric research and serving as centers of excellence for the sickest 
children in the country. Medicaid is a partner in fulfilling those 
public needs, and a partner in fulfilling children's hospitals' mission 
of providing quality care to all children.
    Children should be central to any consideration of the future of 
Medicaid. Medicaid plays a special role in not only providing health 
insurance for low income Americans but by filling in gaps in other 
coverage, whether for Medicare or private insurance. In this capacity, 
it is a major payer for long term and home and community-based care, as 
well as for mental health services, among others. Any consideration of 
Medicaid's future must recognize its many important roles, including 
its absolutely critical role in the financing of health care for 
children.
                                 ______
                                 
  Prepared Statement of the National Association of Chain Drug Stores

    The National Association of Chain Drug Stores (NACDS) appreciates 
the opportunity to submit a statement for the record on ``Evaluating 
Coordination of Care in Medicaid: Improving Quality and Clinical 
Outcomes'' and community pharmacy's role in disease management 
programs. NACDS membership consists of 217 retail chain community 
pharmacy companies that operate approximately 20,500 traditional chain 
drug stores, 15,100 supermarket pharmacies and 6,300 mass merchant 
pharmacies. Chain operated community pharmacies fill over 70 percent of 
the more than 3 billion prescriptions dispensed in the United States.

      COMMUNITY PHARMACY HELPS TO ENHANCE DISEASE STATE MANAGEMENT

    Pharmacy and medication therapy services are among the most 
commonly used and cost-effective medical interventions in the health 
care system. In 2002, over 3 billion prescriptions will be dispensed to 
patients by retail pharmacies, with the goal of improving an 
individual's health and quality of life.
    Pharmacists have a critical role in ensuring the appropriate use of 
medications and the management of chronic illness. Pharmacists are most 
familiar with a patient's condition and drug regimen, as they often 
maintain the only complete and up-to-date record of medication used for 
all of a patient's medical conditions. As Congress considers ways to 
improve quality and clinical outcomes in Medicaid, it is important for 
Medicaid recipients to have access to community pharmacy services, as 
well as important disease management services provided by the pharmacy 
of their choice.
    Many Medicaid recipients could benefit from pharmacy-provided 
medication and disease management programs. That is because Medicaid 
recipients tend to have more chronic medical conditions requiring 
multiple medications, and may lack a medical home. It is crucial to 
ensure that disease management programs are accessible and a consistent 
part of the patient's routine. The natural choice to consider as the 
best manager of disease management programs is the pharmacy. Many 
Medicaid recipients may have multiple physicians, but may use the same 
pharmacy. The consistent use of the same pharmacy will allow the 
pharmacist to track the status of the patient more closely than other 
providers or systems.

                  DEVELOP DISEASE MANAGEMENT PROGRAMS

    Medications are safe and effective when used appropriately for the 
condition for which they are prescribed. An estimated $177 billion is 
spent in health care on hospitalizations and other unnecessary medical 
costs such as emergency room visits for non-life threatening 
circumstances. These unnecessary medical costs are routinely from 
inappropriate or incorrect medication use, including noncompliance of 
medication regimen. It is important for Medicaid recipients who rely on 
multiple medications for various conditions to understand how to take 
their medications to optimize therapy tailored to their particular 
condition or disease state.
    Those enrolled in Medicaid should have access to a benefit that 
includes comprehensive pharmacy services, not just prescription drugs. 
Patients with chronic conditions should be guaranteed continuous 
coordinated care between each of their health care providers.
    A meaningful pharmacy benefit should include important components 
such as medication therapy management programs for chronic medical 
conditions, refill reminders, extended pharmacist counseling, and 
outcomes monitoring and evaluation.
    Disease management programs are an essential element of therapeutic 
care plans and can help to reduce emergency room visits and hospital 
admissions. Preventative measures associated with disease management 
can improve the quality of life for patients with chronic conditions 
and improve their overall health care outcomes. These programs may be 
structured so that those patients most at risk for certain disease 
states can be identified and their therapy managed by a pharmacist in 
conjunction with their health care providers in an integrated approach 
to patient care. Through standardization of definitions, program 
components and outcome measures, patients would be assured a minimum 
level of clinically accepted services to treat a specific disease 
state.
    Essential components of a disease management program should 
include:

 Setting goals for outcomes with the patient;
 Improved communication mechanisms between the physician, patient, 
        pharmacist and other providers;
 Documentation and feedback for evaluation of patient progress and 
        compliance;
 Self-management tools and educational materials to aid patients with 
        behavior modification, compliance, self-monitoring measures and 
        other preventative measures;
 Overall improved access to necessary prescription drugs and other 
        disease specific services.

                 PHARMACIST ROLE IN DISEASE MANAGEMENT

    Community pharmacies can help increase the pool of health care 
providers that will be needed to satisfy the demand for disease 
management and treatment programs for Medicaid recipients with chronic 
conditions
    Pharmacists are familiar with a patient's conditions and drug 
regimens due to the pharmacy serving as a frequent point of contact for 
many patients. Pharmacies also maintain up-to-date and accurate patient 
records, in addition to the readily accessible educational and disease 
management tools at the local pharmacy that enhance the patient's self-
management techniques. In fact, many local pharmacies already offer a 
variety of disease management services including diabetes self-
management services, asthma and anticoagulation care training.
    There are over 50,000 community pharmacies in the country, and many 
of them already provide comprehensive pharmacy services that 
demonstrate pharmacy's role in improving the quality of life of the 
patients they serve. Community pharmacies are therefore a logical place 
for disease management to occur.
    Through its Medicaid Medication and Disease Management Programs 
Pharmacies can:

1. Identify duplicate drug therapies, potential drug-drug and drug-
        allergy interactions, and out-of-range dosing, timing, and 
        routes of administration to avoid serious and costly 
        complications.
2. Provide comprehensive written information and verbal counseling to 
        consumers for educational and comprehension purposes to ensure 
        optimal outcomes.
3. Remind patients to refill their medications when the refill is due 
        to reduce the incidence of non-compliance with medication 
        therapy, thus reducing repeated primary care provider office 
        and emergency room visits.
4. Assist the patient in identifying other activities, such as diet and 
        exercise, to help manage their condition(s).
    In some instances, pharmacy-based disease management services has 
gained acceptance in public and private insurance programs. For 
example:

 Some states reimburse pharmacists for medication therapy and drug 
        regimen compliance for diabetes, asthma, anticoagulation or 
        high cholesterol, HIV/AIDS, mental health disorders, and 
        hypertension.
 Some states require health insurance plans to provide some level of 
        disease management to beneficiaries, and pharmacists may 
        provide services under these programs. At least six state 
        statutes specifically reference pharmacists as providers.
 Some managed care plans serving Medicaid recipients also privately 
        contract with community pharmacies to provide diabetes self-
        management benefits.
    The National Institute for Standards in Pharmacist Credentialing 
(NISPC) was established in 1998 to create a consolidated, nationally 
recognized, credential for pharmacists seeking certification in a 
variety of disease states. Over 1,500 pharmacists have received this 
nationally recognized credential in disease specific management. After 
having demonstrated the level of clinical competence necessary, 
pharmacists develop and supervise successful disease management 
programs that offer a wide range of patient and disease specific 
services for diabetes, asthma, anticoagulation, or high cholesterol.
    The competencies and credentialing standards are based on national 
standards developed by experts representing the National Association of 
Chain Drug Stores, the National Community Pharmacists Association, the 
American Pharmaceutical Association, the National Association of Boards 
of Pharmacy and other pharmacy organizations.
    Evidence of the value of pharmacists has been published in key 
studies that demonstrate the broad range of pharmacist--provided 
patient care interventions. These studies have resulted in improved 
disease state and drug therapy management, greater patient 
satisfaction, improved quality of life and economic savings. For 
instance, the Asheville Project began in March 1997 as an effort of the 
City of Asheville, a self-insured employer to reduce unnecessary health 
care costs. As documented in four articles of the Journal of the 
American Pharmaceutical Association, the project resulted in a system 
in which pharmacists developed thriving patient care services in their 
community pharmacies, with employees, retirees, and dependents with 
diabetes experiencing improved A1c levels, lower total health care 
costs, fewer days of missed work, and increased satisfaction with 
pharmacist's services.

