Home » Blog » Pinpointing the Savings

Pinpointing the Savings

One of the chief arguments among health reform skeptics is that many of the ‘perceived savings’ used to finance the bill will never actually materialize and we will be left with another unsustainable entitlement. Further, the naysayers proclaim that any real savings will just simply come from cuts in Medicare and Medicaid. There are numerous provisions in the bill that rebut these falsities (protections ensuring Exchange subsidy sustainability, redirection of uncompensated care funding that is already spent, bending the curve through the excise tax/MedPAC with teeth, and an INCREASE in reimbursement to primary care providers in Medicare/caid), but I want to stress that the fundamental concern is absolutely valid: How do we modernize the 20th century bureaucratic behemoths that are Medicare and Medicaid in order to ensure their sustainability as more nimble programs in the 21st century? The answer to this question becomes even more crucial given the programs’ assured expansions (Medicare from an aging society and Medicaid from expansion to 133% FPL).

An unlikely private industry source suggested a possible course of action for Medicaid today. The source, UnitedHealth Group, suggests that a number of practices could yield significant savings, focused mainly around coordinating care, modernizing technology and administrative processes, and shifting expensive long-term care (now 2/3 of Medicaid costs) from nursing homes to community-based and homed-based care. In all, the report estimated up to $366 billion in savings to states and the feds from:

Increased use of coordinated care $82B
Coordinated care to expansion population $11B
Shift away from long-term care to community-based care $140B
Administrative modernization $133B

To be clear UnitedHealth has a clear stake in these strategies, and admits their AmeriChoice program can be utilized to tackle 2/3rds of these costs. With the vested interest in mind, though, public private partnerships like this will be crucial if advocates are serious about modernizing these 20th century institutions into coordinated and wired bodies. And now, with health reform moving to eliminate the appalling profit-motivated action of the insurance industry, broader alliances with health plans and efficiency-minded systems may be just the answer to this question.