UnitedHealth envisions $3.5T savings by restructuring Medicare and Medicaid

The nation could save about $3.5 trillion over the next 25 years by expanding coordinated care programs in Medicare and Medicaid, according to a new analysis by the UnitedHealth Group’s Center for Health Reform & Modernization.

The report, “U.S. Deficit Reduction: The Medicare and Medicaid Modernization Opportunity,” agues that the current fee-for-service indemnity payment system, which comprises more than three-quarters of Medicare and Medicaid spending, is one of the primary drivers of fragmented care and rising healthcare costs.

Officials of the UnitedHealth Group, touted as the nation's largest single provider of Medicare Advantage and Medicaid programs, say changes idenitifed in the report could “better coordinate care and provide holistic and proactive support for seniors and Medicaid beneficiaries.”

The report has been provided to the bipartisan National Commission on Fiscal Responsibility and Reform, known as the Deficit Commission. The commission, established in February, is tasked with building consensus and recommending to Congress a new fiscal path for the United States. The recommendations are due in December.

According to the Congressional Budget Office, meaningful deficit reduction will be difficult to achieve without modernizing Medicare and Medicaid, both key drivers of the rising U.S. budget deficit.

“Expanding the use of coordinated care and integrating benefits and funding streams is a win-win for Medicare and Medicaid beneficiaries and for federal and state budgets,” said Simon Stevens, executive vice president of the UnitedHealth Group and chairman of the UnitedHealth Center for Health Reform & Modernization. “These are practical options that can now be tested at scale under current law.”

Fee-for-service payments are given to healthcare providers for each service, such as a physician’s office visit, test or procedure, regardless of health outcomes. Detractors say such care is often fragmented, with minimal communication and coordination among different healthcare professionals.

The UnitedHealth Group report analyzes three approaches:

1. Provide coordinated care for Medicaid-eligible Americans to improve access to care and health outcomes. Over 25 years, savings are estimated at $580 billion, of which $350 billion are federal savings. During the initial 10 years – given transitional costs and phasing – potential savings are estimated at $103 billion, of which $63 billion are federal savings. Under this option, states would enroll most of their fee-for-service Medicaid population (who aren’t also receiving Medicare), including people with long-term care needs, in coordinated care programs.
2. Expand use of coordinated care for dual-eligible Medicare and Medicaid beneficiaries to support people with chronic conditions requiring intensive support and high-cost services. Over 25 years, savings are estimated at $1.62 trillion, including $1.27 trillion for the federal government. In the first 10 years, savings are estimated to be $250 billion, of which $206 billion are federal savings.
3. Provide seniors in traditional Medicare with value-added, comprehensive care management services through the type of programs and approaches used by America’s largest and most innovative ‘self-insured’ employers. Over 25 years these savings – all accruing to the federal government – could be worth $1.9 trillion, of which $317 billion are estimated to arise in the first 10 years.