Questioning the Widely Publicized Savings
Published Online: January 21, 2013
Robert Cosway, FSA, MAAA; L. Allen Dobson, Jr, MD
While HCUP data can be extremely useful to health researchers studying disease prevalence and other issues, it is limited to community hospitals, capturing inpatient stays, emergency department visits, and some ambulatory surgery visits. Finally, HCUP information is based on hospital charges (not actual prices or revenue), and therefore it is of limited value in assessing what a particular payer is actually spending on care. Through weighting and estimation, HCUP can help researchers gain a sense of cost trends in the system. However, as useful as HCUP data can be for some purposes, it is a poor substitute for detailed information on the actual costs of a particular state’s Medicaid program.
Relying on HCUP data as a substitute for Medicaid claims data leads Mr Lewis to make erroneous assumptions about the scale of actual costs, and therefore, possible savings. These significant mistakes invalidate his conclusions. For example, he suggests that the universe of possible savings for care provided to children in 2009 is limited to the $114M spent on pediatric inpatient care in 2006 according to HCUP. Yet actual 2009 pediatric care costs for NC Medicaid were in fact more than $711M, 7-fold more than Lewis suggests. Lacking the actual study data, he misjudges the scale of the program, and so grossly misrepresents potential savings. A response from Milliman (see previous page) outlines some of the specific factual errors in his analysis.
Throughout Mr Lewis’ analysis, we see this pattern of errors: a misstatement of a study conclusion; an erroneous assumption about the scale of possible savings based on incomplete, dated, or incompatible data; circular references to his own claims in other papers to create the illusion of a body of supporting evidence; and finally, a rush to an unsupported conclusion that Milliman’s results are “impossible.” As Mr Lewis is fond of saying—the math just doesn’t work out.
The reality is that modest but sustained reductions in cost trend in a $9-billion-ayear program will produce substantial savings over time. The Milliman study that Mr Lewis attacks is the third detailed report to find that CCNC’s efforts are indeed effective at reducing NC Medicaid’s costs. Detailed studies by industry-leading consultants Mercer and Treo Solutions—each using different approaches and methodologies—reached a similar conclusion: CCNC is helping North Carolina to rein in Medicaid costs.
It is important to note that CCNC has achieved these savings through a “qualityfirst” approach that is both patient- and doctor-friendly. We work to improve efficiency, reduce duplication, and enhance coordination between providers. As quality goes up, costs naturally go down. This private-sector, nonprofit approach to managing cost and quality is working for North Carolina and continues to improve every day.L. Allen Dobson, Jr, MDCEO and President
Community Care of North Carolina
To view the original commentary by Al Lewis, JD, go to:http://www.ajmc.com/articles/Questioning-the-Widely-Publicized-Savings-Reported-for-North-Carolina-Medicaid
Author Affiliation: Milliman (RC), San Diego, CA.
Funding Source: None.
Author Disclosure: The manuscript subject matter is a report that Milliman provided to the North Carolina Division of Medical Assistance under a consulting contract. Mr Cosway testified to 2 committees of the North Carolina Legislature regarding the results of the reports.
Address correspondence to: Robert Cosway, FSA, MAAA, Milliman, 4370 La Jolla Village Dr, Ste 700, San Diego, CA 92122. E-mail. bob.cosway@ milliman.com.
Author Affiliation: Community Care of North Carolina (LAD), Raleigh, NC.
Funding Source: None.
Author Disclosure: Dr Dobson is the CEO and President of Community Care of North Carolina.
Address correspondence to: L. Allen Dobson, Jr, MD, Community Care of North Carolina, 2300 Rexwoods Dr, Ste 100, Raleigh, NC 27607. E-mail: firstname.lastname@example.org.
1. Lewis A. Questioning the widely publicized savings reported for North Carolina Medicaid. Am J Manag Care. 2012;18(8):e277-e279.
2. Cosway R, Girod C, Abbott B. Analysis of Community Care of North Carolina Cost Savings: Milliman Report for the North Carolina Division of Medical Assistance. https://www.communitycarenc.org/elements/media/files/milliman-executive-summary.pdf. Published December 15, 2011.