            IMPROVING THE CURRENT DISEASE MANAGEMENT SYSTEM

    The provision of disease management services and accompanying 
payment for these services are as important as providing the drug 
product itself. In order to provide continuous quality service to 
patients with chronic illnesses, pharmacies must be properly 
compensated to cover the costs of providing disease management products 
and services. For disease management programs to be effective in the 
Medicaid population, pharmacists must be able to be compensated by 
Medicaid as other providers do.
    Pharmacies continue to seek payment as providers while providing 
disease management services to Medicaid recipients. The methods 
employed by pharmacists to improve outcomes serve to decrease chronic 
illness related health care expenditures.

                               CONCLUSION

    Community pharmacists are the most accessible health care 
professionals in many areas of the country. Medicaid beneficiaries 
should be able to receive necessary disease state management services 
provided by community pharmacists. Any Medicaid disease management 
program should provide coverage for such care and allow for the 
participation of qualified pharmacists. The program should also allow 
beneficiaries to have access to valuable pharmacy-based disease 
management and medication therapy management services in addition to 
prescription drug products.
    We appreciate the opportunity to submit these comments for the 
record, and ask that the committee members direct any questions to us 
about this statement. Thank you.
                                 ______
                                 
  Prepared Statement of The National Association of Community Health 
                                Centers

    The National Association of Community Health Centers (NACHC) 
appreciates the opportunity to submit the following statement for the 
record on the unique role of health centers and related health center 
initiatives to effect positive health outcomes for beneficiaries under 
the Medicaid program. NACHC is the advocate voice for our nation's over 
1000 Community, Migrant, and Homeless Health Centers and Public Housing 
Primary Care Centers, and the patients and communities they serve.
    As the Committee gathered from prior NACHC testimony, community 
health centers are one of the most important assets we have in 
providing high quality, cost-effective, primary and preventive health 
care to millions of people living in medically underserved communities 
regardless of their ability to pay.
    Community health centers play a critical role in building bridges 
to better care, and they are an intricate part of the health care 
safety net, in place to catch those who fall through the cracks. Health 
centers today serve as the family doctor and health care home for 14 
million Americans in over 3,400 urban and rural communities across the 
country.
    One in nine Medicaid recipients, one in six low-income children, 
one in eight uninsured individuals, and one in ten rural Americans 
benefit from health centers (known in Medicaid law as Federal Qualified 
Health Centers, or FQHCs). Among the millions of people served by 
health centers:

 40% depend on coverage through Medicaid or SCHIP, the State 
        Children's Health Insurance program;
 40% lack health insurance coverage; and
 86% are living in families with incomes at or below 200% of the 
        Federal Poverty Level (FPL).
    Moreover, health centers are at the center of a multi-year 
initiative to strengthen the health care safety net. Both the Bush 
Administration and a bipartisan majority in Congress, led by Chairman 
Bilirakis and Ranking Member Brown in the House of Representatives, are 
committed to expanding the ability of health centers to reach even more 
patients; a combined effort that to date has enabled health centers to 
provide care to more than 3 million new people, and that will 
eventually increase health center access points by 1,200 over five 
years and double the number of people served.
    Time and time again, these centers have demonstrated their ability 
to provide effective care--reducing infant mortality, decreasing 
hospital admissions and lengths of stay. However, as the health care 
needs of low-income individuals continue to grow, so do the challenges 
to health centers in sustaining their ability to provide quality care 
to Medicaid beneficiaries and other patients. Current budget shortfalls 
threaten state and local financial support of health centers, even 
though their cost of care is among the lowest of all providers. 
Reductions in Medicaid eligibility, benefits, and other areas 
potentially jeopardize the ability of health centers to continue to 
provide care to all patients, including Medicaid patients.Undoubtedly, 
for the community health center program to sustain its efforts at 
improving the health of the millions of Medicaid beneficiaries and 
others it serves, Congress must preserve the program's unique 
interrelationship with Medicaid and seek to expand upon the successes 
of health centers to effect positive health outcomes.

            IMPROVING HEALTH OUTCOMES THROUGH COLLABORATION

    A major reason for the success of health centers in improving care 
for Medicaid beneficiaries and other individuals is found in the 
growing number of health centers participating in a federally-supported 
effort called the Health Disparities Collaboratives, aimed at improving 
health outcomes for chronic conditions among the medically vulnerable. 
Developed by the Health Resource Service Administration (HRSA) Bureau 
of Primary Health Care (BPHC), the initiative is structured around the 
chronic care model, defined as ``a population-based module that relies 
on knowing which patients need care, assuring that they receive 
knowledge-based care and actively aids them to participate in their own 
care.'' The Collaboratives were designed to cover all chronic illnesses 
and, ultimately, prevention as well. Currently, participating health 
centers focus on diabetes, cardiovascular disease, asthma, depression, 
prevention, cancer, and/or HIV.
Background
    The Health Disparities Collaboratives initiative was developed to 
change the way health care is delivered--from a provider-oriented to a 
patient-, family- and community-oriented system. Patients and 
clinicians want a holistic, unified approach that works for both of 
them. Since 1998, more than 450 health centers have begun to 
participate in the program, and by the end of 2003 the number will 
exceed 600, or two-thirds of all health centers--marking significant 
progress toward meeting the federal goal of having all BPHC-supported 
health centers enrolled in these Collaboratives by 2005.
Purpose
    The Collaboratives seek to transform care through a systems model 
that identifies and tracks which patients need care for each health 
condition, apply the most current clinical knowledge and practice 
guidelines to the care that is provided, and actively involve patients 
in their own care by educating them on their condition and encouraging 
them to set their own health improvement goals. To achieve this last 
objective, Collaboratives stress planned individual and group visits to 
help patients track their improvement and to continue meeting their 
goals. Self-management education has been shown to be more effective 
than simply providing information to patients in improving clinical 
outcomes, and it possibly reduces costs associated with caring for the 
chronic condition.
    Vital to the success of the Collaboratives also are patient 
registries that improve clinicians' ability to track the course of each 
patient's treatment and progress. In a recent case study of five health 
centers in various locations throughout the U.S., interviewed center 
staff consistently considered these registries as critical in reaching 
significant improvements in patient health.
Operation
    Health centers operating Collaboratives participate in intensive, 
year-long learning and improvement activities. Multi-disciplinary 
health center teams attend three learning sessions conducted by the 
Institute for Healthcare Improvement under contract to HRSA that use a 
performance-based method of learning that supports teams from several 
health centers to apply, adapt, share, and generate knowledge about 
best practices, and to spread these best practices to other health 
centers. By design, the Collaboratives are to be implemented in care 
delivery systems quickly and efficiently. In the years following their 
intensive learning experience, health center clinical teams disseminate 
best practices to other health centers and continue to report progress 
on nationally shared measures.
    Substantial health center resources are necessary to implement this 
model that successfully changes the delivery of chronic care and 
improves patient outcomes. Health centers must devote a multi-
disciplinary team of three to five staff members--including a technical 
expert knowledgeable in both the subject area and the process of care 
and a team leader that oversees the day-to-day operation--ensures that 
the program is implemented, and oversees data collection. Data 
collection is a critical component of the Collaboratives and requires 
extensive development on the part of the health center.
    Besides these resources, health centers must also devote valuable 
time to implement and administer the initiative. For example, the 
health center must allocate at least three to four hours a week in its 
already busy schedule for the team to work on the Collaboratives. 
Additionally, the team must take time away from the health center to 
participate in several learning sessions. These time and resources 
requirements fall on already financially strapped health centers seeing 
a growing number of patients.
Achievement
    Today, almost 25 percent of all health center medical visits are 
for chronic conditions--most notably diabetes, hypertension, asthma and 
other respiratory illnesses, and heart conditions--or for mental health 
problems, and nearly 30 percent of medical encounters are for prenatal 
care or for key preventive services, like breast and cervical cancer 
screenings, immunizations, and HIV testing. Thus, the ability of the 
Collaboratives to improve the health of center patients will 
undoubtedly assist in closing the health gaps for the medically 
vulnerable in the U.S., and in elevating the quality of care provided 
through the centers because:

