Cover Story

Unprepared for the Boomers

Can MCOs cope with conflicting demands for cost shifting, comprehensive care, and new services for an extremely influential demographic?

John Carroll
Contributing Editor

Jeffrey Bauer is a new breed of older health care consumer. Mid-50s. Educated. By his own account a demanding consumer who is skilled at going to the Internet to hunt down the latest information on what he needs. And he isn't the least bit shy about pressing his demands.

"Remember what they say about us baby boomers: We demand," says Bauer with considerable relish. "Nursery schools had a change. Colleges had a change. This is not a cohort that's been bashful."

Only now, Bauer and the rest of the me-generation are going gray. These boomers, 76-million strong, have a whole new set of demands, and health care is gravitating to the top of the list. The leading edge of the "junior seniors" has already crossed the threshold of their 55th year, and by sheer weight of numbers they're beginning to reverse a decade's worth of shrinking utilization rates as the creaks and groans of middle age begin to turn to higher rates of disease.

Bauer, a PhD, is also senior vice president of Superior Consultant, a company that places special focus on aging and its future effect on health markets. So from a personal and professional perspective, he offers managed care organizations a clear warning: "If I were a managed care organization, I would feel I could not ignore the significance of what's happening right now."

Utilization issues

"We've already begun to see the baby boomers have an effect on hospital utilization," says David Gould of the New York-based United Hospital Fund. "The future has begun."

And its arrival is offering some sizeable challenges to managed care.

Not-so-early retirement

With annual premium hikes already in the double-digits, boomers are expected to add new fuel to rising costs as they seek out advanced care for rapidly growing cases of multiple chronic illnesses such as cardiovascular disease, depression, and diabetes. Their collective health needs will build pressure on plans to continue shifting costs to members even as demands grow on MCOs to add comprehensive disease management programs, new information services, and preventive programs while investing in new technology to integrate complex coverage. A potent voting block, boomers are likely to find plenty of willing champions on Capitol Hill — a trend that has already spawned an effort to gain new legislation to speed up Medicare's approval process for new medical devices as a deeply divided Congress begins to debate Republican Medicare reform initiatives.

But there are underlying trends at work here as well: The big push for early retirement in the '90s has been thrown into reverse as portfolios deflate, a new reality that will push employers and their MCOs to the doorsteps of Medicare. Meanwhile, large employers are dropping long-standing retiree insurance benefits. And any Medicare managed care groups interested in tapping into the current push for reform by expanding their programs are being advised to take note: Once the boomers arrive, the federal program may never be the same again.

"I think the baby boomers are going to be the promise," says Christine Cassel, MD, dean of the School of Medicine at Oregon Health and Science University (OHSU) and a noted national expert on our aging society. "They're used to being consumers and demanders."

But don't expect managed care to approach this demanding generation in a uniform manner.

Mixed bag

Says Cassel: "I think in America you don't have a unitary answer to anything. That's our culture." In health care, she says, that mixed bag is likely to include a continued reliance by many on loosely administered — and very popular — provider networks ill-equipped to oversee the complex effects of aging. Meanwhile, big players like the not-for-profit Kaiser Permanente are making huge investments to build information technology and add DM programs to manage a graying membership.

Backlash coming

Add it all up — conflicting standards, a demanding and politically powerful generation asked to dig ever deeper to pay for its own benefits — and you have the makings of what Cassel sees as the next big health care revolution.

"I think you're going to see another managed care backlash," offers Cassel, one that will lead to more public support for government plans and greater consumer protections. And that means more government regulations — something that most managed care organizations will fight to avoid. If Cassel is right, there will be plenty of older Americans to man the barricades come this revolution.

Boomers — people born between 1946 and 1964 — leap out of a population chart like a 3-D Godzilla. America's post-World War II population boom was raised with a liberal dose of television and long exposure to education. And they've got the original flavor of American attitude — with an innate distaste for old age.

