Patient-Centered Reimbursement

For Chronic Diseases

Jamie Cohen and Andreas Shepard, Amherst College

Health care reimbursement methods that follow the patient can help support
health care providers who are preventing and controlling chronic diseases.

Seventy percent (70%) of health care costs in America are spent on people with chronic
diseases. As a result, proper preventative care and chronic disease management could
result in huge cost savings and quality of life improvements. For example, the Center for
Disease Control estimates that every $1 invested in outpatient training that helps indi-
viduals with diabetes manage their disease saves $8.76 in reduced health care costs. They
further estimate that foot-care programs that include regular examination and patient
education could prevent 85% percent of the amputations caused by diabetes.

While the importance of prevention is broadly accepted, creating incentives to encour-

age prevention has been difficult. Traditional private health insurance has little incentive
to cover preventive services, since patients are likely to change insurers before the sav-
ings are realized. Merely mandat-
ing coverage of certain preventive
health benefits, however, is often
Key Facts
insufficient. There must be a way • Nationwide, spending on patients with
to evaluate whether and how ef- chronic diseases accounts for 70% of health
fectively the care is being used. care expenditures.
New advances in health informa- • The Center for Disease Control estimates
tion technology can help address that every $1 invested in outpatient training
this need by creating ways to moni- that helps individuals with diabetes manage
tor whether patients are getting their disease saves $8.76 in reduced health
the preventive care they need and care costs.
ensuring that doctors are compen- • One-third of kidney failure complications
sated for keeping patients healthy from diabetes are preventable.
in the long term.

Analysis
Investing in chronic disease management programs, preventative care, and education
can help lower health care costs and improve quality of life. Although not all preventive
services programs are the same, the federal government should require private insur-
ance companies to reimburse providers for chronic disease management and prevention
services, according to standards governed by the CDC Preventive Services Taskforce.
Improved reimbursement methods are also needed to financially reward those doctors
who provide the best care, who under the current system are rewarded with more rev-
enue if they let their patient’ conditions worsen to the point where costly interventions
are necessary.

In order to track whether patients are achieving their health goals, the organization of
medical records will need improvement. The most promising avenues are electronic forms
of health tracking, such as fully electronic personal medical records and self-reporting
through social networking applications. The current administration has a head start on
this process, since the economic stimulus package included a provision establishing the
Office of the National Coordinator for Health Information Technology, but any system
that office creates must enable the key feature of matching of patients’ achievement of
health goals with their providers’ reimbursement.

The challenges of controlling the

Talking Points costs of chronic diseases are be-
• Fee-for-service reimbursement systems, ing felt across the country, and
like Medicare, reward providers who allow will likely be amplified if health
patients’ conditions to worsen to the point reforms increasing access to
where they need expensive interventions. those without health insurance
• Providers who prevent their patients from are passed. In order for any such
developing chronic diseases or help their health reform to have a sustain-
patients keep their chronic diseases in check able cost in the long term, pay-
receive very little financial reward. ment reforms will be needed. The
• Controlling the costs of chronic diseases will short-term costs – establishing
be important to controlling overall health care a more robust electronic health
costs. tracking system and of making
the first additional payments to
providers that are helping their
patients meet health goals – will be outweighed in the long run with fewer and better
managed chronic diseases. Regardless of whether reforms increasing access are passed,
the existing health care system, which already consumes 1/7th of GDP and continues to
grow, should be reshaped along similar lines.

Next Steps
A starting point for this new reimbursement model is state or federal health insurance
programs, including Medicare, Medicaid, or state health insurance options, like Com-
monwealth Care in Massachusetts. Medicare especially may benefit from the improved
management of chronic diseases, since the greatest costs of chronic diseases are found
in older patients.

Sources
Halvorsen, George. 2007. Health Care Reform Now!. San Francisco: John Wiley & Sons, Inc.
Centers for Disease Control and Prevention. “Preventing Diabetes and It’s Complications.” Revised Septem
ber 5, 2008. http://cdc.gov/nccdphp/publications/factsheets/Prevention/diabetes.htm
“Medicine Online”. Steve Coll. Think Tank blog post: June 9, 2009. <http://www.newyorker.com/online/blogs/
stevecoll/2009/06/medicine-online.html>

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