 The health centers are infused with the latest evidenced-based 
        research and treatment protocols related to each of these 
        diseases;
 Their clinicians are now able to more closely monitor our patients 
        and provide care that is culturally-competent; and
 Their patients are more energized to be even more involved in their 
        treatment and management of their conditions.
    Whether measured in terms of individual health center patients or 
large populations, the Collaboratives demonstrate that it is possible 
to transform the health care system from one of sickness care to one 
that is truly about health care. Collaboratives are powerful drivers 
for positive change, through generating improved outcomes faster than 
traditional models of training or individual patient-doctor 
consultation, and efficiently and effectively translating research into 
practice. For example, only two months after the results of a clinical 
diabetes prevention trial were reported in the medical literature, 
health centers were busy learning how to put the knowledge gained from 
the trial into practice.
    As a result of the work of the Collaboratives, the Institute of 
Medicine commended health centers in a recent report, Fostering Rapid 
Advances in Health Care: Learning From System Demonstrations, saying 
that their ``strong record in chronic care management, electronic 
patient registries and performance measurement . . . contribute to 
providing care that is at least as good as, and in many cases superior 
to, the overall health system in terms of better quality and lower 
costs,'' and recommended health centers as models for reforming the 
delivery of primary health care. The General Accounting Office also 
recently recognized the Collaboratives as a promising federal program 
targeting health disparities that should be expanded.

         IMPROVING HEALTH OUTCOMES THROUGH PERFORMANCE MEASURES

    The Collaboratives are only the latest advance in a long history of 
quality health care delivery by health centers. Numerous studies over 
the years have documented that health centers deliver effective, high 
quality health care, using both objective and comparative measures of 
performance. For example, a recent article in a peer-reviewed journal 
examined various health policy studies and reports documenting the 
success of health centers in reducing and eliminating health 
disparities. Some highlights from the article include the following 
important findings:

 Medicaid beneficiaries who sought care at health centers were 22 
        percent less likely to be hospitalized for potentially 
        avoidable conditions (Ambulatory Care Sensitive Conditions, or 
        ACSCs) than beneficiaries who obtain care elsewhere, and were 
        16 percent more likely to have outpatient visits for ACSC-
        associated conditions. As a result, health centers have 
        demonstrated reductions in Medicaid costs of 30 percent to 34 
        percent, compared with patients receiving care elsewhere.
 Prevention and screening services provided at health centers have 
        been instrumental in reducing disparities. For mammograms, 
        clinical breast examinations, and up-to-date Pap smears, health 
        center women far exceed the national rate for comparable women, 
        and meet or exceed the Healthy People 2010 goals for those 
        categories.
 Even though health center women are more likely to be at greater risk 
        for adverse pregnancy outcomes, their infant mortality and low 
        birth weight rates are at or below the national averages for 
        all women.
 Health center practices meet or significantly exceed literature-based 
        standards for treatment of the most common conditions of 
        hypertension, acute otitis media, diabetes, and asthma on over 
        80 percent of the care elements. For example, health center 
        diabetics were twice as likely to have their glycohemoglobin 
        tested as scheduled than the national population.
 Health center uninsured adults are more likely to receive counseling 
        on lifestyle issues (such as diet and eating habits, physical 
        activity, smoking, drinking, and drug use) than uninsured 
        adults who seek care elsewhere.
        reducing disparities in care for medicaid beneficiaries
    A study conducted recently by researchers at the George Washington 
University Medical Center's School of Public Health and Health Services 
found that higher penetration of health centers into states' medically 
underserved communities is associated with significant reductions in 
minority health disparities. As the number of health centers serving 
medically underserved patients grows, this health disparity gap narrows 
in such key health indicators as infant mortality, prenatal care, 
tuberculosis case rates, and age-adjusted death rates. Significantly, 
the study found that comprehensive Medicaid coverage, coupled with the 
clinically customized and supported health care provided by health 
centers, ``may yield the most effective medical care strategy'' for 
reducing disparities in health care for beneficiaries of Medicaid.
    The findings from this study add significantly to the already large 
and still-growing body of evidence that health centers are doing a 
remarkably effective job at providing the right kind of care for 
everyone they serve, regardless of race, income, insurance coverage, 
location, or primary language.