Eight-year countdown

"The leading edge is 57, so they are a scant eight years away from going onto Medicare rolls and being officially senior citizens," says Dan Perry, executive director of the Alliance for Aging Research. "But they'll deny it to the end. They will never accept the idea that they are old, elderly, or seniors, or any of those other euphemisms."

And they expect a lot more than a new prescription and doctor's orders when they show up for medical treatment.

"Compared to the group that came before the boomers, they're much more active on their own behalf," says George Isham, medical director of HealthPartners in St. Paul, Minn. "They're much more demanding. They want service. They're much more likely to bring in printouts from Internet articles. They want to be more active in their own care. The challenge is to provide them with a higher level of service, discussing the ins and outs that they need to learn about the management of their own care."

"Our parents' generation let the doctor do the decision-making," says Bauer. But that deferential approach to everyone wearing lab coats is vanishing. "There's going to be a big shift in the expectation of individual participation."

On Jan. 1, 2011, Perry says, boomers will start joining the ranks of senior citizens at the rate of 10,000 a day. And in the meantime, a growing number of middle-aged boomers are gaining their first experience with what will be a long-term and intimate relationship with the country's health care system.

Case in point: After watching demand for inpatient hospital services in New York City shrink steadily in the 1990s, as managed care helped drive down the number of beds needed, patients began showing up in larger numbers in 2000 and pre-9/11 2001. Boomers were seeking care and new technology to deal with the problems of aging: heart failure, coronary artery disease, cardiac arrhythmia, chronic obstructive pulmonary disorders, and pneumonia.

"While the rapid pace of change in the health care system and the uncertainty about population growth in the city make it difficult to predict the future, inpatient services are likely to continue to grow in the next several years due to the aging of the population and further technological advances," says Sharon Salit, the United Hospital Fund's senior policy analyst.

"As utilization increases, costs are going to go up," adds Gould. "There will be a demand for finite resources, such as staffing."

And that's just for starters.

"For many people, the incidence of chronic disease goes up continuously as you age, but it takes a particular turn at 55, 65, and 75," says Isham. "I think that as people get to be 55 or so you have to respond to their needs. We know the baby boomers are breaking that barrier now."

Two key strategies are at the top of Isham's list: preventive medicine campaigns and DM.

Campaigns like HealthPartners's program to encourage members to walk 10,000 steps a day to stay fit is one way of improving the boomers' chances of a fit aging. But with the inevitable growth of chronic disease among boomers, adds Isham, managed care plans have to expand disease management programs.

"The approach of gathering all of your cases of people with given chronic conditions, keeping a registry for evaluating performance, figuring out ways to do things better, is an approach that's very durable," says Isham.

DM debate

DM has long been the subject of a rancorous debate over its effectiveness. Isham, for his part, believes that DM — administered effectively — is a proven winner. Since 1994, HealthPartners has reduced the hemoglobin A1c levels in its diabetic population by more than 1 point with a substantial reduction in complications. "That's real, tangible control of these chronic conditions that results in better quality of life, fewer episodes of chronic episodes, and lower costs," says Isham.

As the population ages, a growing legion of experts says that DM will need to be structured to handle a huge rise in comorbidities. Only by providing thorough oversight for the many medications and specialists that ailing boomers will need can DM succeed at its goal: coordinating the right care at the right time to avoid costly episodes of bad health among the chronically ill.

Masters of their health

Susan Rawlings, Aetna's head of retiree markets, offers a personal story to illustrate the trends at work.

When she was house hunting recently, she scouted eight dwellings in one day — all owned by retirees ages 65-plus. And each had been to the doctor that day. About half, she says, appeared lonely and depressed.

That informal survey highlights a disaster in the making. As people age, says Rawlings, comorbidities are not uncommon. Often, a spouse dies and depression follows, which can trigger the rapid onset of new complications.

For managed care, says Rawlings, the challenge is taking a "holistic approach" to an aging member's health — providing access to services that are tailored for an older population. A member in his 30s suffering from diabetes may need a DM program targeted directly at the disease. But many aging members will see a multitude of ailments crop up once one disease strikes. MCOs need to start thinking these issues through now, adds Rawlings, before the boomers qualify for Medicare. And MCOs need to channel the boomers' independent spirit to conform to a new mandate: "They need to become masters of their own health."

