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The Business Case for Diabetes Disease Management for Managed Care Organizations

In: Frontiers in Health Policy Research, Volume 9

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  • Nancy Beaulieu
  • David M. Cutler
  • Katherine Ho

Abstract

Diabetes is a common and very costly chronic disease. There is broad-based agreement on how to manage diabetes, yet less than 40% of adults with diabetes achieve guideline-recommended levels of medical care. We investigate the reasons for this phenomenon by examining the business case for improved diabetes care from the perspective of a single health plan (HealthPartners of Minnesota). The potential benefits accruing to a health plan from diabetes disease management include medical care cost savings and higher premiums. The potential costs to the health plan derive from disease management program costs and adverse selection. We find that the implementation of diabetes disease management coincided with large health improvements. For a defined population of diabetes patients, medical care cost savings over several years were small in the closed panel medical group but moderate for the health plan overall. We find evidence that adverse selection and the timing of cost and benefits worsen the health plan business case. In addition, the payment systems, from purchaser to health plan and health plan to provider, are very weakly connected to the quality of diabetes care, further weakening the business case. Finally, overlapping provider networks create a public goods externality that limits the health plan’s ability to privately capture the benefits from its investments. Nonetheless, it is clear that improved diabetes care affords economic benefits to health plans as well as valuable quality of life benefits to adults with diabetes.

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This chapter was published in:

  • David Cutler & Alan Garber, 2006. "Frontiers in Health Policy Research, Volume 9," NBER Books, National Bureau of Economic Research, Inc, number cutl06-1, October.
    This item is provided by National Bureau of Economic Research, Inc in its series NBER Chapters with number 9878.

    Handle: RePEc:nbr:nberch:9878

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    Cited by:
    1. Javitt, Jonathan C. & Rebitzer, James B. & Reisman, Lonny, 2008. "Information technology and medical missteps: Evidence from a randomized trial," Journal of Health Economics, Elsevier, vol. 27(3), pages 585-602, May.
    2. Julien Mousquès & Yann Bourgueil & Philippe Le Fur & Engin Yilmaz, 2010. "Effect of a French Experiment of Team Work between General Practitioners and Nurses on Efficacy and Cost of Type 2 Diabetes Patients Care," Working Papers DT29, IRDES institut for research and information in health economics, revised Jan 2010.
    3. van de Ven, Wynand P.M.M. & Beck, Konstantin & Buchner, Florian & Schokkaert, Erik & Schut, F.T. (Erik) & Shmueli, Amir & Wasem, Juergen, 2013. "Preconditions for efficiency and affordability in competitive healthcare markets: Are they fulfilled in Belgium, Germany, Israel, the Netherlands and Switzerland?," Health Policy, Elsevier, vol. 109(3), pages 226-245.
    4. Randall D. Cebul & James B. Rebitzer & Lowell J. Taylor & Mark E. Votruba, 2011. "Unhealthy Insurance Markets: Search Frictions and the Cost and Quality of Health Insurance," American Economic Review, American Economic Association, vol. 101(5), pages 1842-71, August.
    5. M. Lippi Bruni & L. Nobilio & C. Ugolini, 2007. "Economic Incentives in General Practice: the Impact of Pay for Participation Programs on Diabetes Care," Working Papers 607, Dipartimento Scienze Economiche, Universita' di Bologna.
    6. David Cutler, 2006. "The Economics of Health System Payment," De Economist, Springer, vol. 154(1), pages 1-18, 03.
    7. Randall D. Cebul & James B. Rebitzer & Lowell J. Taylor & Mark E. Votruba, 2008. "Organizational Fragmentation and Care Quality in the U.S. Healthcare System," Journal of Economic Perspectives, American Economic Association, vol. 22(4), pages 93-113, Fall.
    8. World Bank, 2009. "Europe and Central Asia - Health insurance and competition," World Bank Other Operational Studies 3064, The World Bank.
    9. James B. Rebitzer & Mari Rege & Christopher Shepard, 2008. "Influence, Information Overload, and Information Technology in Health Care," NBER Working Papers 14159, National Bureau of Economic Research, Inc.

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