          IMPROVING HEALTH OUTCOMES THROUGH PATIENT NAVIGATION

    Community health centers have learned a lot of lessons over the 
last forty years of providing health care, one of the important of 
which is that it is not enough to open your doors and offer care, but 
that you must also reach out to individuals and help them get that 
care. To be certain, deeply rooted obstacles to accessing care exist 
even when health services and programs, like Medicaid, are 
theoretically available and affordable. Poverty, geographic isolation, 
cultural and ethnic differences, lack of transportation, low literacy, 
lack of knowledge regarding the need for or availability of health 
services are all barriers to health and social services for millions of 
unserved and underserved Americans. Availability does not equal 
utilization.
    People who are local, indigenous members and residents of 
underserved communities are uniquely knowledgeable about their 
population's needs. Where such individuals are already serving as 
natural helpers, they communicate to health providers the needs of 
community members, provide quality health promotion and disease 
prevention information to community members and serve as a crucial link 
between their communities and providers to increase utilization of 
available preventive health services and to use existing health 
services appropriately.
    As voices from within the health care system, the job of these 
individuals, otherwise known as Patient Navigators, is to bridge gaps 
and eliminate disparities in a fragmented system that is often a 
challenge too great to overcome--especially among rural, urban, 
minority, and medically underserved communities. By guiding patients 
through the maze of what can be a sometimes-confusing healthcare 
system, especially in the case of Medicaid, patient navigation serves 
an effective way to increase access to care and improve health 
outcomes.
    By their very nature, Patient Navigators are familiar with Medicaid 
eligibility requirements, community housing, prescription drug access, 
and other programs that might be available to help patients pay for 
their treatment, and they would also know whether local community-based 
organizations offer ride services in that area for medically 
underserved patients to get to their medical appointments.
    To be sure, many federal and state programs, like Medicaid, have 
been created to aid poor and underserved communities, yet obstacles in 
the health care system are still an impediment to care for many 
Americans. Patient Navigation can increase efficiency and access--not 
by creating new healthcare programs, but by increasing access to health 
care and programs that already exist.
    For example, the National Breast and Cervical Cancer Early 
Detection Program and the National Breast and Cervical Cancer Treatment 
Act--programs funded by the federal government and operated in large 
part through health centers--enable underserved women to be screened 
and treated for breast and cervical cancers. Patient Navigator programs 
work within the community health care system to bolster community 
outreach and support for these types of programs and to ensure that 
eligible women are educated, enrolled, and informed about their 
coverage options if diagnosed.
    By breaking down barriers associated with accessing the health care 
system, Patient Navigator programs can serve as a cornerstone for 
federal and state health care initiatives and can improve health 
outcomes. As such, Patient Navigators help ensure that the health 
resources Congress and State Legislatures have already put into 
communities are used effectively.
    All told, Patient Navigation programs work to build community 
education and trust, but they are also plugged into the community 
health care system. This combination allows Patient Navigators to serve 
as liaisons for patients between a complex care system and the ultimate 
goal--access to quality care and the improvement of health outcomes.
    Congress has an opportunity to implement and expand the use of 
Patient Navigation in Medicaid and other areas by passing the 
bipartisan Patient Navigator, Outreach and Chronic Disease Prevention 
Act (S.453/H.R. 918). This legislation would allow communities across 
the country to establish community-based patient navigator programs 
aimed at improving the health and quality of care received by 
individuals, including those under Medicaid.

            DELIVERING MEDICAID SAVINGS THROUGH QUALITY CARE

    The provision of high-quality health care, with a special, 
community-driven focus on the unique health needs--not to mention the 
special linguistic and cultural needs--of the populations they serve, 
has enabled health centers to deliver savings to all payers, but 
especially to Medicaid. According to one recent study, preventable 
hospitalizations in communities served by health centers were lower 
than in other medically underserved communities not serviced by health 
centers. Patients in underserved areas served by these centers had 5.8 
fewer preventable hospitalizations per 1,000 people over three years 
than those in underserved areas not served by a health center. Several 
other studies have found that health centers save the Medicaid program 
more than 30 percent in annual spending per beneficiary due to reduced 
specialty care referrals and fewer hospital admissions. Based on that 
data, it is estimated that health centers already save almost $3 
billion annually in combined federal and state Medicaid expenditures. 
Of those savings:

 $1.8 billion is in reduced federal Medicaid spending, an amount that 
        exceeds the total of all Medicaid payments to all health 
        centers last year; and
 Over $1.2 billion is in reduced state spending, an amount that is 
        more than four times the current national total of direct state 
        funding to health centers across the country.

                               CONCLUSION

    It is clear that health centers could be the foundation for 
reforming how states provide health care to the poor, especially in 
tough economic times. Time and again, health centers have demonstrated 
their ability to generate significant cost savings for Medicaid and 
other parts of the health care system, even as they improve the well-
being of their patients and communities. As Congress moves forward on 
considering ways in which to reform Medicaid, it is critical that it 
keep in mind these health center efforts and successes, and seek to 
expand the excellent ability of these centers to effect positive health 
outcomes for Medicaid and other medically vulnerable patients.

                                 ______
                                 
Prepared Statement of Sandeep Wadhwa, MD, MBA, Vice President, Medical 
  Management Services, McKesson Health Solutions, McKesson Corporation

    I am pleased to submit this statement on behalf of McKesson 
Corporation to the Subcommittee on Health of the House Committee on 
Energy and Commerce, subsequent to the October 15, 2003 hearing on 
Evaluating Coordination of Care in Medicaid: Improving Quality and 
Clinical Outcomes.
    As the world's largest healthcare services company, McKesson is the 
industry leader in the provision of disease management services for 
state Medicaid programs. As such, we are uniquely positioned to provide 
Congress with information on the use of disease management programs to 
improve quality and clinical outcomes in the Medicaid population while 
decreasing health care costs.
    Our disease management clients cover a broad host of purchasers of 
health care, including:

 State contracts for the Fee-for-Service Medicaid populations in 
        Mississippi, Washington, Oregon, Colorado, Florida, New 
        Hampshire, and Montana
 Managed Medicaid plans such as Columbia United Providers, Triple-C 
        (Puerto Rico) and the Santa Clara Family Health Plan
 Individual high risk insurance pools like CoverColorado and the 
        Oklahoma Health Insurance High Risk Pool
 Commercial health plans such as Blue Cross Blue Shield Federal 
        Employees Program and Blue Cross Blue Shield of Texas
 Medicare+Choice plans such as Order of Saint Francis and Group Health 
        Insurance
    McKesson is the industry leader in care management services and 
software and also has market leadership positions in demand management 
and utilization criteria. Furthermore, we are leading providers of 
physician and quality profiling software and case management workflow 
software. As an early provider of these programs, we have been 
delivering disease management services since 1996. McKesson's disease 
management programs leverage our experience with patient services, 
pharmacy management, and health care quality improvement activities. 
Many of these programs and services reflect the capabilities and 
expertise of our 170 year old company, one of the largest nationwide 
distributors of pharmaceuticals and health care products and the 
largest health information technology company in the world.
    Over the past two years, many states have turned to disease 
management to help address their Medicaid crisis. In particular, the 
costs for state Medicaid fee-for-service (FFS) programs are rising 
dramatically. The FFS population does not have many of the quality 
improvement and cost-control measures available to those enrolled in 
Medicaid managed care. The FFS population also has a disproportionate 
share of the Supplemental Security Income disabled population. Although 
the disabled population is only 17% of the Medicaid population, it 
accounts for nearly 40% of its costs.\1\ Care coordination efforts with 
a particular focus on the disabled population provide a major 
opportunity to improve access to care, empower patients to control 
their conditions, enhance the quality of care, and reduce avoidable 
Medicaid costs.
---------------------------------------------------------------------------
    \1\ Rosenbaum S. ``Medicaid.'' New England Journal of Medicine. 
346(8): 635-640. 2002.
---------------------------------------------------------------------------
                          QUALITY IMPROVEMENT

