Making It Safe to Grow Old: A Financial Simulation Model for Launching MediCaring Communities for Frail Elderly Medicare Beneficiaries

July 2016 | Antonia K. Bernhardt, Joanne Lynn, Gregory Berger, James A. Lee, Kevin Reuter, Joan Davanzo, Anne Montgomery, Allen Dobson | Original Investigation

Policy Points:

  • At age 65, the average man and woman can respectively expect 1.5 years and 2.5 years of requiring daily help with “activities of daily living.” Available services fail to match frail elders’ needs, thereby routinely generating errors, unreliability, unwanted services, unmet needs, and high costs.
  • The number of elderly Medicare beneficiaries likely to be frail will triple between 2000 and 2050. Low retirement savings, rising medical and long-term care costs, and declining family caregiver availability portend gaps in badly needed services.
  • The financial simulation reported here for 4 diverse MediCaring Communities shows lower per capita costs. Program savings are substantial and can improve coverage and function of local supportive services within current overall Medicare spending levels.

Context: The Altarum Institute Center for Elder Care and Advanced Illness has developed a reform model, MediCaring Communities, to improve services for frail elderly Medicare beneficiaries through longitudinal care planning, better-coordinated and more desirable medical and social services, and local monitoring and management of a community’s quality and supply of services. This study uses financial simulation to determine whether communities could implement the model within current Medicare and Medicaid spending levels, an important consideration to enable development and broad implementation.

Methods: The financial simulation for MediCaring Communities uses 4 diverse communities chosen for adequate size, varying health care delivery systems, and ability to implement reforms and generate data rapidly: Akron, Ohio; Milwaukie, Oregon; northeastern Queens, New York; and Williamsburg, Virginia. For each community, leaders contributed baseline population and program effect estimates that reflected projections from reported research to build the model.

Findings: The simulation projected third-year savings between $269 and $537 per beneficiary per month and cumulative returns on investment between 75% and 165%.

Conclusions: The MediCaring Communities financial simulation demonstrates that better care at lower cost for frail elderly Medicare beneficiaries is possible within current financing levels. Long-term success of the initiative will require reinvestment of Medicare savings to bolster nonmedical supportive services in the community. Successful implementation will necessitate waiving certain regulations and developing new infrastructure in pilot communities. This financial simulation methodology will help leadership in other communities to project fiscal performance. Since the MediCaring Communities model also achieves the Centers for Medicare and Medicaid Services’ vision for care for frail elders (better care, healthier people, smarter spending) and since these reforms can proceed with limited waivers from Medicare, willing communities should explore implementation and share best practices about how to achieve fundamental service delivery changes that can meet the challenges of a much older population in the 21st century.

Author(s): Antonia K. Bernhardt, Joanne Lynn, Gregory Berger, James A. Lee, Kevin Reuter, Joan Davanzo, Anne Montgomery, and Allen Dobson

Keywords: frail elderly, Medicare, long-term care, financing.

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Volume 94, Issue 3 (pages 597–625)
DOI: 10.1111/1468-0009.12199
Published in 2016