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The Business Case for Diabetes Disease Management for Managed Care Organizations

Author

Listed:
  • Beaulieu Nancy

    () (Harvard Business School)

  • Cutler David M

    () (Harvard University)

  • Ho Katherine

    () (Columbia University)

  • Isham George

    () (HealthPartners of Minnesota)

  • Lindquist Tammie

    () (HealthPartners of Minnesota)

  • Nelson Andrew

    () (HealthPartners of Minnesota)

  • O'Connor Patrick

    () (HealthPartners of Minnesota)

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 plans 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.

Suggested Citation

  • Beaulieu Nancy & Cutler David M & Ho Katherine & Isham George & Lindquist Tammie & Nelson Andrew & O'Connor Patrick, 2006. "The Business Case for Diabetes Disease Management for Managed Care Organizations," Forum for Health Economics & Policy, De Gruyter, vol. 9(1), pages 1-38, December.
  • Handle: RePEc:bpj:fhecpo:v:9:y:2006:i:1:n:1
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    Cited by:

    1. David Cutler, 2006. "The Economics of Health System Payment," De Economist, Springer, vol. 154(1), pages 1-18, March.
    2. 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 1842-1871, August.
    3. 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.
    4. Hanming Fang & Alessandro Gavazza, 2011. "Dynamic Inefficiencies in an Employment-Based Health Insurance System: Theory and Evidence," American Economic Review, American Economic Association, vol. 101(7), pages 3047-3077, December.
    5. 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.
    6. 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.
    7. 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.
    8. Karen N. Eggleston & Nilay D. Shah & Steven A. Smith & Ernst R. Berndt & Joseph P. Newhouse, 2011. "Quality Adjustment for Health Care Spending on Chronic Disease: Evidence from Diabetes Treatment, 1999-2009," American Economic Review, American Economic Association, vol. 101(3), pages 206-211, May.
    9. Mousquès, Julien & Bourgueil, Yann & Le Fur, Philippe & Yilmaz, Engin, 2010. "Effect of a French experiment of team work between general practitioners and nurses on efficacy and cost of type 2 diabetes patients care," Health Policy, Elsevier, vol. 98(2-3), pages 131-143, December.
    10. 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.
    11. World Bank, 2009. "Europe and Central Asia - Health insurance and competition," World Bank Other Operational Studies 3064, The World Bank.

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