SCAN Health Plan CEO Dave Schmidt sees senior

community services as more than just icing on the cake

Managed Healthcare Executive - Oct. 2004
By: Julie Miller

One thing can be said about the members of SCAN Health Plan: They enjoy a little dessert now and then. A unique social HMO for Medicare eligibles, SCAN goes beyond medical benefits and is able to offer its members access to community-based services such as transportation, housecleaning and home-delivered meals-dessert included.

It's one of only four social HMOs in the country, and its mission centers on enabling its frail elderly population to live independently in lieu of more costly nursing homes. To get an idea of the difference the social services have made, consider some of SCAN's recent statistics, compiled in July.

The plan covers 62,000 people, and 16,000 of them, or 26%, are nursing-home-certifiable. In July, 516 people-just 0.8% of its members-were residing in nursing homes. While the average member is 77 years old, within the nursing-home-certifiable population, the average member is over 80 years old, and most of them are living independently.

CEO Dave Schmidt, who's directed the plan since 2002, says SCAN is unique not just because of its senior population and community-based services, but also because it draws from a large set of mass-customized options to create one-on-one member management.

"Our mission is focused on independent living in addition to healthcare," he says. "We do things that other plans don't. We're focused on the psycho-social aspect of diseases and how people live. Because we add that dimension, it changes the dynamics of what's important."

Based in Long Beach, Calif., SCAN was founded in 1977 by 12 frustrated senior citizens who felt the services available to them didn't meet their needs. They built the original Senior Care Action Network around social and community-based services they thought were necessary to maintain independent living, with the help of experts in medicine, gerontology, psychology and social service.

Budget neutral
Before the era of MCOs, senior healthcare was basically all fee- for-service Medicare. Apart from the cost aspects, coordination of care became a struggle for consumers who visited several providers, especially as they aged and required increasing amounts of functional assistance. For many, nursing homes became the only option.

"The idea of staying independent at home wasn't particularly top of mind then," Schmidt says. "Then there was legislation in 1982 creating the social HMO, of which we are still technically a demonstration project."

A group of researchers from Brandeis University and the Health Care Financing Administration proposed the structure for the new social HMO that added uncovered social services to the existing Medicare HMO, which was already considered to be an improvement over fee-for-service. The goal of the social HMO project was to demonstrate that by providing the added services, the plans would help seniors avoid nursing home placement and would do so in a manner that remained budget neutral when compared with fee-for- service Medicare.

Four of the original five plans still exist today: Elderplan in Brooklyn, N.Y., Health Plan of Nevada in Las Vegas, Kaiser Permanente Northwest in Portland, Ore., and SCAN. The Minnesota plan that dropped out did so because of low HMO payment in the state in general, according to Schmidt.

"Look at it from an economic perspective," he says. "If in fact we're paid the same as fee-for-service Medicare-which was the intent of the legislation-there's no savings there. Where there is savings is on the Medicaid side.

"Medicaid pays 50% of the total nursing home costs in California, and at the higher end, 80% of the costs in a state like Idaho. It costs roughly $140 a day to be in a nursing home in California. If we can spend $700 in a month-and it's often less than that-and avoid the nursing home placement, it makes pretty good economic sense.

And it clearly makes sense from a quality-of-life perspective. Our members are intent on keeping this benefit alive," he adds.

Schmidt says for the money, SCAN can delay nursing home placement quite a long time with its community-based facet, called the Independent Living Power program. For those members who qualify as nursing-home-certifiable, the plan is able to provide transportation to doctors' appointments; individual care coordination, including prescription compliance; personal care services, such as incontinence supplies; homemaker services, such as light house cleaning and grocery shopping; home-delivered meals; electronic emergency response systems; and caregiver relief, such as adult day care or short-term nursing home stays.

"There is a limitation on how many of these services we can provide. Currently it's $700 a month," says Schmidt. "It isn't meant, as in fee-for-service, to create in essence a nursing home in your own house. It's not that. It's not 24-hour nursing. SCAN's Independent Living Power benefits are not medical benefits."

Incontinence supplies are a major issue with an elderly population that wishes to remain independent, but other services, such as the meal delivery, are often evaluated for cost- effectiveness, he says. For some members, if they didn't have meals delivered, they wouldn't eat at all, while others might attempt to prepare a meal and injure themselves in the process. Something as simple as breakfast can become a dire-need situation.

Schmidt says he knows the meals are important to many people, but the plan continues to evaluate the economic value. "In all honesty, we don't completely know the answer to that. The services we've been providing for 20 years are working, so there's some part of us that says they're the right ones."

In SCAN's television commercials, unscripted video testimonials from members point out the ability of the plan's Independent Living Power to allow them to live in their homes. One woman, a psychologist, was concerned because her aging parents weren't eating properly. The home-delivered meals solved the barrier to independence for them.

Life expectancy
Social HMOs must renew their contracts every three years. With the advent of the Medicare Modernization Act (MMA) and SCAN's elderly demographic, a new structure is emerging to allow the HMO to become a specialty plan under MMA, beginning in 2008.

"We helped to craft the language for MMA specialty plans," Schmidt says. "Specialty plans serve a disproportionate share of frail elderly, are dually eligible programs, and serve nursing- home-only beneficiaries. With the Centers for Medicare and Medicaid Services and Congress, we hope to craft something that looks like a social HMO but will be different. And the reimbursement will probably be less than it is today. We will work very hard on ensuring the services we provide will meet the goal of the right care, at the right time, for the right price, but also while sustaining independence. That's the direction we're headed.