    The care coordination process begins with a comprehensive effort to 
identify patients with a chronic illness. Patients are identified 
primarily through historical medical claims analysis. This process is 
highly efficient and accurate and allows for a comprehensive 
population-based identification method rather than relying on costly 
and more fallible chart reviews at physicians' offices. Initially, the 
physicians of those patients who have been identified are contacted. 
Direct mailings then go out to the patients informing them of the 
chronic care management program's design and goals. Community based 
awareness campaigns also help to raise awareness among patients and 
physicians.
    Once patients have been identified, enrollment campaigns ensue. 
Initial enrollment and assessment takes place telephonically or through 
face-to-face meetings with patients. Participation in the programs is 
voluntary. In our experience, fewer than 5% of eligible patients have 
opted-out of these programs, and the highest rates of participation are 
among those who are the sickest, the frailest and the most vulnerable.
    Most patients in Medicaid FFS see multiple physicians without one 
serving as the primary coordinator of care. The absence of a physician 
``quarterback'' contributes to excessive testing, medication errors, 
and miscommunications. A key dimension of disease management 
interventions is assisting the patient in voluntarily identifying a 
``medical home'', which is a physician or a clinic primarily 
responsible for treating and managing the patient's chronic condition. 
Once a medical home is established, the disease management nurse 
cements the relationship by serving as an advocate for the patient and 
informing the physician of symptoms, self management practices, and 
gaps with nationally accepted clinical guidelines. The quality of the 
patient/physician interaction is enhanced through patient education and 
nurse advocacy.
    In Mississippi, McKesson has partnered with the University of 
Mississippi Medical Center (UMC) and with the Mississippi Primary 
Health Care Association, the trade organization of community health 
centers, to educate providers and beneficiaries about the disease 
management initiative. The Mississippi disease management program is 
targeted to more than 35,000 Medicaid patients with diabetes, asthma or 
high-risk hypertension. Twenty thousand patients are targeted in the 
asthma program which is predominately for children whose average age is 
12. Approximately 15,000 patients, with an average age of 44, were 
identified for the diabetes and high-risk hypertension program. This 
partnership, which was launched in the spring of 2003, has been 
extremely successful in generating a high level of participation. 
Ninety-seven percent of all patients who were contacted for enrollment 
agreed to participate in the program.
    Another aspect of disease management is addressing the slow 
adoption of national clinical practice guidelines in the Medicaid 
population. The poor and disabled are more apt to be undertreated than 
commercially insured populations. Patients are educated on the 
guideline recommendations and encouraged to discuss the appropriateness 
of the recommendations with their physicians. McKesson presents reports 
to providers on the gaps that exist between practice and guideline 
recommendations. Through clinical decision support tools and patient 
empowerment, disease management programs are designed to reduce errors 
of omission and improve the quality of care. In Mississippi, UMC 
physicians reviewed and customized McKesson's protocols to make sure 
they were appropriate for Mississippi beneficiaries. For example, UMC 
physicians ensured that the terminology and images in the printed 
materials were easily understood and culturally appropriate, and that 
the program objectives were aligned with the state's standards of care.

                           CLINICAL OUTCOMES

    Improving care coordination, guideline adherence, and patient 
education results in improvements in clinical outcomes. This has been 
particularly evident in Washington State where McKesson has been 
providing disease management services for 21,500 Medicaid beneficiaries 
with asthma, diabetes or heart failure since April, 2002.
    In just over one year, the program has documented clinical outcome 
improvements as well as financial savings to the state. In the asthma 
program, which serves 9,500 patients, the flu vaccination rate 
increased 28% in one year. The flu vaccine not only prevents asthma 
exacerbations, but also reduces costly hospitalizations. Regular use of 
anti-inflammatory drugs, which are a key intervention in controlling 
the symptoms of asthma patients, increased 14% over the year. 
Additionally, the number of patients who used an asthma action plan 
more than doubled, from 11% at enrollment to 25% at the end of one 
year. An asthma action plan is an important patient guide to self 
management and symptom monitoring and can reduce the morbidity 
associated with asthma.
    Heart failure is largely the consequence of hypertension or heart 
damage sustained from heart attacks and is especially prevalent in the 
Medicaid disabled population. In the Washington Medicaid heart failure 
program, which serves 2,300 patients, the number of patients monitoring 
their weight daily increased by 74% in one year. By tracking their 
weight on a daily basis, patients with heart failure detect insidious 
weight gain, which indicates fluid build-up, and can notify their 
doctors before the condition becomes so severe as to threaten breathing 
or life. Over the year, hospitalizations in this population have 
decreased by over 25%.
    The diabetes epidemic linked to increased rates of obesity affects 
both disabled adults and overweight children. Adults with diabetes 
typically have several related conditions such as high blood pressure, 
cholesterol problems, and obesity. The goal of disease management 
programs is to improve control of patients' blood sugar levels and also 
better manage their other risk factors. In the Washington diabetes 
program, which serves 9,600 patients, there was a 33% increase in the 
number of patients who knew their hemoglobin A1c level. The hemoglobin 
A1c is a key measure of long term sugar control. By teaching the 
patient the importance of this number, nurses have encouraged patients 
to participate more actively in their care and understand the 
physician's treatment goal. There was also a 48% increase in regular 
aspirin use in this population of diabetics. Aspirin use has been shown 
to dramatically reduce the risk of heart attacks in patients with 
diabetes.
    These clinical improvements reflect the intense efforts of nurses 
to provide patients with the information, strategies, and skills to 
gain control of their chronic conditions and to work with their 
physicians to reinforce treatment recommendations. Disease management 
programs not only provide vulnerable Medicaid populations with nurse 
coaching and advocacy support; they also empower patients through 
skills and education to be more active participants in their care. In 
many instances, McKesson directs the intervention to the caregivers of 
the Medicaid patient. The caregiver is often the mother or guardian of 
a child with asthma or the spouse or daughter of a Medicaid disabled 
patient. These caregivers endure tremendous stress in caring for a 
patient, and the disease management nurses provide them with training, 
reassurance, support and knowledge to sustain them as effective 
caregivers.

                             BUDGET IMPACT

    Perhaps the central barrier to chronic care management in Medicaid 
is overcoming the initial costs associated with implementing and 
providing these services. While these programs have demonstrated net 
cost savings through reductions in avoidable utilization, there are 
clearly costs associated with their provision.
    Most states are including provisions for guaranteed financial 
savings in their Medicaid disease management contracts to ensure that 
they are either budget negative or budget neutral, a practice that has 
facilitated rapid adoption. If net savings to the state are not 
achieved, the disease management program must refund a certain amount 
of the fees paid by the state. Third party auditors or evaluation firms 
are usually hired by states to verify or conduct their reconciliation 
analysis.
    The state of Washington program guarantees over $2 million in 
savings in the first year of operations, and current estimates from the 
state indicate this will be exceeded. Savings from this program largely 
arise from reduced hospitalizations and emergency room visits due to 
improved disease control. The savings estimate include costs for 
implementation and program costs. McKesson and the state of Washington 
were recently recognized by the Disease Management Association of 
America as the leading Medicaid disease management program, based on 
the its evidence of quality improvement and public/private partnership.

                            RECOMMENDATIONS

    Based on McKesson's experience with Medicaid FFS disease management 
programs, we would like to offer the following recommendation to the 
committee.
    1) Federal regulatory barriers impede the ability of states to 
utilize disease management services. While managed care innovations are 
generally able to be implemented with a 1932(a) amendment to a state's 
Medicaid plan, most states have to seek a Medicaid 1915(b) waiver in 
order to offer disease management services to that population group. 
CMS categorizes disease management as a prepaid ambulatory health plan 
(PAHP); however, the 1932(a) exemption does not apply to PAHPs. 
Congress can play an important role in expanding the use of disease 
management services by addressing the regulatory hurdle to their 
adoption in Medicaid.
    2) Ambiguity surrounding the payment for disease management 
services for those eligible for both Medicaid and Medicare coverage 
(e.g. dual eligibles) prevents many states from offering programs that 
would benefit this particularly vulnerable and costly population. 
Clarification of policies by Congress and CMS would enable states to 
provide these needed services to improve care and treatment outcomes 
and appropriately reduce costs.