Matter of survival

And fast. For the boomers, it may all come down to a simple matter of survival in the brave new world of health insurance.

Big employers have been backing away from promises of providing health insurance for retirees, part of the cost shifting that is pressuring members to take more control of their care as they shoulder more of the expense. The new debate over Medicare reform is likely to fuel the issue, says Rawlings, with new measures being discussed that allow boomers to save money for retirement health needs while influencing them to take more responsibility for their health.

"They will become almost forced to become more responsible for their health, and will demand something that supports that," says Rawlings. "I think it's almost inevitable. How far that goes, though, I'm not sure."

For managed care, that means a greater emphasis on providing the information they'll need. Products will be needed that encourage the right mix of medicine, adds Rawlings, without discouraging critically needed care.

But many managed care companies are also balancing the demands of cost shifting from employers unwilling to spend generously for insurance. And that is laying the groundwork for a debate over how increased consumer spending will affect the boomers' level of care. If members are forced to pay an ever-increasing share of the costs, some see a growing reluctance to take advantage of just the kind of services that will best safeguard their health.

"The results vary," says Wayne Miller, vice president for client management at Prescription Solutions, the giant pharmacy benefit manager. "Many health plans are interested in disease management and forms of disease intervention where the focus is on improving prescription compliance. Going to tiers or increasing copays to 60 bucks-plus negates benefits of the formulary. The worst would be to increase copays so high that it becomes illusory, with people not taking medications."

"You're not going to cope by increasing copays and creating tiers," adds Miller, who's studied the impact of aging on health care. "All that will do is shift the cost burden to employees."

Managed care companies aren't convinced.

"That's a two-edged sword," counters HealthPartners's Isham. "On the one hand, it could be a barrier in the sense that people could be discouraged. But on the other hand, frankly, having people evaluate the service or the worth of information or advisability of action is certainly a way to get more people engaged in their own condition."

Collaboration needed

"It's critical that people get more engaged in their care," says Kathy Feeny, Pacificare's executive vice president for Secure Horizons Senior Solutions. Any responsible approach to aging is going to require collaboration from all sides — hospitals, physicians, plans, and members.

"We need to prepare people to share more of the costs," says Feeny. Today, octogenarians are the fastest growing age group in America. As the boomers head into retirement, the number of people in their 90s is likely to mushroom as new technology adds to longevity. And those covering about 10 percent of their Medicare costs today may well see that grow to 30 percent or 40 percent, says Feeny.

Adding to the debate over cost-sharing: Middle aged Americans are likely to be the biggest beneficiaries of expensive new medical technology.

Diagnostic medicine has made big strides in recent years and promises even more advances in the near future. Genetic screening to predetermine vulnerability to disease is a fast-approaching reality. New medical devices and procedures are keeping people alive longer. And boomers with their inquisitive consumer habits are prime candidates for the scans and tests that already exist to sound an early warning for a host of maladies.

Can't be ignored

"If I were a managed care organization right now, I would feel that I could not ignore the significance of this trend," says Bauer, the senior VP at Superior Consultant. "I think I would start looking at diagnostics. Now is the time for them to look at us leading-edge baby boomers and attract us with packages that include diagnostics."

Just don't hand them the bill.

Boomers' likely response, says Bauer: "Wow! We want those tests. And we want someone else to pay for them."

Complicating providers' response to this aging society is a dire shortage of skilled professionals trained to handle the onslaught of the aged. Every year, some 23,000 new doctors begin practice in America, and only about 2 percent choose geriatrics.

"There's a huge shortage of geriatric physicians," says Cassel. That will make it tougher for health plans to cater to the special needs of an older population, and leaves the medical community woefully shorthanded for the boomers once they surge past 65. But it's also easy to see why it's happening, says Cassel.

Young physicians coming out of OSHU often have debts of $110,000 to $120,000, says Cassel. And anyone choosing a specialty is going to look long and hard at low Medicare reimbursements for physicians. "They can't make a living doing that, given the way Medicare pays."