"If you look at it holistically and not just focus on the Medicare dollar, it's a good, admirable program. The difficulty is you have to get to the top of CMS before there's anyone who really has any interest in both Medicare and Medicaid," he adds.

The Medicare Modernization Act helps keep out-of-pocket costs down for members. Previously, the 2% annual Medicare increase when pharmaceutical costs were going up 14% to 16% didn't balance out, Schmidt says. Besides, physicians were becoming more resistant to accepting Medicare patient populations because the reimbursement was low. The not-for-profit plan's own employees also wanted reasonable cost-of-living raises to keep up with inflation.

Pressure was coming in from all sides. "When that happens, something has to give, and that's benefits," he says. "It is in fact a zero-sum game. So if pharmaceutical costs go up 16%, and the budget increase is 2%, the pharmaceutical costs nearly take the entire increase, as they did in 2002.

"By MMA injecting that incremental money back into the system, and by our learning how to manage care better-hopefully we get a little better each year-we're able to give greater benefits to the members. This year, we were able to substantially increase the benefits over last year, but last year, benefits were less than in the previous year," he says.

Until 2001, SCAN members had an unlimited drug benefit and no monthly premiums, but that changed "when the squeeze occurred," Schmidt says. There was a period when out-of-pocket costs went up, but the level shifted back down again this year.

For example, the cost of a generic drug 30-day supply is $7 for the member, down from $10, and the $2,400 annual limit for brand drugs in Los Angeles County was eliminated earlier this year as well.

Additionally, the plan reduced the hospital copay from $50 per day for the first 10 days to $50 per day for the first eight days, as a result of new money from MMA. Some counties have returned to having no premiums, and others pay $20 per month.

SCAN has always provided a drug benefit with a fairly liberal formulary as part of its status as a social HMO. Members average 3.3 prescriptions per-member, per-month. This summer, the plan announced it would offer a Medicare drug discount card to allow its 3,200 qualifying members to receive the $600 transitional benefit in 2004 and 2005. But Schmidt says, "the discount drug card has almost no utility for SCAN members because they can get drugs at a discount just by being a member."

For injectable drugs, costs are more, but the benefit is identical to the Medicare specialty drug benefit of 80/20.

Forward movement
Members and providers can find the formulary and other information on the plan's Web site, www.scanhealthplan.com, which was redesigned and updated August 1. Changes included more user- friendly navigation, better color contrast for ease of use by seniors and a comprehensive health information portal. Schmidt estimates that less than 30% of the members use the Internet, but that number might be growing in the future as the nation's 75 million computer-literate baby boomers start turning 65 a few years from now.

Also on the Web site for providers is a geriatric newsletter, and soon there will be online Continuing Medical Education (CME) opportunities. SCAN is a designated CME source and has educated physicians within and outside of its provider network.

"We started with Healthcare Partners Medical Group and St. Mary's Hospital in Long Beach and did a CME geriatric symposium with all-day events for physicians in the community, and not just SCAN physicians," Schmidt says. "CME training has been well attended; we've had over 200 physicians at each one. The spring event was held in Palm Desert, and we had 60 people pre-register for the upcoming fall event as they left, which is a pretty good endorsement, indicating that this is well-received and there is a great need for geriatric education across the country."

Coordinated care As the managed care structure continues to push preventive care, disease management and member education, SCAN has a compounded set of challenges for its members. Many of them have multiple providers, multiple health conditions and the added concern of aging. Likewise, many rely on family to make healthcare-related decisions on their behalf, adding even more points of contact. Coordinated care and individual member management is of the utmost importance.

SCAN OnCall, the 24-hour nurse line, is staffed with nurses trained in geriatric care. They attend sensitivity training (see sidebar, "Sensitivity training brings understanding to a new level," page 22) and understand the specific needs not just of elderly people with comorbid conditions, but also those with reduced cognitive function. The plan also employs catastrophic case managers for people with extreme incidents or acute chronic disease.

For example, someone under age 70 with chronic obstructive pulmonary disease (COPD) often has one other related condition, Schmidt says. But frail elderly are more likely to have COPD and diabetes, which don't relate, but confound management of their disease.

He says the individual care solutions will also change throughout the continuum of health, "which unfortunately has a downward sloping line." Case management and disease management might change the flow, but often the needs only increase as time goes on and the individual ages.

Case managers help members and their families decide when and how to make a transition to a nursing home if it becomes necessary. SCAN loses 0.5% to 0.6% of its membership to death every month.

"End of life needs to be something that public policy, health plans and all the various interest groups become very heavily involved in," Schmidt says. "It is a huge consumer of resources in this country. In my opinion, it's something that we as a society have not come to grips with, and therefore, we spend resources that seem ill-conceived.

"It's somewhat frightening that people in end stage of Alzheimer's disproportionately go on ventilators. Clearly there's no quality of life in that process. They are not going to recover functioning. The reason [they are put on ventilators] is probably very complicated. There's some ethical reasons for it, but the biggest reason is that we don't prepare the family up front for the inevitability of what might happen and proactively deal with it.

"It's certainly a big issue for us, and it's an area we want to focus on more," Schmidt adds. "Basically, it's about communicating. As we collectively develop an approach for end of life, care planners are going to become a key part of that communication process. We really do have a unique relationship with the infrastructure that supports our members and their families."