                               CONCLUSION

    McKesson's experience with Medicaid FFS disease management programs 
indicates that effective disease management programs lead to improved 
quality and clinical outcomes while reducing Medicaid expenditures. The 
outcomes-focused, evidence-based interventions provided in disease 
management programs improve coordination of care and adherence to 
guidelines and empower patients with appropriate knowledge and 
resources.
    As Congress grapples with improving the quality and delivery of 
health care, we support the greater utilization of disease management 
programs as a vital way to enhance clinical outcomes for Medicaid 
beneficiaries, while concurrently reducing the cost of delivering 
better care. We look forward to working with you and members of this 
Subcommittee as you address these important concerns.

                                 ______
                                 
Follow-Up to the Written Testimony of Rhonda M. Medows, M.D., Secretary 
              of the Agency for Health Care Administration
                       benefits to beneficiaries

    The Florida Medicaid disease management program provides additional 
health education and supportive services to beneficiaries living with 
chronic disease including diabetes, asthma, heart failure, 
hypertension, hemophilia and HIV/AIDS. Each disease state program 
provides individualized health education materials, supplemental 
medical aids such as blood pressure cuffs and weight scales and nursing 
support to the specific population served. At the core of each program 
are nurse care managers who work with beneficiaries on a one-on-one 
basis, telephonically or face-to-face, to empower participants to 
improve their health through behavior and lifestyle changes. The nurse 
care managers coordinate care with the beneficiary, the family, the 
primary care physician and other community support organizations 
involved in the health of the individual. In addition, each program 
offers 24/7 access to a nurse, via a toll free number, to every 
beneficiary that is eligible for disease management.
    The Florida: A Healthy State program (FAHS), part of an innovative 
public-private partnership between the Agency for Health Care 
Administration and Pfizer Inc. was the first disease management program 
to manage multiple disease states. It's community-based program with 60 
nurse care managers in 10 hospital systems is also the largest, with 
over 115,000 beneficiaries living with diabetes, asthma, hypertension 
and heart failure enrolled. The program, now beginning a second term, 
has demonstrated success in improved clinical results, lower 
utilization of high cost inpatient services and emergency department 
visits, which lead to overall cost savings. The table below illustrates 
the program impact on utilization at the end of the first year.

----------------------------------------------------------------------------------------------------------------
                                                                                                          Heart
                                                             Overall  Hypertension   Asthma   Diabetes   Failure
----------------------------------------------------------------------------------------------------------------
Inpatient Days............................................  15.  12.6%          0%       >0.7%    >13.7%     >6.0%
Emergency Room Visits.....................................  0.7  1.0%           %       >4.0%     >1.8%     >1.3%
Sample Size...............................................   N=3,947       2,014         733     1,003       197
----------------------------------------------------------------------------------------------------------------
This analysis compared the number of emergency department visits and inpatient days in two groups, a) care
  managed and b) non-care managed. Claims data from July 2001 to December 2002 was analyzed. To be eligible for
  inclusion, both groups had enrollees that were Medicaid eligible continuously from July 2001 to December 2002,
  and were matched for eligibility category (SSI vs. TANF), disease state, prior utilization and length of time
  in the program.

    In addition, population level improvements demonstrate that the 
program has successfully educated patients about their disease and 
health care, increased their abilities to self-manage, and changed 
health-related behaviors. The measurement of these health behaviors is 
indicative of the beneficiary's self-management skills, lifestyle 
indicators, and perceived quality of life. This data is self-reported 
by the beneficiary to the nurse care manager, using nationally 
recognized and validated instruments for data collection. A more 
detailed description of the instruments is attached, please reference 
the attachment ``Self-Management Outcome Measures''.

------------------------------------------------------------------------
                                                               Program
                      Health Behaviors                          Impact
------------------------------------------------------------------------
Non-Smokers (n=949)........................................  3.
                                                                      7%
In Process of Quitting Smoking (n=949).....................  35
                                                                     .4%
Following a Special Diet (n=1,720).........................  14
                                                                     .0%
Regular Physical Activity (n=982)..........................  13
                                                                     .9%
Medication Compliance \2\ (n=969)..........................  39
                                                                     .0%
General Health Status \3\
Physical Health (n=1,834)..................................  3.
                                                                      4%
Mental Health (n=1,834)....................................  4.
                                                                      9%
------------------------------------------------------------------------
\1\ N is the number of beneficiaries with an initial health risk
  assessment for which a follow-up assessment has been completed. A
  response to the question related to the measure at both initial and
  follow-up, with a minimum thirty-day period between them, is required.
  A total of 12,365 beneficiaries have completed an initial assessment.
\2\ Medication Compliance is measured on a 12-point scale (0=very
  compliant, 12=very non-compliant).
\3\ General health status is based on the SF12, a validated measure of
  general health status. A higher value indicates better health.

    Clinical markers are reported specifically for each disease state 
based on nationally recognized clinical treatment guidelines and 
standards of care. Examples are:

 Asthma
     Asthma severity classification (NHLBI Classification)
     Peak Flow Meter use
 CHF
     NYHA Classification (New York Heart Association)
     Weight Monitoring
     Cholesterol values
     Blood Pressure
 Diabetes
     HbA1c values
     Cholesterol values
     Blood Glucose
     Self foot exams
     BMI (Body Mass Index)
     Blood Pressure
 HTN
     Alcohol use
     Global Risk score (calculated using CMS data system)
     Aspirin use
     BMI (Body Mass Index)
     Cholesterol values
     Blood Pressure Data
    A complete report on program impact and outcome measures is 
attached. Please reference the documents ``Florida: A Healthy State of 
the Program, Summer 2003'' and ``Florida: A Healthy State A Florida 
First Health Care Initiative, Program Update, June 2003''.

                             DATA ANALYSIS

    Data management capabilities are one of the most important 
components of a quality DM program, and leads to more robust outcome 
measurements. In the disease management programs, information is 
captured throughout the program to assess improvement processes across 
several general domains, including health behaviors, patient self-
management skills, clinical indicators, psychosocial outcomes, and 
health care utilization and revolves around three key areas: 1) medical 
record information, including laboratory test values, 2) claims data 
for inpatient hospitalizations and ED visits and 3) self reported data 
from participants. Every effort is made to insure that complete 
information is collected from the program participants to insure 
adequate statistical power to analyze the relationships between various 
intervention components and associated program outcomes.
    Health Behaviors--Information about current health behaviors, 
including diet, exercise, and smoking status, are captured and stored 
in the disease management data system at baseline, at all relevant 
follow-up contacts with care managers, and summarized in regular 
reports.
    Patient Self-Management Skills--To determine whether the program is 
positively impacting patients' self-management skills, relevant 
information regarding self-monitoring is collected as well. This 
includes, but is not limited to self-monitoring of weight for patients 
with heart failure, home self-monitoring of blood glucose and daily 
foot exams for patients with diabetes, and home blood pressure 
monitoring for patients with chronic heart disease. Medication 
adherence is also measured at least annually using a 9-item validated 
self-report medication compliance scale (Morisky DE, Green LW, Levine 
DM. Med Care 1986. Jan:24(1):67-74.).
    Clinical Indicators--To determine whether the program has had a 
positive impact on patients' health status, a number of clinical 
measures are also captured during regular nurse care manager contacts 
with program participants including results of laboratory tests, vital 
signs, and symptoms. This data is retrieved using a variety of methods, 
from patient self-reports, to manual review of the medical record, to a 
pilot of home self-testing by beneficiaries, scheduled to begin this 
month.
    Psychosocial Outcomes--We define psychosocial outcomes as outcomes 
that represent influences on patient health-related perceptions and 
beliefs. Several indicators of psychosocial improvement are used 
throughout the course of the programs including health status, self-
efficacy, and patient satisfaction. The SF-12, a commonly used and 
validated instrument to assess health status across all conditions is 
administered annually. Self-efficacy regarding self-management for each 
disease is also measured via the SF12 to assess patients' confidence in 
their ability to do what is necessary to manage their condition. This 
kind of efficacy is a powerful measure of patient empowerment, and a 
strong predictor of actual health behaviors.
    To determine the level of patient and provider satisfaction with 
the disease management program, both patient and provider satisfaction 
are measured. Included in the measure of patient satisfaction are 
questions regarding overall satisfaction with the program, satisfaction 
with program staff, usefulness of information received, satisfaction 
with assistance with adherence to treatment and self-management plan, 
and whether patients would recommend the program to family or friends. 
An independent third party consultant was utilized to conduct a 
telephonic patient satisfaction survey for the FAHS program. Results 
are expected within the next quarter from the University of Florida.
    Service Utilization--Claims data is used to collect and analyze 
information on service utilization to assess whether the program is 
influencing appropriate hospital admissions, number of days in the 
hospital, and reducing unnecessary or inappropriate medication and 
emergency room use.