That's an issue most Medicare+Choice plans are already acutely familiar with. And the huge number of boomers is adding immense political weight to the current debate over how, and whether, managed care companies can deliver competitive services and still make money.

In the view of Secure Horizons's Feeny, the simple realities of health care economics are going to become more and more obvious as the boomers head toward retirement age and Medicare. Getting a drug for $5 when it costs $88 doesn't give the consumer a "line of sight" as to what the real costs are.

"Rude awakening"

"I believe there will be a rude awakening for the baby boomers coming into Medicare," she adds. "We have to come to grips with the realization that money will be short."

That may lead to a new system in which the poor are protected, the rich dig deeper, and the middle class comes to grips with what the real costs are and learns how it can pay a bigger part of the bill. Cost sharing for baby boomers now, says Feely, is an early wakeup call.

GOP's plan

The Republican plan — driven by the fast-approaching boomer generation — calls for health plans to come back to Medicare and offer competing plans while attracting new members with a drug benefit. But MCOs aren't likely to expand their M+C programs unless they can turn a profit.

It's a subject that Rawlings can relate to.

"If you manage your business responsibly and understand your customer, it's doable at this point," says Rawlings. But it's tough. With annual costs growing at a minimum of 10 percent a year and reimbursements inching ahead at 2 percent, anyone can understand why managed care companies have been discarding Medicare+Choice in wholesale lots. "Even in hyper-efficient programs, most companies spend anywhere from 85 percent to 95 percent of the dollar on medical costs."

Factor in administrative costs and the varied expenses of regional health care, and you don't have much left to return to shareholders.

The real factor that will decide the future of Medicare is the level of government contribution, offers Rawlings. But cost sharing will continue to be a big issue for boomers.

From Cassel's perspective, M+C was badly flawed from the beginning. The only way a plan could function profitably was by pursuing a "risk-avoidance strategy" that sought out the healthiest old people. As higher costs ate up any margins, it was only natural to see MCOs start pulling out.

"The fundamental economic model may need to be evaluated," adds Cassel, who expects an early-2004 release date for her upcoming book, Medicare Matters. And while Medicare reform is still a swiftly developing situation, she adds, most Republican arguments have centered on providing more benefits at a greater cost to participants.

Whatever shape reform takes, Cassel says she's sure of one thing: "If older people are footing more of the bill, then they'll be more demanding."

The boomers wouldn't have it any other way.

Assessing new technology: Medicare's crucial role

Before the elderly — and many managed care members — ever have a chance of taking advantage of new medical technologies, Medicare has to provide its stamp of approval and decide how much it's willing to reimburse for its use. For the makers of new technology, it's a crucial bottleneck. And they often complain that the review procedure can drag on — a familiar lament for companies that depend on government action.

"To cover a Medicare device, there are three processes: coding, payment, and coverage," says one congressional staffer. The problem in Medicare, say critics, is that the steps aren't streamlined, different divisions responsible for different steps don't communicate well, and the federal sanction procedure can stretch out indefinitely.

A new bill offered by Democratic Rep. Anna Eshoo of California and Republican Rep. Jim Ramstad of Minnesota is designed to lay out deadlines of 6 to 12 months for hammering out approvals while setting up a Council for Technology and Innovation to make sure Medicare is shepherding new technology through at a quick step.

Sponsors say that the bill is badly needed to "shore up the system" before the boomers hit 65. But the measure — if approved — will influence more than Medicare. Many health plans wait for Medicare to issue a reimbursement decision before they agree to make a new technology available to their members. "They look to Medicare for a couple of things," says the staffer. "Should we cover and what should we pay?"

The bill also requires Medicare to pay for clinical testing involving the elderly and to provide a fast way for people to appeal claim denials. Currently, some Medicare patients have to wait more than a year to have their cases heard — and they don't all have the time.

Backers of the bill go to some pains to point out that Medicare is not responsible for approving the devices for use. That's a task handled by the Food and Drug Administration before Medicare ever gets involved.

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