Federal agency seeks Medicaid savings with better care

Volunteer parish nurse Joanie Friend (top) of the Bradley Hills Presbyterian Church discusses the medication of elderly patient Hazel Sears (L) with her husband Marvin and asks for his assistance in making sure his wife takes her pills, at the Sears' home in Bethesda, Maryland, September 21, 2007.

WASHINGTON (Reuters) - A small percentage of people account for a huge share of Medicaid healthcare program costs and U.S. officials on Wednesday announced a drive to save money while improving care for these patients.

The initiative will focus on coordinating care of people who receive health coverage under both the Medicaid program for the poor and the Medicare healthcare program for the elderly, Health and Human Services Secretary Kathleen Sebelius said.

These 9.2 million "dual eligibles" tend to have multiple chronic illnesses and 43 percent have a mental impairment. They represent only 15 percent of Medicaid enrollees but account for about 40 percent of the spending, according to the Centers for Medicare and Medicaid Services, which oversees the programs.

The initiative includes sharing information between the two programs on treatments, prescriptions, equipment orders and hospitalizations to help avoid duplications and fragmented care, Sebelius said on a telephone conference.

In 2007, Medicaid spent $120 billion for this group, an average $15,459 per dual eligible person, compared to $2,541 for a non-disabled adult enrolled in just Medicaid, CMS said.

"If we are able to reduce those costs by 10 percent across the country, that's a $12 billion a year savings," Sebelius said. "If it's five percent, it's a $6 billion a year savings."

State governments are straining under the rising costs of Medicaid, which is paid for mostly by the states with help from the federal government. Medicaid takes up a third of many states' budgets, and for nearly all, it is the fastest growing spending area.

In April, the Government Accountability Office said rising healthcare costs pose the biggest threat to long-term state and local fiscal conditions.

The federal economic stimulus plan helped states cope with an increase in Medicaid enrollment as laid off people turned to the program for help, but the extra money runs out this summer.

Moreover, the program is set to expand under the healthcare overhaul signed into law last year by President Barack Obama. But Republicans in Congress are pushing in budget talks to limit spending on Medicaid as well as the U.S. government role in overseeing the program. They want to turn it into a federal block grant to states and give governors a greater say in how the money is spent.

Sebelius said the cost saving initiative will help officials get a handle on the biggest cost driver of the program.

"It is not the millions of children, who are covered. It is not the millions of pregnant women who are covered," Sebelius said. "It really focuses squarely on the 9.2 million who account for almost 40 percent of the Medicaid budget across the country."

(Reporting by Donna Smith and Lisa Lambert; Editing Vicki Allen)