         POSSIBILITIES FOR IMPROVEMENT OF OUTCOMES MEASUREMENT

    There are a number of ways that the Disease Management (DM) 
industry can improve our ability to demonstrate the value of DM 
programs. Obviously, conducting tightly controlled studies of disease 
management would be ideal, but this is not always possible, and almost 
always impractical in applied settings. Short of conducting randomized 
controlled trials, however, there are approaches that can be used to 
better demonstrate the effectiveness of DM programs. The industry is 
beginning to see value in sophisticated analytic techniques like time 
series analysis, or regression discontinuity designs to evaluate the 
savings associated with a program.
    Use of the most sensitive and appropriate measures of program 
success is critical to accurate outcome reporting. While there have 
been a number of recent efforts in the DM industry to develop a 
standard set of outcomes measures and metrics for DM programs, to date 
there has not been a widely accepted version. Of primary importance is 
choosing measures that are sensitive to the change that the program is 
hypothesized to effect. These measures include care management 
processes and health care delivery processes defined below.
    Care Management Processes are specific to the duties performed by 
the care managers and include information about patient engagement, 
services and assessments performed during all patient contacts, ongoing 
monitoring of additional intervention components including patient 
support and education, and any other related fulfillment activities 
associated with the program.
    Health Care Delivery Processes include the actual clinical care 
received by the patient including preventive screening and services, 
appropriate medication prescribing, and other appropriate medical 
procedures and treatments.

                      ENROLLMENT AND DISENROLLMENT

    Patient attrition presents an enormous challenge for the disease 
management programs. The mobility of the Medicaid population creates 
difficulties in continuity of care and accurate measurement of long 
term care management. The two main categories of Medicaid eligibility 
for the disease management program are disability (Supplemental 
Security Income, SSI) and low income (Temporary Aid for Needy Families, 
TANF). The TANF population had approximately 35% of beneficiaries 
remaining continuously eligible for the 12-month period of FY 2001-
20002. The SSI population presents a more stable pattern of eligibility 
with approximately 71% remaining eligible for the same 12-month period.
    The transient nature of the patient population's residence status 
presents large challenges for acquiring and maintaining communication 
with patients as well. Approximately 40% of beneficiary contact 
information is incorrect, creating a challenge for the disease 
management program to find beneficiaries and to actively engage them. 
Medicaid is working on system enhancements to improve the contact 
information. The disease management programs have added resources to 
increase the number of beneficiaries contacted, including on the ground 
personnel to literally go house to house to share program information, 
software packages that enable the program to gain correct phone number 
information, and radio and print media designed to increase awareness 
of the program.
    Beneficiaries identified through claims data as being eligible for 
disease management due to disease state condition are automatically 
enrolled in the program and may opt-out at any point they desire. They 
may re-enroll at any time as well. Beneficiaries who lose Medicaid 
eligibility are disenrolled, and re-enrolled when eligibility is 
regained. Due to this high volume churn of eligibility, the disease 
management programs now leave beneficiaries on the census list for 60 
days after loss of eligibility, at no charge to the Agency, to improve 
continuity of care as many will re-gain eligibility and return to the 
program. In the FAHS program, care managed patients have been in the 
program an average of 445 days. Disenrolled patients were enrolled for 
an average of 329 days.

------------------------------------------------------------------------
                                                               Average
                                                  Total        Days in
                                              Beneficiaries    Program
------------------------------------------------------------------------
Current FAHS Enrollees......................        89,061           445
Beneficiaries Disenrolled...................        40,477           329
------------------------------------------------------------------------
Note: Based on beneficiaries enrolled as of November 5, 2003

    An example of enrollment and disenrollment statistics for the FAHS 
program is outlined in the table below.

----------------------------------------------------------------------------------------------------------------
                                   2001Q4    2002Q1    2002Q2    2002Q3    2002Q4    2003Q1    2003Q2    2003Q3
----------------------------------------------------------------------------------------------------------------
New Enrollments.................    35,774    24,882        32    27,537     9,763     9,286    15,384     6,844
Re-enrollments..................         1        31     5,208     6,004     1,276     2,586    10,509    12,257
Disenrollments..................         5       126    12,430    13,408     6,891     9,883    16,507    18,840
  Cumulative (end of quarter)...    35,770    60,557    53,367    73,500    77,648    79,637    89,023    89,284
----------------------------------------------------------------------------------------------------------------
Enrollment, disenrollment, re-enrollment and cumulative enrollment statistics by quarter extracted from Pfizer
  Health Solutions' Clinical Management System (CMS') software.
Note: Patients disenrolled can be re-enrolled within the same quarter, even on the same day; these numbers do
  not represent mutually exclusive individuals.



             ADDRESSING CULTURAL AND HEALTH LITERACY NEEDS

    Each Florida Medicaid DM program strives to provide low literacy, 
culturally competent educational materials in English, Spanish and 
Haitian-Creole. Each vendor utilizes a universal telephonic translation 
line and has bi-lingual nurse care managers who interact with 
beneficiaries in their native language when possible.
    In addition, a second initiative of the Pfizer-Florida Medicaid 
partnership is a comprehensive health literacy study and intervention. 
The study was conducted in association with the University of South 
Florida (USF) and 27 Federally Qualified Health Centers. Health 
Literacy is the ability to read, understand, and effectively use health 
care information and follow instructions from health professionals. The 
Florida Health Literacy Study investigates the direct effects of the 
health literacy interventions on patient disease knowledge, self-care 
behaviors and the management of their Type 2 diabetes and/or 
hypertension. The study will also estimate the indirect effects of 
these interventions on disease complications and, ultimately, health 
care costs. The study is the first of its magnitude on health literacy 
and is detailed below:

 27 Federally Qualified Health Centers (FQHC) are Participating: 14 
        are intervention sites, 13 are control sites. 14 Health 
        Educators were hired and trained to provide group and one-on-
        one educational sessions using diabetes and hypertension 
        materials in English and Spanish. Educational materials were 
        available free of charge to Medicaid beneficiaries with Type 2 
        diabetes or hypertension at 60 community health center sites, 
        33 of which are non-study sites.
 Enrollment (as of February 2003): 679 at the intervention sites; 325 
        at the control sites
 Status: The study ended in May 2003 with a 6-month follow-up to occur 
        in November 2003 and results are expected from the University 
        of South Florida in first quarter 2004.
    Pfizer Health Solutions underwrote two key market research projects 
that marked the beginning of the Florida: A Healthy State program and 
provided important information about the health care delivery in 
Florida and the patterns of utilization of the MediPass population. 
These include:

 The Physician Market Research (2002)
 Patient Market Research (2002)
    The physician market research provided an interesting perspective 
on the issues and challenges faced by practitioners caring for 
chronically ill Medicaid patients. This feedback helped FAHS understand 
the intricate relationship between the social, economic, linguistic and 
cultural problems affecting these patients and their overall health 
status.
    The patient market research followed in an attempt to better 
understand the needs of the patients served by Florida: A Healthy 
State. The project targeted Medicaid beneficiaries representing all 
races and ethnic groups. These included: Whites, African Americans, 
Hispanics, and Haitians. The purpose of this project was to assess:

 Experiences with the health care system
 Effective/culturally appropriate channels of communications to 
        disseminate information about the program and encourage 
        patients to enroll.
    Through this research it was learned that some ethnic groups value 
health differently and that cultural relevancy is extremely important 
when communicating information about health choices and personal care. 
These findings led to modification of all program materials to conform 
to the needs of the patients enrolled in FAHS:
    This included:

1. Re-designing patients materials for cultural relevancy, language and 
        literacy level: Bilingual program letters; Bilingual patient 
        brochures; and Awareness campaigns (free flu shots coupons, 
        magnetic calendars . . .)
2. Re-designing care management protocols: Spanish-speaking care 
        managers available on triage line; Bilingual care managers 
        working extended hours (Spanish, English, Haitian/Creole); AT&T 
        translators; and Hospital staff translators
3. Ongoing efforts include:  Developing bilingual patient education 
        materials that meet Health Literacy principles and are written 
        at 4th grade level. Assessing the educational needs of the 
        patients and making health information available in various 
        formats and different venues.
    4. Dissiminating program information through culturally appropriate 
trusted sources: Medicaid Offices--e.g., health fairs; Department of 
Children and Families--e.g., services for low-income and disadvantaged 
populations; Community based organizations--e.g., groups like Little 
Havana Nutrition Education Center, Community Voices Miami (coalition of 
health and social services organizations), federally qualified 
community health centers, child care agencies, area health education 
centers; Advocacy Groups--e.g., (American Heart Association, American 
Lung Association, American Diabetes Association), LULAC; Faith-Based 
Organizations/Churches--e.g., Diabetes Sundays, Lectures, Radio Shows, 
Church Bulletins; Government agencies--e.g., Department of Health and 
county health clinics, Department of Elder Affairs; Municipalities--
e.g., City of Hialeah centers (large Hispanic population), City of 
Miami and others; Schools--e.g., County School Boards, Pediatric Asthma 
Programs
5. Developing a Statewide Community Resource Directory with relevant 
        health and social information for nurse care managers, Medicaid 
        Area Office staff use.
    The Health Choice Network program represents an innovative Bristol-
Myers Squibb funded program of faith based, culturally competent care 
for Medicaid beneficiaries with diabetes and depression. This community 
based care management program entitled Diabetik SMART is active in 8 
Federally Qualified Health Centers and 50 community sites, with the 
faith-based outreach component involving 9 predominantly African-
American and Hispanic Churches. This unique program utilizes 
Promotoras, or culturally appropriate lay health workers, to enhance 
disease management services to beneficiaries. The Promotoras, trained 
and supervised by registered nurses, interact with the beneficiaries, 
lead educational sessions and provide educational materials to actively 
engaged beneficiaries. Over 1,741 beneficiaries were identified as 
eligible, with 494 actively engaged in the program in its first year of 
operation. Evaluation of the program will be conducted by the 
University of Florida and will measure the relationship of improved 
health behavior, as indicated by a lower Hemoglobin A1c, to direct 
health care costs. The program has not been fully operational for the 
time necessary to accurately measure changes in health behavior, and 
results are expected in 2004.
    Complementing these other disease management initiatives, the 
Medicaid Area Office staff organized a series of quarterly outreach 
campaigns partnering with the faith based community and interfaced with 
a Medicaid newsletter in an effort to educate and empower Medicaid 
beneficiaries to make better health care choices. The newsletters are 
printed in English, Spanish and Haitian-Creole and distributed to 
various local community agencies and other state agencies to raise 
awareness of health care issues. Each quarter has a designated theme 
such as ``Diabetes Sunday'', during which Area Office staff worked with 
local pastors to hold health fairs and screening after Sunday services 
at predominantly African-American and Hispanic Churches in an effort to 
raise awareness of diabetes and the importance of screening and 
treatment. ``A Child Primer'' focused on back-to-school issues, such as 
immunizations and child health check-ups; ``Healthy Aging'' focused on 
elders and health care. ``Managing Chronic Illnesses'' is the current 
quarter's theme in which Area Office staff partner with the local faith 
based community and provide health information and outreach activities 
in churches on illnesses such as diabetes, breast cancer, hypertension, 
heart failure and even AIDS. Up next is ``Healthy Bodies, Healthy 
Minds'' with a focus on managing stress, mental health, healthy eating 
habits, physical fitness and well health exams. Copies of the 
newsletters are attached.
    The Area Office staff have also been involved with a number of 
other efforts including outreach activities sponsored by the Agency 
Community Resource Office, the Minority Health Awareness Committee and 
most recently partnering with The Center for Medicare/Medicaid via 
First Coast Service Options, Inc. to reach individuals in communities 
challenged by low income, low literacy and location. Medicare and 
Medicaid information was provided to these individuals in Spanish, 
Creole and English.
    Area Office staff have completed more than 2,000 education/outreach 
activities reaching a total of more than 200,000 individuals. Of this 
total more than 300 education outreach activities were completed beyond 
normal working hours. Education and outreach efforts are also a part of 
interaction with Medicaid beneficiaries as staff assists them in 
navigating the health care system. Publications are sent directly to 
beneficiaries when responding to correspondence and as a result of 
telephone calls received. The Medicaid Area Offices are actively, 
thoroughly and willingly involved with the community to reach 
culturally diverse groups of beneficiaries and individuals.
    Outside the scope of the disease management program, the Agency has 
contracted with Florida A&M University's Institute of Public Health 
College of Pharmacy and Pharmaceutical Sciences to conduct an objective 
demographic study of Florida's Medicaid population in the interest of 
facilitating the development of improved service delivery models, 
health promotion activities and improved communication between 
beneficiaries and the Agency. This study will utilize (1) the analysis 
of existing Medicaid data and reports and (2) the collection of primary 
data to supplement existing knowledge including telephonic surveys. 
Completion of the study is expected in early 2004.
    In closing, Florida Medicaid's disease management programs have 
demonstrated successes in improving the health of beneficiaries 
enrolled by empowering them to make better health behavior choices 
leading to clinical improvement of their existing chronic illness and 
in turn, reducing health care costs. We look forward to a continued 
reporting of favorable outcome measures and positive impact on the 
lives of Medicaid beneficiaries statewide.

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